Pricing themselves out of the market

Letter to the editor originally published in the Spokesman-Review for 5 March 2011:

Tea plan hard to swallow

I just finished reading the Feb. 27 article about the tea party policy talks. The most interesting comments came from former Godfather’s Pizza CEO and presidential candidate Herman Cain. He advocates lowering the corporate tax rate, eliminating the capital gains tax and suspending taxes on the profits corporations park offshore.

Really? That’s the plan? To give even more money to the guys who have been shipping our jobs overseas for the last 20 years? And then to make it even easier to hide their money in offshore accounts so they don’t pay any taxes at all?

While the rest of us are struggling to pay the mortgage or send our children to school? That’s the Republican/tea party plan? Think I’ll pass.

Rick Gallinger

Veradale

Followed by a posted comment to this on-line letter to the editor which I regard as a most accurate and telling one. Screen name author Patangali:

There is not an economic system in the world that is purely socialistic or capitalistic. China has 300 Wal-Marts and a new one is built every week, and tens of millions of small family owned businesses while many industialized democratic calitalistic nations have free universal health care, public schools, libraries, and subsidized public transportation among other publicly owned businesses or services. When are we going to get past throwing out words like socialism or capitalism to inflame people’s emotions…. or liberal or conservative, or party labels, or ethnic slurs, or sexist, racist, nationalistic, or other divisive descriptions? Is it not time for enlightened leadership that knows no labels?

The company that makes the batteries for the new electric cars recently located its operations in China rather than the US because the Chinese government offered to build the company a state of the art manufacturing plant, at a very reasonable lease rate. For the US to be able to compete with this we would have to have government go into the real estate ownership and leasing business, and that would be attacked by some who are not “imaginative or liberal” thinkers as socialism….so it would not happen.

Although I have never lived in China, one of my employees just returned from teaching English in China for three years. He claims that although the vast majority of people in China live in poverty they live comfortably and are not starving or without basic services. The fulfillment of their lives comes from their relationships with family and friends and the simple pleasures. They are not, for the large part, obsessed with making much more money than they need. There are, however, thousands of millionaires in China who live in large mansions that would cost tens of millions of dollars if located in Los Angeles.

“Patangali” was responding to another individual also posting a comment to this particular letter. But the main gist of his comment is worth further review.

Real estate markets in this nation, especially in the last few years, have been priced extraordinarily high.  Speculation, is one factor, the assumption that people coming from a more expensive state or geographical location within a state can also “pay more” after moving to a state known for lower real estate prices, being another factor.  Thus, driving up the cost of property, property tax values, even rent.  Because the assumption that people may be “wealthier” who come from a “more expensive part of the country,” could just as easily apply to businesses as well.  That as “Patangali” said, the Chinese government could actually offer a state of the art facility and lease rates that were far more affordable to an electric car battery maker from the U.S. than the corporate owner could hope to find here.  Yes, the Chinese government can do that.  But in this “free market society,” for the American government to do that, all hell would break loose.

So, that leaves us where?  Especially when we are talking about competition.

Laying aside for the time being how spendy labor is as to paychecks and benefits, let us address the cost of living and even of doing business here in this country.  Only in China can millionaires live in literally lower cost mansions than can be found in Los Angeles.  Which would certainly argue that a Chinese millionaire would be practically working poor stateside.  If mansions in Los Angeles can cost 10s of millions of dollars, then what would be the cost of real estate over all say any business wishes to start up and put people to work?  And very precisely, in an area known for the highest possible real estate prices.  Compare that to what the Chinese government has to offer, and you know where the next batch of jobs will now be headed to.

Which doesn’t do a thing for employment and economic recovery.

Briefly, if banks and the real estate industry wants to bring back a vibrant use of land, those zoned commercial, those zoned domestic, those zoned for manufacturing purposes; then they need to consider the priority of making real estate, leasing, and etc. more reasonable in price.  Otherwise, it isn’t doing a thing if it isn’t being bought or rented and made use of.  It most certainly won’t add to the coffers of distressed states nor guarantee any kind of profit for the real estate industry or the banks.  Time to bring down the price of land if we are to entice businesses to stay in the country.

Part 2 of this latest post involves complaints made by specific manufactures “on the news” last week who were struggling to find qualified engineers.  And on the PBS “Need to Know” was quite a commentary about Universities such as Ohio state that literally put more money into collegiate sports than they do education.  And that part of the “high cost of education” that puts students in hock in the tens of thousands of dollars, goes for collegiate sports.  If you are wondering why American students are lagging behind other countries including China, maybe we should put less blame on the teachers and the students and look at where colleges and etc. really want to put their priorities.

That’s not going to help with employment and economic recovery either.  Do we as a nation want to be solely “entertained” by this major emphasis on sports?  Or do we instead see a need to further our nation’s future by young people educated enough to actually do the job?  Quite frankly, I can see where I would make the choice.  But then, I’m not Ohio state.


 

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