You Gotta Watch Your Wallet...
In 1946, Henry Hazlitt wrote a wonderful book, Economics in One Lesson. This small, easy to read book is still widely available and ought to be read and contemplated by all. The reason is simple. Hazlitt uses easy to understand stories to gently eviscerate the public policy mistakes that the know-it-alls and political wonks use to separate taxpayers from their wallets.
Meanwhile, the policy-wonks in Oregon’s majority party are hard at work trying to stuff the Governor’s budget with money straight out of your wallet. They seem to be only looking at this current budget-cycle and not ever contemplating the long-term health of Oregon’s economy, it’s families and businesses.
One example is the crazy idea to put a $1000 tax on any car purchased before 1997. Yikes! There is another idea for a $.05 tax on every wholesale pound of coffee sold. Hearing this, I can imagine that ODOT is trying to re-engineer their GPS milage tracking device to also include a tax on every sip that you enjoy from your Dutch Bros Kicker cup.
Another shameless tactic which is fast spreading throughout Oregon’s counties is using government to provide “affordable housing.” Proponents claim this can be partially accomplished by rent control. This economic fallacy of rent control is continually embraced by pundits, politicians, editorialists, news reporters and academics as a requirement for economic development. HB 2004 is the rent control bill currently making it’s serpentine way through the twisted logic of Salem’s hallways.
Thomas Sowell wrote, “History alone should be able to tell us what the actual consequences of such laws have been, since they have been around for thousands of years. Anyone who has taken a course in Economics 1 should understand why those consequences have been so different from what their advocates expected. It is not rocket science.”
The advocates make claims like, “this will ensure stable housing for workers,” or “it will stop the landlords from gouging tenants,” and finally, “land-owners should not be making tons of money during a housing crisis.”
In Oregon, the reason there is a lack of affordable housing is there is a lack of housing. This means housing is not being built. Why not? One of the main reasons is because of existing laws which prevent housing from being built. This is a particular problem in Oregon where designated Urban Growth Boundaries (UGB) are a major component of the zoning, planning and building requirements.
High and unaffordable housing costs are not the problem, they are a symptom. The real problem is a shortage of houses.
I can illustrate this by using an example of an ice cream shop. With low cost ice cream and cheap treats, everyone wants some. If the ice cream supply were limited because of some legal requirement or some unforeseen circumstance then the local ice cream shop would quickly. Some would label this a "shortage." However, if store owners can raise prices the will slow demand for the product.
Owners don’t do this because they are meanies and they want to gouge ice cream lovers.They do this to slow demand and their stabilize inventories. The higher price makes people think twice, reconsider their resources and/or needs and weigh any options. Just like the housing market, as prices rise, inventories stabilize and more treats are available on the street (or in the freezer.)
The high cost of housing is not something that needs fixing. Rather it is the supply of housing that needs fixing. You know that local housing is in short supply because it is becoming more expensive. When bidding wars break-out among home buyers, as is currently happening, it is a sign of a shortage. This is a not a sign of an outbreak of unbridled greed among wealthy landlords.
Supply and demand is one of the first things taught in introductory economics textbooks and you will find great examples in Hazlitt’s book. If only I could get some folks here in the capital to curl up with Hazlitt’s book, too. Now that would be an accomplishment.
Also, please let your voice be heard with regard to Oregon’s upcoming budget (2017-2019). Without any viable increases in the State’s income, non-critical services will require budget cuts over the next two years. Representatives need to hear whether your wallet is up for grabs, or not.
Best Regards, Dennis