Category Archives: Regulation

Why We Shoot Each Other

Posted on by
Reply

By Alex Marshall
April 2001

Some school kid will shoot some other school kids again soon, and thus provide an adequate “hook” for this article. I was worried that it had been too long since the last schoolyard massacre – at least several weeks – for people to care about what I say on the subject. But I needn’t worry. Another will be along soon.

It’s difficult to identify causes or cures for the random violence that erupts in our schools, malls and office buildings. I would like to suggest some that are perhaps less intuitive than gun control or less violence on television, valid as these may be.

I would like to mention subjects such as national health care. Better leave policies when families have children. Higher minimum wages. Stronger protection for injured workers. More equal school funding. Publicly financed elections.

What, I can hear you saying, have these to do with kids killing kids in schoolyards? It’s not as if someone picked up a gun because OSHA didn’t protect workers from repetitive motion injuries?

Not directly, but there are fewer degrees of separation than one might think. For the last generation, we have steadfastly refused to do things that give us some responsibility for the well being of each other. We have refused, over and over, to be our brother’s keeper.

Measures like national health care or family leave are the true test of community. Are we willing to limit our own actions for a greater good? Are we willing to share a burden? Are we willing, in the case of health care, to limit our fees if we are doctors, our premiums if we are insurance salesmen, our access to specialized health care if we are rich?

We have been tempted. We almost passed national health care, but “we” decided, after hearing scary stories by various special interests, that we just weren’t ready. We did pass a very weak Family Leave act. We have passed a few, limited gun control measures. But by and large, we have not. Most recently, “we,” that is the new Bush administration, rejected worker safety measures that would have given us responsibility for people injured through typing or whacking chickens.

And how does this relate to a teenage kid killing people in California, to name a recent news item? Quite simply, our insistence on pursuing individualistic, competitive solutions to every problem is producing a society that is individualistic and competitive. It is producing a society that tells people, including kids, you’re all alone. It’s every man for himself. If you can’t make it, tough luck.

We are a very rich society, yet we still have more poor people, worse schools, longer working hours and less adequate health care than other first world country.

The California kid who last month picked up a gun after being teased was a manifestation of this society where every man, woman and kid is on his own. I can almost hear that kid telling that to himself, as he grabbed his father’s gun.

We Americans like to think of ourselves as valuing family and community. But France and Germany have far greater protection for families, and far greater respect for the rights of a community. It’s telling that Europe has strong limits on how corporations can use information acquired over the Internet. We do not.

We tend to rely on markets to solve common problems, which means competition of individuals and companies. We reject cooperation. This runs like a theme through every major public policy issue. We deregulate utilities, airlines, TV cable companies, all in a belief that a frenzy of competition for money will somehow produce a greater good for everyone.

But it doesn’t always work that way. Adam Smith’s invisible hand sometimes pushes everyone down, instead of lifting them up. Or it sometimes pushes most of us down, and just a few of us up. “Market failure” is far more common than economists like to admit, as anyone who has paid a $1,000 for a short airline hop will know.

Gun control is, of course, one example of our refusal to cooperate, to give up individual liberties and choices for the sake of the common good. We are as addicted to guns as the worst alcoholic is to his whiskey. It is so tellingly clear that we need to control, manage, order, track and regulate guns and those who own them. Yet, we resist. Our government is our government, so we can’t blame the politicians without blaming ourselves. They do what we tell them to do, ultimately. And if they aren’t doing it, that means we aren’t telling them forcefully enough.

The Future Of Menial Jobs

Posted on by
Reply

From THE BOSTON GLOBE
Monday, July 10, 2000
BY ALEX MARSHALL

PARIS — If you’re hankering to watch a movie after midnight here, you don’t search for an all-night video store. You walk down the street to the nearest Cinebank, a machine carved into a wall that, similar to an automatic teller machine, dispenses movies instead of cash.

Slip in your credit card, scroll through some movie titles, press a button, and presto: out from a slot emerges the latest Depardieu, Schwarzenegger or Julie Roberts flic.

Such machines haven’t hit the United States yet. And with our low labor costs, they may never. In this country, it may always be cheaper to pay someone to man a late-night video store, rather than pay to set up the machine and develop the technology that makes it possible.

This small example illustrates a big point: Western Europe is probably far more advanced than us technologically on a day to day level, in part because its higher labor costs push employers to innovate more.

Although France, Germany, Sweden lag behind us in computer and Internet use, they are ahead of us in the day-to-day mechanization of life in ways that weed out the more boring and simplistic jobs. Indeed, some Europeans say America appears almost Third-worldish because the continued presence of jobs whose skills consist mostly of standing around.

It isn’t just video clerks that machines are replacing in Paris. Steer your car into a French parking garage, and you will never see a parking lot attendant. A machine handles it all. In one system, a machine dispense a code that will raise the bar for exit after you have paid the cash for the time spent in the garage.

