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It’s interesting that you mentioned 1983. That was a huge year for changes to the tax code specifically the increase in the FICA contribution. I have heard it described as the largest tax increase on the US work force in history. This was followed three years later by the revision of the income tax code. Much has been said about lowering the highest tax rates but very little has been said about the changes to the code for workers. Did you know that this tax code revision eliminated deductions for consumer interest? Or that it did away with income averaging? All three of these changes adversely affected my part of the economy (construction). The house I live in is worth 10 times what it was in 1978 but are carpenters making 10 times what they made in 1978? I will save you the research time. The answer is no.

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Sep 16, 2023·edited Sep 16, 2023

Nah, the _house_ is not worth 10x what it was. The house is a depreciating asset that will fall apart if you don't pay to maintain it.

The _land_ is worth 10x what it was. For reasons Henry George explained more than a century ago.

https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty

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Depends on where you live,

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Sep 17, 2023·edited Sep 17, 2023

If you tell me your house is worth _ten times_ what it was 30-40 years ago -- if it has appreciated far faster than inflation -- you're telling me you live in a tight market.

If you don't live in a place where the market has become constrained by land use rules, then your house _hasn't_ appreciated that much.

https://fred.stlouisfed.org/graph/?g=18Wzw

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Actually, not what I was responding to. I meant the value of land vs house. I owned a house in upstate NY and the value attributed to land as opposed to the house, at least as far as assessments went was about 1/20th of the value. It was a residential area in the city of Rochester.

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Sep 17, 2023·edited Sep 17, 2023

I don't see how that's inconsistent with my point. Up until just the last few years Rochester was a slow-growth market. It only went up around 4x in the 40 years from 1978 to 2018.

https://fred.stlouisfed.org/series/ATNHPIUS40380Q

I haven't actually gone and researched the sudden uptick since COVID, but I'd bet an influx of people fleeing the NYC and Boston metros has been driving up demand. There's definitely a _huge_ uptick in prices in the Sacramento area due to Bay Area transplants. When you see that kind of sudden up-tick in prices, it's because the _land_ -- the opportunity to be in the area at all -- has suddenly become more valuable. _Buildings_ don't appreciate like that, they only shift in value in a way that corresponds to the cost of replacement, which is more or less tied to the general price level. When you see real estate become seemingly-untethered from other prices, always and everywhere that's a signal of land shortage, and can only be resolved by building more densely to accomodate the people that want to pursue opportunities locally. (And the Land Value Tax works to incentivize smart use of land, and to disincentivize destructive speculative bubbles that keep land _out_ of use where its use is most valuable.)

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Sep 17, 2023·edited Sep 18, 2023

But yes, the large increase in value is due to the increase in the value of the land. I see your point.

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Sep 17, 2023·edited Sep 18, 2023

I don’t disagree with that. I would say that it’s not a land shortage per se, but a product of land speculators. There should be ceiling on ownership in any given area

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founding

There needs to be a serious effort at undoing the harm neoliberalism has caused society. Not everything or everyone should be held to a standard in which only shareholders win. This is true for anti-trust; wages; IP rights; access to markets; access to finance; and, the general decrease in competition in our markets. There is no shortage of people willing to work on this - there is a lack of consistent effort at clearly articulating why and how government works for The People.

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Matt you rock 🪨

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founding

There lies wisdom in these words.

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It's probably too little too late. Turns out people do not like to be gaslighted with bullshit statistics that have no relation to their reality. Also this administration has a bad habit of pretending everything is fine until the country and their political opposition have been screaming about it for months. Remember the supply chain debacles or "transitory" inflation? Voters will not remember every single economic event, but they will remember the White House being out of touch.

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Over in Austria, a collaborative set of activists (mostly one though) held their governments feet to the fire on food pricing by scraping data and analyzing it. https://mastodon.gamedev.place/@badlogic/111071396799790275

Showing what looks very much like price collusion on goods between dominant players.

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Everyone forgets that Delaware is the corporate motherland. No way Diamond Joe would have been senator since the malaise era if he wasn't a shill for the corporate attorneys. He talks up union and working class like he's been there, but com'on man! We all know that's just to keep the bureaucrats happy. No one actually expects him to help out the working man.

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I do think Scranton Joe does want to help the working man, but as Matt points out, his team doesn’t know how.

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founding

B/C his team is more concerned with the concerns from Dem donors vs their actual base. It's just so maddening.

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THIS 💯!

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It's also coming to a head on the Republican side of the isle. Watching the neocon primary candidates try to out neocon each other while wondering why nobody is voting for them is a beautiful sight to behold.

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I hear what you’re saying. But isn’t one of those big donors labor and adding to the tension of which way to go?

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Good analysis of what’s going on (and wrong) in government today. But it isn’t just ‘Bidenomics’. This has been going on for decades. What we have is a ruling and government class all getting rich based on policies and rules which they provide, legislate and support that ignore common sense and the basic needs and desires of a vast majority of the population. Examples are the climate fallacy, carbon capture nonsense, open boarders, failure to enforce laws actually on the books, creative prosecutions based on political ideology, featherbedding of any and all government jobs whether they be local, state or federal. And this includes guaranteed pensions, COLA raises, Peter Principal promotions for those same government lackeys, politicians getting wealthy while in office thanks to lack of term limits and rampant revolving door lobbying, and just plain corruption at the highest levels of government. Fortunately the peasants are finally waking up and beginning to figure out where the problems really are. Let’s just hope we actually do have a landslide of voting in 2024 to finally drain the swamp. Of course the corruption is so widespread that any change is highly unlikely.

