Roy Ho’s Blog

Although McCain may not be as much of a moderate as you think he is, McCain is out of line from his Republican party than Obama can be from his Democrat party.  Although McCain’s platform may not be as environmentally friendly as Obama’s platform, McCain is trying harder to sell his environmental policies than Obama, see CNN.  It all means McCain is trying to define the stage the environment better: to choose his battle field to his advantage.  

Environmental crisis is more than oil.  Climate change is also driving the food cost.  The ethanol market is now driving food prices world wide.  It is also driving the agricultural land prices up as well.  Consequently, we are now having a farm bill that is trying to cut down on the farm subsidy.

This is the first time that a Republican President is saying the cut in farm subsidy is not enough.  And this insufficient in farm subsidy cut is the cited reason for veto.  

On the contrary, a Democrat constituency group would want to support a farm bill and may even want to decrease the cuts in order to lower food prices. 

McCain may not have been explicit about his position in farm subsidy.  However, a thorough environmental policy will eventually lead to that point: cut farm subsidy.  

Environmental crisis is eventually down to this point: efficiency on resources, i.e. economics.  Traditional tree huggers, the ones from 60’s, cannot tolerate the word “economics”.  However, this is what it will go down to.  And McCain will feel very comfortable if he will be able to define this issue.  

If McCain is able to define environmental crisis well, McCain will be able not only to fight Obama better than any Republican can, but also expand Republican base to a new territory and grab the traditionally Democrat constituency group over: intellectuals, and some religious left (both Christians and otherwise).  More importantly, McCain can do something other countries have not been successful: take the green voters to the right wing rather than letting left wing to hog them.  Better yet, eliminate the possibility of growth for the Green Party.  

Green parties are getting strong footholds everywhere around the world.  Germany had Green Party to be part of the ruling coalition.  Green parties in Canada are getting 10% of the world both federally and provincially.  The way to starve off your competitor is to offer products the buyers have been looking for.   

1)       the other two parties seldom address;

2)       draws an equal amount of voters from both sides.

Environmental crisis is such an issue.  The biggest loser from McCain’s aggressive environmentalism is to starve off the Greens and continue a 2 party system.  If McCain is successful, then he can make the game even by 2012.

The most difficult asset, in politics, to obtain is not policies or platforms.  In politics, policies and platforms are commodities.  Message is produced.  Brand is a product of time and money.  This difficult-to-obtain asset is the salesmen: politicians.  Obama is a great weapon for Democrats’ long term growth.  Can Obama contribute to this environmental debate? 

There are reasons for both house and senate not to do anything with Bush in regard to recession (or anything else, like treaty ratification) for their personal and political gains.  However, such a delay may not be a bad thing for the country.  

A new president will be mandated by November, almost down to 6 months now.  A new administration will start operation by next January, 9 months away.  So, the good reason for not doing anything with Bush is: if legislations are passed now, then it will be the new administration that has to execute them, what if these legislations will completely contradict to the new administration’s mandate?  Is this legislative prescribing “solutions” that are going to be doomed? Or even worse sour the relationship with the new president?  

And if these legislations turned out to be successful, guess what, the outgoing president will definitely claim to be his credit years from now in his memoir just as the same time the new president will claim to be his credit.  Will any new president like such a trap?  How can any well intended legislator purposefully set such a political trap up for the new president to step on?  

We know there is no solution that would be “the only” solution.  Creating grand standing solutions right now requires an unquestionable monolithic ideological conviction that says this is the only solution to the problem.  The worse is this conviction can be misinterpreted as: arrogance. 

How can the legislators trust the new administration to execute these solutions faithfully when they just push them down the new administration’s throat?  Therefore, the delay tactic is not only for the gain of the legislature as a whole as well as individuals, but also prudent for the nation.  

Bush is complaining the Congress is delaying his every effort to get us out of recession, CNN reports.

What does he expect?  He is about to go.  Who would want to send him legacy legislations?  

Everyone should be in a transition mode and see what solutions will better fit the direction the next President will want to take.  After all, there is never one solution.  So, any legislator would think “why not wait and see?”

Any real meaningful legislation will require work from both House and Senate.  Every Joe, Dick and Harry will want to add his stamp, his pet project, pet cause, pet donor’s wishes to the legislation.  And it is much better to trade favours with a new president than an out-going president.  

All possible outcomes from this congress are items that are fiscally inexpensive and good for TV items.  This mortgage crisis cheque is a good example.  Everyone gets a few hundred bucks.  It is good for re-election.  And if the problem persists to 2009 January, then there is something the legislators can trade with the new president.  

This is just a blamemanship game. 

The political solutions usually cannot do a dent in a short run.  The effects of government fiscal policies and programs usually do not affect the economy in a matter of months.  These interventions affect the market set up and their effects are measured in years and decades.

Short term interventions require government’s active participation in the market (be it real estate or stock market or whatever else).  This kind of short term interventions are effective only when the action 1) is rare and 2) is taken shiftly.

Interest rate fluctuation is the first type, however the Fed can affect only the interest rate aspect of the economy. And that is not the solution for everything.

Shiftly is a time element.  The reaction has to be quick.  Such a quick action can only be carried out by an undemocratic institution, like the Fed.  And China’s interventions are effective because they are undemocratic.  They can shut down all stock transactions to serve whatever the political purpose is.  But we live in a democracy with freedom, right?

Some environmentalists are embracing the more expensive gas as the way to push for a greener America.  And we are now getting close to USD$120/barrel, after CNN reports a strike in UK’s North Sea. 