Other types of automation have become ubiquitous in much of Europe. Hand-held credit card processors are standard in many restaurants. Some gas stations are completely automated. The newest subway line in Paris has no operators at all.

Why this greater prevalence of automation in Europe? Because quite simply, they have better things for their people to do than to sit all day in a booth in a parking garage. Employer costs are much higher in most of Western Europe. Wages, health care contributions, pensions, family leave and general taxes all add up. This pushes employers to automate — which in the long run makes economies more productive and efficient.

These high labor costs also push up unemployment. But the relationship is not absolute. Germany had lower unemployment than the United States in much of the 1970s and 80s, even while having far higher labor costs.

In the United States, a healthy dose of social benefits, higher minimum wages and other pro-labor policies might actually improve our nation’s competitiveness, by pushing companies to modernize.

Although we boast of an admirably low-unemployment rate, the Brazilification of our economy continues. We may have already entered a new Gilded age where the Internet millionaires think of ways to spend their money, while the nameless hordes collect the parking payments for their BMWs.

Europe is desperately trying to copy the entrepreneurship and flexibility of the American economy. Here in Paris in government and business circles, the talk is all of privatizing, marketizing and facilitating Europe’s entry into “The New Economy.”

But astute observers recognize that economics are like lapel sizes and hem lines — different flavors go in and out of fashion with the times.

“There is no superior system,” said Robert Boyer, a French analyst in Paris and author of the 1999 paper “The Diversity and Future of Capitalisms.” “Each system has its strength and its weakness. According to the international economy, the strengths or weakness will pop out.”

So while Europe is busy imitating the United States, we might pause in our orgy of self-congratulation and begin imitating Europe, before the next fashion in economics hits and we are out of step. A strong dose of social protection and higher wages would moderate income inequality and boost productivity by discouraging businesses from using low-skill, low-pay jobs as an integral part of their business plans.

Europe will probably never achieve American-style, free-wheeling capitalism, and America will probably never achieve the equality and harmony of European social democracy. But a lean in the direction of the other by each might help each enormously.

———————-

Alex Marshall is the author of How Cities Work: Suburbs, Sprawl and the Roads Not Taken.

Conclusion

Posted on by
Reply

Getting There: Building Healthy Cities

[Excerpt From Chapter Nine]

Of all the public decisions that go into place-making, the most important is what type of transportation systems to use. They will determine the character of the city and much of its economy. Do we pave roads or lay down tracks? Do we fund buses or subsidize cars? Do we lay down bike paths or more highway lanes? Do we build airports or high-speed train lines?

What is transportation for? That’s the essential question Lewis Mumford asked forty years ago.

In the first place, it’s for building the economy of a city. A city’s external links to the outside world, its freeways, train lines, airports, ports, and others, will determine the potential of its industry and people. The big links a city has to the outside world determine its economic potential, something most people do not grasp. Thus, people should think hard about, and usually be ready to fund, the new airport, the new train lines, the new port, and even the new Interstate if it actually travels somewhere new, though this is not likely these days.

As these external links are established, attention can be paid to the internal transportation network. We should recognize that the internal transportation serves a different purpose than the external transportation systems of a city. The layout of a region’s internal transportation will determine how people get to work, how they shop, how they recreate, how they live. The standard choice today of lacing a metropolitan area with big freeways for purely internal travel means we will have a sprawling, formless environment. Simply getting rid of the freeways–forget mass transit–would establish a more neighborhood-centered economy and dynamic. But we don’t have to forget mass transit. Laying out train lines, streetcar tracks, bus lanes, bike paths, and sidewalks–and forgoing freeways and big roads–will mean a more place-oriented form of living. Both the drawbacks and the benefits of such a style dwell in its more communal, group-oriented form of living. You will have the option of not using a car. But to get this option, you have to accept that using a car will be more difficult.

Transportation is not the only public decision. Policies on growth and development can help implement a transportation policy. Such policies are far less important than usually thought, however. The major transportation systems dictate the pattern and style of developments. Once those are established, ways will be found over and around zoning and land-use laws to build the type of development that fits with a big highway or train line.

But zoning and other land-use laws can be used to facilitate or support the type of development that goes along with a particular style of transportation. The best way to do this would be to move away from zoning and go back to actually designing cities. Governments would actually lay out street systems on paper, and then private or public developers could build them as needed. This would give a coherent structure to a metropolitan area. It would also mean better coordinating the relationship among states, metropolitan areas, and smaller localities.

