Rising rents hurt the entire economy, not just the tenants.

Economists know that it is the circulation of money, not its

accumulation, that creates a strong economy. That is why war appears

to stimulate the economy, but so did the WPA and other Depression-era

programs, without war.

The Keynesian economics approach commonly known as “tax and spend”

might have been overused, but its principles are still true. When A

spends a dollar with B, B spends part of that dollar with C, who

spends part of that, and so forth, until that single dollar becomes

[by this “multiplier effect”] $5 of the gross national product [GNP].

The greater the percentage of that dollar that gets passed on to the

next person, the more the entire economy benefits.

If we need to stimulate our economy, we need to increase the

percentage by which dollars are passed along from person to person.

What does this have to do with rents?

Those whose basic needs have been met can afford to save for

retirement, invest, become landlords, and accumulate wealth. Others

live hand to mouth, spending every dollar they have on necessities

and the balance, if any, on things they want: clothes, cars, toys,

movies, etc., in what is commonly known as discretionary spending.

Tenants as a group spend almost all of their money, buying products

and services in their community, stimulating the local economy and

enabling local businesses to buy more goods and hire more people,

which creates an even better economy.

To improve the economy, we need to increase tenants’ discretionary

spending by limiting the amount used for rents. Consumer confidence

goes up, investors get on board, and our economy is on an upward

spiral.

Instead, landlords raise the rents out of greed, exploiting

tenants’ desperation in a tight housing market. Unlike the fairytale

landlords would have the public believe, tenants do not move out when

the rent goes up, because they would only move to another expensive

place, and another increase there. Instead, tenants pull in their

belts.

This means that having to spend more on rent, they have less

discretionary spending. If they had $200 per month left after paying

for necessities, a $100 rent increase cuts their discretionary

spending in half. In turn, this means not only that local merchants

relying on tenant business suffer a 50% reduction in sales [on

average], but that through the multiplier effect, the community and

nation loses about $500 per month in its overall GNP.

The landlord doesn’t buy all of the things that the tenants would

have, but saves it, taking it out of circulation. Multiply that by

every month this condition persists, times the two-thirds of

Glendale’s population that rents, and we have a serious reduction of

local and national wealth. Except for the landlords, of course, who

prosper at everyone else’s expense.

This condition is not just in Glendale, but across the nation.

Labor strikes with demands for higher wages arise from higher costs

of living, and rent is far and away the biggest cost of living for

tenants. Higher wages paid by employers in a region might not make

them locally uncompetitive. However, as a nation, we are losing

business to other countries because corporations cannot afford to

satisfy the landlords’ greed by wage increases that only go to still

higher rents. We see our movie studios doing business out of the

United States, or locally, and wonder what can be done to stop this.

Duh.

The philosophical debate about whether government should step in

to control rents is a facade. It happened under Nixon, and during the

last world war. This is a pragmatic decision. If we can freeze the

rents, the economy can recover. If we blindly trust that somehow

greed will rescue the economy, a greed that created this crisis,

civil unrest is not far behind.

How strong can America be, as it now defies the international

community and pledges itself to a prolonged first-strike war and

exacerbated terrorism, with a collapsed economy of hostile citizens?

We are all in this together. We are only as strong as our weakest

link. We need to fix America first.

KEN CARLSON

Glendale