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Follow Rudy Havenstein. He gets inflation, has written on (nonsensical) changes made to the calculations and who/how it hurts. CPI is a joke. Grocery shop and you get it.

The wealth divide is real, getting worse and everyone has access to the data. CEO pay to worker pay was 20 times in 1965 and 399 in 2021. I’m surprised more people aren’t on strike. Corporations get bailed out but anything for “regular “ people is labeled socialism. Ugh...

The government is a mess. It’s been told what to do by corporations for so long that it’s full of people who know someone (important?) but has no one who knows how to do anything. Fire everyone and start over. I’m stealing from Robert Bruce here - I’m not Democrat and I’m not Republican. I’m disgusted!

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Oh. And I went to the grocery today. There was a nice roast in the case, not unlike the roast my mom fixed every Sunday for her, my dad, me and my 11 siblings - yes, 14 of us. The roast today was $99!!!!! My dad worked at International Harvester and my mom didn’t work. Inflation/value of the dollar problem? Beef is unaffordable today! I’m not hurting but I’m mad as hell for those that are!

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good points, but hey, your mom did work, she just wasn't paid for her work. Today she'd have to work outside the home to support that family of 11 kids. And you'd all be eating KFC. Read "Who Cooked Adam Smith's Dinner?"

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Some tough but fair medicine here, Matt. As a liberal Democrat, I am part of the team not matter what. But you can’t just stick your head in the sand and try to jawbone folks that their economic insecurities are irrational. You’re right, the messaging has to change the Biden, despite being old, I think has a record that he can run on and win.

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"What does the public see that the bureaucrats don't?"

The question is "What do the bureaucrats see that the public doesn't?"

Money. A future. The hope of buying a home, getting a raise, dependable healthcare.

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Thanks for this. I've got a question about housing. Living in San Francisco, housing costs are among the most expensive in the country. Not being anything of an economist (I own a small business), it seems to me much of these housing costs arise from the enormous wealth gap in this city (as well as the rest of the country). When policy makers invite a certain segment of the economy with various incentives and that segment happens to be well-paid, the pressures on housing becomes too real. So, with the need for more housing, policy makers support market-rate housing. Many cynical reasons for this but let's just say allowing only market-rate housing has pushed housing costs to extraordinary heights as there is a small but significant portion of the population that can afford to pay these costs. I'm not even including institutional investors here but that seems another aspect to housing costs. With increasing prices comes increasing wealth for those fortunate enough to afford such costs. Now, for the sake of protecting property values, little is being done to ameliorate the situation as those with this property wealth also have the means to support policy makers who support the system as it is. It strikes me as a vicious cycle of sorts, excluding more and more and in fact this dynamic seems to be happening not just in this country but throughout the world. But, as I stated, I'm no economist so does this enormous wealth gap have anything to do with housing inflation?

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founding

Possibly, but I believe a much larger factor is that we just aren't building nearly enough housing, of any kind.

The fundamental problem is that once you own a house -- or more precisely, once you own land -- you have a financial incentive to want the value of that property to go up; but the farther up it goes, the less affordable the neighborhood becomes for new entrants. Current property owners always have the advantage in local politics, so it is their interests that get represented, not those of people who would like to live there but don't. This is reflected in zoning and the difficulty of getting projects approved.

This is why States have to start passing laws that override local preferences in this regard. California has done some of this in recent years, but we need more. If you want to get involved, look for a YIMBY group in your area.

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founding
Sep 16, 2023Liked by Matt Stoller

Happy Rosh Hashana

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IIRC that change in CPI was another little Reganoid gift

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Of the hundreds of billions of dollars of investment coming out of the IRA, CHIPS, and Infrastructure acts, some 70% are going into Red areas. More jobs and better paying jobs will help with the cost of living. It is of course taking time for these investments to turn into reductions in economic and material suffering. Probably the best messaging will come from jobs with better wages.

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Darn right

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"Today’s political class doesn’t even know what they don’t know." Well said and so true.

The plummeting cost of money since the 80's blew out the price of everything. When the money used to cost something there was far less air in the prices. I remember our 15% mortgage on a $60K house in 1983. I wonder what the sticker price on that humble house has ballooned to since then with rates on their way back up.

The plummeting cost of money since the 80's blew out the price of everything. Whatever party is in charge will have to figure out what to do about the consequences. Joe and the Dems are in the hot seat.

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The one big problem is that people don't like higher interest rates because they got used to really cheap money. The public is "taking their medicine" a bit with higher rates, and people don't really like getting 8% loans when they used to be 3%.

The problem is really cheap money has lots of negative externalities, like cryptocurrency scams, stupid bubbles, fake tech companies, etc. So it's completely understandable the average person isn't happy with rates, but at the same time higher rates aren't necessarily harmful to the economy overall.

How does the administration handle that? Not great so far, I'd say.

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Great observation. Also our tax code encourages and incentivizes debt.

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