Growth control laws and boundaries are a wonderful tool for shaping development. Conceptually they are great because they help the public and the planners focus on where they want growth to occur. But growth boundaries are misleading because they give rise to the perception that without them, houses and shopping centers would magically pop up like mushrooms after a good rain. They would not. In reality, development only occurs after the public has made a decision about where to lay out roads, train lines, sewers, and other public infrastructure. Growth boundaries are as much about inhibiting public development as private. They are lines that tell government, beyond this point, go no farther with your services. A better way to think about growth boundaries is that they are lines that demarcate to what point the public is going to extend its blessings, both in the form of transportation and in things like educating children, police services, and libraries.

But growth boundaries are not possible usually without addressing the tangled political structures of our cities. Which leads us to our third rule of thumb.

The Master Hand

Posted on by
Reply

The Role of Government in Building Cities

[Excerpt From Chapter Six]

In 1817, the governor of New York convinced the state legislature to spend $7 million to finance a canal from Albany to Buffalo. Eight years later, after thousands of workers had carved a channel through rock and earth, the Erie Canal was complete. The 350-mile canal opened the entire upper Midwest to shipping, and cemented New York City’s role as transportation hub for the nation, and as the country’s greatest city.

In 1919, the U.S. Navy, concerned that the country was losing the race in radio technology to Europe, created the Radio Corporation of America–or RCA. It was funded as a joint project between government and private business, and the Secretary of the Navy sat on its board. Later spun off as a completely private enterprise, it grew into one of the largest and most important companies in home and commercial electronics and communications.

In 1995, Denver opened its enormous new international airport, its cream-colored canvas peaks glinting in the sun. It was a big risk by taxpayers. But like New York state’s gamble with the Erie Canal two centuries previously, it was meant to move the Rocky Mountain metropolis into the position of a central transportation hub for the nation.

What all these actions or events have in common is government, government, government. In this chapter, I seek to make clear the role of government in creating both the architecture of place, and the related architecture of economics or wealth. In this antigovernment country, virtually founded on hostility to the enterprise, we tend to obscure government’s central role in creating the places where we live, the jobs we perform, and the money we spend. Government, whether it be a republic, monarchy, theocracy, or dictatorship, is more central to our lives than many of us acknowledge or understand.

From an urban planning perspective, it’s important to understand the role of government so we can more easily grasp the levers of power when we desire to make real changes.

Americans tend to think of government as something outside themselves, a kind of regulatory body that interferes with the working of both an economy and the development of places. According to this view, the shapers of cities and the creators of wealth are the individual actors: the developer, the house builder, the company owner.

But government–that is, us–almost always lays down the concrete slab that economies and places are built upon. Government not only creates the laws, and operates the courts and the police, it then lays down the roads and builds the schools. In a modern economy, it then proceeds to set up a Federal Reserve System, a Securities and Exchange Commission, the International Monetary Fund, and other more elaborate financial infrastructure.

I sense that most people do not understand this, and the reason can be laid at the feet of an insidious idea called “the free market.” We tend to think that places and economies just happen, built by the invisible hand of Adam Smith if by anyone. In our mind’s eye, we tend to see supermarkets and subdivisions proliferating across the countryside, driven by consumer choice and the decisions of banks to finance them. We tend not to see the government’s prior decision to build an Interstate through the area that made the whole thing possible.

The intersection of place and economics is often in transportation. The decision of what transportation system to build, something almost always done by government, tends to create both an economy for an area or metropolis, and a particular physical framework organized around that infrastructure. So when Denver builds a big airport, it also creates the loose physical structure of warehouses, offices, and shopping centers that proliferates around airports. When New York City built its subway system (which was nominally private but steered and aided by government), it also created the possibility of the dense networks of skyscrapers that would follow. The Interstate Highway System created both a new economics of transportation and a new lifestyle organized around suburban living.

. . . . . . . . . . . . . . . . . . .

We would understand government’s role in both places and economies if we understood better what government is.

Government, to put it unsentimentally, is “a system of authority,” from which all other forms of authority, including ownership of property, derive.12 In a democracy, that authority derives from the consent and will of the people. Managing this authority for the highest and best use is the central task of the people.

In this country, this understanding of political community has been replaced by rigid beliefs in the free market, without an understanding that the “free” market itself only exists through its creation and maintenance by a political state. The “free market” is a political act first. Politics comes before economics. By this, I mean the economic system we live under, in both the nation and the globe, rests on a foundation of political decisions that establish said system’s existence and form. Politics determines economics.

The capitalist system is a political act that creates a publicly defined set of rules enforced by the “system of authority” of government. Markets can be said to exist without governments only if we define markets as blind desire. “Free” markets exist only as created and underpinned by government. The polity creates the system of laws and courts and police that lets the “free” enterprise system operate.

The equations of economists, even at their most convoluted, seldom have a line saying something like “Right here there is a 10 percent chance that forces from a rival company will break through the factory’s defenses and shoot the CEO in the head.” That would be an actual free market, which we can see in operation in the drug markets nationally and globally. The illegal-drug cartels act little differently than France, England, Spain, Portugal, and the Netherlands did in the sixteenth and seventeenth centuries, as they warred to control markets, robbed each other’s ships, and fought to control supply lines.