We all know that there is very little difference between Obama and Clinton in terms of green policies.  We also know that McCain has risked a lot more of his political capital against his Republican Party than Obama and Clinton have risked against their Democratic Party.  Ever since Bush announced his own plan, the differences among green policies in the country is getting narrower.  However, has anyone actually explained anything other than recycling and driving less?

Climate change is becoming an inevitable issue in the United States as it takes more and more media space as well as more and more votes from opinion polls.  Some government intervention will eventually occur.  How will these actions affect our life styles?  And it is more than gas prices or recycling.  How will it affect our consumption? Land prices? Zoning? And one may ask: “how are they related in the first place?”

Cost of transportation from your house to your job may not be that much.  However, the cost of transportation factors into everything in your household.  All this cost essentially is dependent on the distance between your residence to a national major transportation node.  Now, we are looking at a fraction of all your after tax income as transportation cost.  At the aggregate level, companies move ever closer to national transportation nodes.  This in turn encourages higher density, nationally. 

People are demanding more and more “walkable communities”. People are demanding more green space to produce more oxygen production, more farm land and everything else natural.  Governments and voters will eventually find out that the most effective way to conduct business is to revitalize downtowns everywhere.  That is equivalent to increase density. 

Instead of creating layers and layers of enforcement agency, chaotic laws that benefit no one but compliance lawyers auditing firms, governments may eventually consider turning to some economic or organic ways to increase density in order to minimize the eradication of green space and farm land.  If fiscal policy is to achieve this goal, then it will turn to some modification of property tax. 

Most of the property tax in North America is calculated based on two parts: the value of the property and the value of the land.  Very often, more than 2/3 of your property tax is derived from the value of property rather than the land.  This taxing philosophy prevents the most innovative use of the most expensive resources (land) in a city.  As a result, no land developer sees the value in having more retail space, having more office space, more residential space on the same piece of land. 

Values of properties in downtowns have little to do with the properties themselves but more to do with the land, i.e. location.  A tax philosophy that encourages efficiency of resources would place tax more on the value of land.  In such a scheme, the most profit would be extracted based on the value of the land rather than the property.  This encourages having the best property on a given piece of land rather than having the least cost to have a property on a valuable land.  Two storeys buildings in a downtown of a metropolitan of a 1 million would then become uneconomical.  It would only encourage a speculator or a developer to develop a high rise to make use of this most valuable land. 

Therefore, if your house happens to be in a big metropolitan, green politics will eventually make your wallet to realize the value of your house’s location.  Saving on your property tax bill may encourage you to sell your house.  Comparing house value based versus a land value based property tax scheme, one may argue that suburban residents and country residents have been subsidizing downtown residents through property tax.

How so?

Land prices in country vary not as much as cities.  Lands in cities vary the most in downtown area.  A 100 by 100 feet parcel of land in a downtown can easily fetch the same value of an acre in the country although the properties on top of the land are the same. 

The high expense of gasoline is effective in making people aware of their consumption choices.  However, letting the location of a residence to be swayed by gasoline price is difficult to be justified for a lot of families.  And since downtown land owners will prefer their continual land squatting for the next perfect sale opportunity, such a property tax modification may speed up the progress.

Therefore, having a property tax based on land value actually would serve country voters much more favourably than the suburbs’ and more for the suburbs’ than the urban areas’.  At the end, having such a green fiscal policy actually brings more benefit to the Republican voter base then Democrat voter base.  You would think voters make rational choices.

However, the conventional wisdom

In fact, a property tax scheme that is completely focused on the value of land or just the sale price of the property and land will eventually make land speculation more expensive, land development more expensive, building them require more engineering sophistication. 

Therefore, no one would want to squat on a piece of downtown land for decades without either developing it himself or selling it to a developer since the tax would serve as a good indicator to the owner how much value the land could possibly worth. 

Such a scenario will moderate urban sprawling depending on the proportion of land value in the property tax.  Downtown land owners will be the most immediate beneficiaries.  The land owners in the fringes of the city also see benefit.  The grumpiest of all the land owners will be the ones who have been expecting urban development in the future 10 years on their land but now an unforeseeable eternity. 

Land development is a hair splitting business.  A few basis points in the business loan will make or break the deal.  In this green scenario, since land becomes even more expensive and a higher density is very much needed to become profitable,

Downtowns in the states have been in decades of decline.  This is only partly due to the white flight.  A big portion of incentive has been due to the government unintentionally induced incentives for land squatting.  In other words:  a big portion of disincentive for innovative and cost effective use of land has been unintentionally created by governments all over the country. 

Being green is about having the least “economical footprint”.  In the words of economics, it is about being “cost effective”, “consuming” the least resources.  Currently, not all the costs are being factored into the environmentally wasteful products and therefore we are consuming at a cost that is far below the recovery cost of our consumption causing to the environment.  Fixing the environment requires money, just like anything else. 

Suppose the government finances the fix from levying a tax on gasoline.  Gas consumption goes down while demand for public transportation goes up.  Automobile manufacturers will have to create more energy efficient cars for the market.  But that is not the end of it.  This change of transportation habit is only a facet of the high expense of natural resources. 

There are many social injustices that require rectification.  Climate change is only one of them.  The difference is urgency, or priority.  If there is money to be made, there is a way for many willing change agent who will work on the cause.  For instance, Walmart is taking a serious effort into greening itself. 

If that is not possible, there are charities.  However, no one can fund a non-profitable cause with as much resources as a government can since government takes taxes off everyone to finance the actions.