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
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
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.
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.