The current global economy, so often held up as an example of the benefits of the free market, was not only created by technological advances like the computer or the telephone, but from the political arrangements that allowed their introduction and peaceful operation. It was politics that allowed for the laying of a transatlantic cable, and for the creation of a system of laws and courts that governs trade. Even mailing a letter to Europe relies on a slew of postal treaties worked out in the nineteenth century.

People may forget that we had a fully functioning global economy in the sixteenth century. England no longer seizes ships from France laden with goods from India because it and most countries have a series of political agreements that allow for “free” trade. These agreements not only prohibit the use of force, but they also provide a mechanism for adjudicating disagreements and for setting standards. The peaceful creation of wealth through a market economy is always based on the establishment of a prior political system. Peaceful global trade has emerged over the last two centuries because a system of political authority has emerged that creates the structure within which a global economy has to operate.

In effect, we have a world government. We can see it in action when the World Court at The Hague in Holland orders the United States to accept tuna caught in nets that harm porpoises, even though America’s own laws prohibit its sale. Sorry, says the World Court, but the system of global trade you agreed to prohibits your discriminating against other countries’ products on this basis. Pull at this thread and you find a vast structure, including things like the World Bank and the General Agreement on Tariffs and Trade (GATT), the latter supervised by the World Court, which in turn reports to the United Nations. These institutions, though, should serve the interests of their polity and not just the short-term interests of individual businesses or even countries.

The gradual ability for governments to replace the rule of force with the rule of law changed the form of cities, as well as the form of trade. Historian Eric H. Monkkonen says that the emergence of the nation-state allowed new forms of cities and towns to develop. Before the viable nation-state, only settlements that could defend themselves were possible. This took the classic form of the city-state. When “the state and the city separated,” it allowed more specialized forms of cities and towns to emerge, which in turn allowed a greater percentage of the population to urbanize.13

The classic model of a free market, where businesses operate unhindered by government interference, is comparable to a perfect vacuum created in the laboratory. I use this analogy, though, in a way contrary to the usage of many economists. With markets, it is government that restrains the “natural” forces of power and violence from rushing in and contaminating the perfect vacuum of the free market. Another analogy is that of a soccer game. Government not only referees the game, judging when players are offside and so forth, but also creates the field, its parameters, and how you play.

Government is often thought of as a parasite on free enterprise, or at least as dependent on it. But the reverse is more true. To paraphrase architect and organizational theorist Ted Goranson, behind Adam Smith’s invisible hand is an invisible arm–government.14 Again, this should be obvious, but I suspect it isn’t. The standard mental model of capitalism is that this magic system of supply and demand operates by itself, without human aid or deliberate organization of any kind. These are basic tenets of Economics 101, handed down by the priests of the system, the economics professors.

If you want to look at how markets operate without government, just look at the buying and selling of crack cocaine, or of bootleg whiskey during Prohibition in the 1920s. Without government, the act of exchanging value becomes quickly mixed with the use of force to control a market or command a sale. Indeed, since government itself is a system of authority, a system of regulated force, it can be said that in its absence, another “government” quickly emerges that establishes through force a system of rules and regulations by which trade can occur. The Mafia can be compared to a private government that is competing with the established government’s authorized monopoly on the use of force and subsequent ability to establish rules and structures.

Russia and some of the newly emerging capitalist countries are having problems establishing a functioning capitalist system because they don’t have enough government, not the converse. Capitalism only operates where there is the rule of law, including a court system to keep a record of contracts and enforce them. It operates even better if government creates a transportation system, a clean water supply, and other basic public goods. The limited liability corporation is a foundation of modern capitalism that is completely a political creation.

“All liberal rights presuppose or imply the dependency of the individual on the collectivity and on the principal instrument of the collectivity, that is, on the coercive-extractive state. This is a truism and a banality,” but one that has been forgotten in the modern era, says Stephen Holmes, writing in The American Prospect in an article titled “What Russia Teaches Us: How Weak States Threaten Freedom.”15

As Holmes writes, it is ironic that in this era of calls for lower taxes what Russia suffers from is the absence of sufficient taxation. Total tax revenues in Russia are at about 10 percent of the economy, which is insufficient to create a public sector to establish the rule of law and a healthy infrastructure.16

Part of our misconception of government is due to our emphasis on the Bill of Rights, which, as Holmes writes, is really a spelling out of a set of “negative liberties.”17 They focus on being free from government. But essential liberties also come from government’s presence. What makes democracy so revolutionary is that it established the concept of being free to participate in government, that this system of authority, which is what government is, could be controlled by the people, the polity, the public.

The failure to recognize that a market economy is a political choice and creation first and foremost leads to a belief that an economy operates by itself. The “laws” of supply and demand magically lift all boats to their highest and best use, without the aid of human intervention, goes the standard fairy tale. Part of this confused belief system comes from economics being classified as a science, and the conviction that, because equations and numbers are used, it can be compared to physics or chemistry. But humans are different than falling apples or sodium combining with chloride. They are their own actors, and can combine and perform in a variety of ways, many of which no one can guess.

Lewis Mumford posits that with the industrial revolution, nations adopted a new religious belief in classical economics to replace the belief that an all-seeing, all-knowing father God had laid out an orderly and just path for the world.

“The most fundamental of these postulates was a notion that the utilitarians had taken over, in apparent innocence, from the theologians: the belief that a divine providence ruled over economic activity and ensured, so long as man did not presumptuously interfere, the maximum public good through the dispersed and unregulated efforts of every private, self-seeking individual. The non-theological name for this pre-ordained harmony was laissez-faire.”

The idea of Adam Smith’s invisible hand shaping prices and production for the common good is a marvelous model that is true in some situations. The problem is, most students of economics accept it as being solid as an axe. They then proceed to pick it up and wield it indiscriminately. But the market only operates efficiently and for the benefit of everyone when the products of a market can be converted into something that can be bought and sold for money. Saving a historic building, for example, might greatly enhance the wealth and overall appeal of a town, not to mention the daily lives of its citizens. But it is very difficult to “marketize” the view of a church by charging people for the privilege of walking by it.

Not only do markets not always maximize public or individual good, they actually often degrade it through the same mechanisms meant to produce value.

There are many, many situations where people, all pursuing their maximum self-interest, make things worse for everyone, themselves included. Our treatment of the environment is the most obvious example, and the one most likely to topple the laissez-faire theology. It is simply too apparent that, left to themselves, people and companies will pollute the air, water, and land to the detriment of all without some larger system of legal control. Traffic is another. Everyone trying to get to work quickly and easily by car creates a traffic jam where no one gets to work quickly. Yet another example is the widespread distribution of guns. Individual actors, trying to maximize their personal safety, increase their physical danger, because a more dangerous world is created by the sum total of the actions of everyone arming themselves.

What’s troubling is how a proper understanding of the role of government in our lives is being undermined by a steady barrage of libertarian and antigovernment rhetoric. This language obscures the real relationship people have with government. It’s like criticizing the boat that keeps you afloat.

The version of the Republican Party dominant at the end of the twentieth century has been tremendously destructive in this, and should be rightly held responsible for the misconceptions many Americans hold. Republican leaders like Senator Trent Lott of Mississippi frequently wield the motto that “You know how to spend your money better than the government.” According to this analysis, government is akin to a thief, robbing taxpayers of their hard-earned pay. If government should exist at all, then, goes this line of thought, it is at best a necessary evil, best kept small and minimal.

This theory obscures the fact that government creates the wealth the people hold in their hands and are now reluctant to give up. A dollar bill is signed by the Secretary of the Treasury for a reason. Money is a communication device produced by a political agreement, both literally and in a wider sense. Not only does government print the money, but it also creates the conditions under which money can be “made.” It also creates the infrastructure of wealth creation, like public education and transportation systems.

America’s tortured, confused relationship to government can be seen in our tortured, chaotic, and confused transportation systems. Whether it’s trains, planes, or automobiles, the confusion between public and private has produced the worst of both worlds. Government puts too much money into highways and then prices the use of them too low, and so they are massively congested. Government shortchanges passenger train travel, leaving citizens with a skeletal, impoverished system. Government has ceded control of the skies to commercial airline companies, even though these for-profit companies depend on a public system of airports and air traffic controllers. This has left air passengers often running a gauntlet of high ticket prices and lousy, take-it-or-leave-it service. In general, we are a rich country with a surprisingly impoverished and incoherent transportation system.

Much of this would change if we recognized government’s central role in the architecture of our lives. Once this is accepted, arguments about the size of government become less ideological ones and more practical ones. Whether government or private enterprise performs a task becomes a question of efficiency. It is often beneficial to limit the scope and role of government, but this does not change government’s essential relationship to our lives.

The Stock Transfer Tax: An Idea Whose Time Has Come Back?

Posted on by
Reply

By Alex Marshall

May 2003

It sounds too good to be true. At a time when New York City and state are billions of dollars in the red, they could raise that and possibly more by reinstating a tax that is mostly paid by people living outside the state and country.

It’s called the Stock Transfer Tax. Until 1981, the state had one, and the city got the revenue.

Until it was phased out, it was raising $300 million a year for the city. Technically, it is still in place, only the proceeds are instantly rebated to the buyer of a stock. Now some people, including an Albany legislator, are considering bringing it back in a new form.

A lot has happened since 1981. The number of purchases on the stock market has grown exponentially. If the same tax were in place now, it would raise an amazing $11 billion in 2004, according to the city’s Independent Budget Office, which recently studied the issue.

Just how does this lucrative tax work? It’s a bit hard to understand, in this age of supposedly landless and nationless capital. But, even though shares of IBM or Apple may be bought by someone in Peru or Peoria, transactions still go through the New York or American stock exchanges, which are located in New York City, if the stock is listed through those houses. The buyer pays the relatively tiny tax, not the brokerage house. The old tax was set on a sliding scale, rising up to 5 cents per share, to a maximum of $350 per transaction. No one has suggested re-instating it at the old level, in part because the various fees that are associated with stock trading have all declined.

New York State Assemblyman Ronald Tocci of Westchester County has suggested reinstating it on a sliding scale, up to a penny per share. The Fiscal Policy Institute ran a scenario study of a half penny per share, with a $35 cap. The IBO, in its studies, put it at half the old rate, or approximately 2.5 cents per share on a sliding scale.

“I see it as a possible, viable alternative to a lot of other unpopular taxes,” Tocci said in an interview from Albany.

New York State first implemented the tax in 1907. In 1965, according to Frank Mauro of the Fiscal Policy Institute, which has studied the issue, the State agreed to give all the revenues to the City in exchange for the City giving up the revenue from a penny of its sales tax. In 1975, during the City’s budget crisis, the securities industry agreed to a 25 percent surcharge. And in 1979, in part because of lobbying by the industry, Gov. Carey agreed to phase it out.

“A good tax is one where the base is very broad, and the rates are very low,” Mauro said.

“Economists agree that all taxes have economic consequences. So to have the least interference, you should have the base very broad and the rates very low.” “It’s intriguing,” said Ed Cupoli, chief economist of the Assembly Ways and Means Committee in Albany. “But the legislature would be reluctant to do anything negative to the securities industry.” In theory, the tax raises enormous sums of money at a miniscule rate of taxation, which, not incidentally, is paid by people mostly living elsewhere.

For example, if a trader in South Dakota bought 100 shares of IBM for $80 a share, the current cost would be $8,000. A penny per share stock transfer tax, depending on the sliding scale, would add at most $1 to this transaction, or 1/8000 of the total cost. For a lower-priced stock, the fee would be lower because the tax would be lower. If someone bought 1000 shares, or $80,000 worth, the fee would be capped, perhaps at $35.

Such a tax would not be burdensome on any one individual. But because millions of shares of stocks are sold daily, it would generate enormous sums of money very quickly.

If this tax can generate so much money so easily, why aren’t our competitors doing it?

They are. In fact, most other stock exchanges have a transfer tax in place, and often at considerably higher rates. Hong Kong, Singapore, France, Germany, Ireland, Switzerland and others have such a tax, all at higher rates than what is being proposed here, according to J.W. Mason, a doctoral student in economics at the University of Massachusetts at Amherst, in an article in City Limits Magazine in October 2002 (“Big Idea: Tax the Street”, www.citylimits.org.).

London, often said to be one of New York’s principal competitors, taxes stock sales at 0.5 percent of the price of a stock. This rate is many times higher than the New York tax. In the case of the 100 shares of IBM above, this would be $40, instead of $1.

If Tocci’s plan of a penny per share were put in place, it would probably raise more than $2 billion a year. If split between the city and state, this would be a significant source of new revenue for both.

There is a downside though. The worry is that if such a tax were reinstated, then the New York Stock Exchange and the American Stock Exchange, the principal entities affected, would leave town to avoid it. If the traders traded in New Jersey, their customers would pay no tax.

Tocci and others argue that the stock exchanges would be unlikely to leave town to avoid a tiny tax that they themselves don’t even pay. Some of the other remedies being considered, such as a surcharge on the income tax of wealthy taxpayers, would hit their personal pocketbooks much more directly, Tocci said.

But others in the banking and budgeting business have been more critical.

“I think it’s dead on arrival in Albany,” said Rae Rosen, a senior economist at the Federal Reserve Bank. “An industry-specific tax might on balance do more harm than good, particularly for an industry that has the ability to move operations out of the city.” The tone of the limited IBO analysis is pessimistic. The IBO examined the issue as part of a larger report, “Budget Options for New York City,” (www.ibo.nyc.ny.us/). The section on the Stock Transfer Tax says: “The proposed STT half-restoration could reduce overall private sector employment in the city by as much as 80,000 and lower receipts from other city taxes by close to $650 million.” David Belkin, Senior Economist at IBO, says that there has been a general trend against such taxes.

“The industry people say the exchange will collapse,” Belkin said. “But even just assuming some decline, that in and of itself has an impact.

London and Hong Kong have one. But there is more competitive pressure. There is a big fight going on in London over their tax. The tax is worth considering. For one thing, other more onerous taxes raise relatively small amounts of money. In the IBO’s study, “Budget Options for New York City,” (http://www.ibo.nyc.ny.us/), controversial measures, such as a Luxury Apartment Rental Tax, would raise only an estimated $27 million a year. Other taxes, such as restoring the commuter tax, would raise only about $500 million, or far less than most versions of the stock transfer tax.

One indication that the tax could work is that there already is one in place. It’s what funds the Securities and Exchange Commission. Although Congress recently scheduled the tax to decrease in rate over the next few years, it now raises more than $2 billion a year. About $350 million of that goes to fund the SEC. The rest goes into the US Treasury.

Tocci and Mauro suggest one way to make the tax palatable to The Street is to give them some direct benefit. Some of the money could pay for a new stock exchange building, or for industry promotion. It should be remembered that in the 1970s, the industry agreed to a surcharge to help solve the city’s budget problems.

“It has to be part of a community effort, it has to be part of saving New York,” Mauro said.

“Doing this at a very low rate and raising money from all over the world would be better than raising taxes that would come directly from the New York economy.”

–First published in Spotlight on the Region, the bi-weekly newsletter of Regional Plan Association in New York City.

Guns Don’t Kill People; Cars Do. Or At Least Not As Many

Posted on by
Reply

On Foot Or On Wheels, Facing The Threat

Whether you walk, drive or bicycle on your daily rounds, are you more in danger of getting killed from a bumper of a car or a bullet from a gun? It depends on where you live, although the stats suggest that overall, the mean metal of a car is more dangerous than that from a gun, simply because speeding cars are so much more prevalent than speeding bullets.

The New York Daily News started out this somewhat morbid train of thought of mine with its news series this month examining pedestrians killed by vehicles. The series noted that from 2000 to 2002, 580 pedestrians were killed. The news campaign, entitled Save a Life, Change the Law, is an excellent example of advocacy journalism. It informs the reader of a fact — a lot of people on foot are killed by cars — and then forcefully presents a possible remedy, in this case, making it easier to charge drivers with criminal penalties if they kill a pedestrian. If more drivers were charged with criminal penalties for reckless behavior, drivers might think twice before speeding through an intersection.

The good news is that both the murder rate and the killing of pedestrians by vehicles have been steadily dropping over the last decade. In 1990, 365 pedestrians were killed and an amazing 2,606 people were murdered. In 2002, only 195 pedestrians were killed and only 575 people were murdered. If the murder rate keeps up its swift descent, walking across a dangerous intersection will be riskier than walking through a bad neighborhood.

Eric Monkkonen, an urban historian at the University of California at Los Angeles, studies both crime and urban planning. He is the author of Murder in New York City (UCLA press 2001), and America Becomes Urban, (UCLA 1988). Both are excellent. He said New York City’s murder rate has always gone up and down over the centuries, but was unusually high in the last generation.

“New York has always been safer than other American cities, so the crime rate could go even lower.” Monkkonen said from his office in California. “The question is how to get it there. I wouldn’t trust anyone who has a simple answer.” Moving back to pedestrian deaths, Transportation Alternatives, in several excellent recent reports available at its web site www.transalt.org, reported that the number of pedestrians has continued to drop in 2003, with only 102 pedestrians killed in the first nine months of the year. It appears we are heading for a record breaking year in safety. T.A. credits the transportation department with a series of traffic calming measures that have significantly made things safer for pedestrians.

But only if you are satisfied with not dying.

Transportation Alternatives also reports that in 2002, 15,000 pedestrians and 4000 cyclists were injured, about the same as in past years. Also in 2002, 16 cyclists were killed, a rate that has been pretty consistent for the past decade.

How do we fare if we move from the urban streets of New York City to the more suburban ones of New Jersey? Not so well, at least if we are walking or driving.

Drivers in the Garden State killed 184 pedestrians last year, an alarming 37 percent increase, it was reported recently. Pedestrian deaths in New Jersey had been dropping, and the increase is so large that it begs some specific explanation. New York has 8 million people; New Jersey has about 8.4 million.

Given the similar populations and the similar pedestrian death rates — 184 in New Jersey versus 198 in New York City — seems evidence that it’s more dangerous to walk in New Jersey, simply because so many more people walk regularly in New York City.

It’s not only more dangerous to walk, it’s more dangerous to drive. In 2001, New Jersey had 747 traffic fatalities, at least double the number of those in New York City.

This statistic matches with the work of William Lucy, a professor of urban planning at the University of Virginia, who made headlines consistently in the 1990s with his studies showing one was more at risk living in a traffic ridden suburb than a crime ridden inner city. Several of his studies showed that a prosperous Northern Virginian or Richmond suburb was less safe to live in than Washington DC or Richmond, which then vied for the highest murder rates in the land. The reason was surprising but obvious from the data.

Speeding cars killed a lot more people in the suburbs than they did in the inner city, where the cars tended to travel more slowly and accidents tended not to be fatal.

Here in the Tri State Region, it would be nice to have the best of all worlds. If we make it safe and most of all pleasant to walk and bicycle in the city or suburb, we will have safer and more pleasant communities all around.

–Alex Marshall, an Independent Journalist, is a Senior Fellow at RPA

Mergers Or No Mergers, It’s Time To Re-Regulate The Airlines

Posted on by
Reply

I write this from the terminal of the Boston International Airport. I am about to board a small prop plane to Harrisburg, Pa, the state capitol. Given the plane’s small size, and my largish one, the ride will be uncomfortable. Not only will my 6’7′ frame be crammed into a tiny seat, but the propellers will sound like an electric shaver next to my ear for an hour and a half. Winds will bat the plane around as heavy seas do a rowboat.

For the privilege of this unpleasant ride, I am paying US Airways $851. Luckily for me, the taxpayers of Pennsylvania are reimbursing me, because their state legislature is flying me to Harrisburg to give my views on highways and suburban sprawl.

It has been more than 20 years since President Jimmy Carter and Alfred Kahn, chairman of the now defunct Civil Aeronautics Board, began deregulating the airlines. It is time to face facts about this experiment: It has failed. Every single aspect predicted by the advocates of deregulation has gone the opposite way. Competition, the theory went, would increase the number of airlines, increase the number of direct flights, make ticketing easier, and bring simpler, and lower fares.

At first, the theory seemed true. In the early 1980s, low-cost carriers like People Express offered short- to long-distance flights for pocket change. But in the ruthless consolidation that followed, these carriers were driven out of business. Now, a handful of oligarchic airlines reign over the skies like despots. Many smaller markets, like Harrisburg, have seen their air service, something vital to their economic health, ruthlessly extorted by one or two airlines. Flying has become unpleasant, uncomfortable, unpredictable and expensive. Passengers have no guarantee what they will pay, or under what conditions they will have to pay it.

The recent proposed merger between US Airways and United Airlines would do nothing to address these problems. It would probably make them worse. As it happens, these two airlines are already the only ones flying to Harrisburg from Boston. Their already vicious level of competition — I could have flown United and paid $856 — has not exactly produced affordable service. The problem with the airline industry is not mergers or no mergers, but the relative freedom airlines have now to engage in predatory capitalism with their customers.

A few weeks ago, I watched that classic movie from the early 1970s, The French Connection with Gene Hackman. At one point, the local New York villain suddenly decides to fly from New York to Washington to meet the mysterious Frenchman. The film shows the bad guy walk up to the Eastern counter at the airport, and say, ‘One ticket to Washington, please.’ The clerk says, ‘That will be $40, please.’

And that’s it.

Can you imagine something so simple nowadays? Forty dollars to fly from New York to Washington, at the last minute. Even with inflation, that’s pretty good. And consider what the villain did not do. He did not call seven, 14 or 21 days in advance to get this price. He didn’t have to stay over on a Saturday night. He wasn’t required to pay $75 if he changed his return date, or buy a whole new ticket at full-fare if he changed his departure date. He bought the ticket from ‘Eastern,’ one of many defunct airlines. That flight now to Washington from New York would cost $311. And that’s a bargain, considered what is being charged to smaller cities like Harrisburg.

Airlines executives frequently state that average ticket prices have declined in the last 20 years. But, as Robert Kuttner showed in his book Everything For Sale: The Virtues and Limits of Markets, prices declined even faster during the era of regulation. And average prices don’t take into consideration the economic costs of unnecessarily extending stays through a weekend to get a lower fare, or not being able to easily change one’s schedule. Nor do average prices consider that fares have increased enormously in some markets.

There is a way out of this mess: Reregulate the airlines. Reestablish the Civil Aeronautics Board, or some newer equivalent, which would set routes and fares. We would once again have a reasonable, stable system of air travel. Although Sen. John McCain and others have introduced passenger ‘Bill of Rights,’ few have contemplated complete re-regulation. They should.

People often forget that private airlines depend on a system of publicly financed, publicly-maintained airports. In giving these over to airlines to use as they will, it’s as if we had given over our public highways to a handful of taxicab fleets, who were allowed to charge whatever they wanted, and on whom we were completely dependent.

Americans have fallen in love with the idea that competition makes everything cheaper and better. This is not always true. With air travel, it’s time we returned to the days, like in those old movies, when the nation’s air travel system served its passengers, rather than only the profits of a dwindling number of airlines.

Alex Marshall, an independent journalist, is the author of How Cities Work: Suburbs, Sprawl and the Roads Not Taken. He writes frequently on transportation.