Massages and rent control

Fiscal Conservatism 608

I was having my semi-monthly massage with a massage therapist who shall remain nameless. We have a good conversational friendship where we often talk politics. She tends to be very left (but not always) and I am the fiscal conservative who usually votes for Republicans. She is planning to vote for Hillary and I haven't focused too much on the other side but would rather cut off my leg than vote for Mrs. Clinton.

So we were talking for a few minutes at the beginning of the massage and she asked me how much I thought she used to pay for her apartment in New York City over 30 years ago. I guessed $300, but I was off. $129.50 was her response. She had a four-room apartment in midtown Manhattan in the late 1970s as a student. She stayed there for several years and when she left, the rent had gone up to something like $223.50.

She then recounted the story of a friend of hers who lived in Greenwich Village, which was (back then) a much less desirable part of the City. "Her rent was only $100 per month, but she had a four-flight walk-up with no elevator, and lived in a big loft which was literally one room. But I couldn't believe how cheap her rent was."

Both apartments were rent controlled, of course.

"I could never have afforded to live in New York without that rent-controlled apartment," she said. She liked rent control.

"I do not support rent control and believe in the free market," was my reply.

"Do you think it is fair that a building owner can charge millions of dollars for an apartment? Nobody can afford that."

This is not the type of in-depth conversation one wants to have during a massage, so I told her to table the discussion.

When she was done and I was getting ready to leave, I asked her a couple of questions. I was hoping she had forgotten our previous conversation so I could make my point.

"Do you think massages have health benefits? Are they really therapeutic?"

"Of course," she said. And of course I agree. They not only feel good, but they keep your body healthier and reduce some minor aches and pains.

"Would you pretty much recommend massages for everyone? In other words, are they a good thing for just about everyone to do?" I asked.

"Sure," she said.

"OK, let me ask you if you wouldn't mind if I went around the neighborhood, hanging up signs offering your services at $15 per hour. I'll bet your business would have a line out the door and you could give massages all day long, seven-days-a-week if you wanted to. Would that be alright with you?"

"Of course not. You are pulling my leg, right?"

"I'm making a point. Stay with me a minute. Would you accept the clients coming in at $15 per hour?"

"Of course not."

"If the government sets your rates and forces you to comply, that is rent control."

She lost the debate the minute she agreed at the start that massage had a health benefit, because then (thank you, Obamacare) the government can argue a legitimate financial and health-benefit interest in promoting massages for everyone and could justify price caps on this important public good.

Now let's take this a couple of steps further.

Let's say the therapist keeps her practice (say she invested a lot of money to buy it and doesn't want to walk away, so she continues working for $15 per hour while figuring out what to do) and sees patients all day. One day, the room is going to need painting. If that costs $300, is she going to sacrifice two or three days of wages to paint her room? (If $300 isn't too much, pretend that the work required was more extensive.) Of course not. The paint can peel away as far as she would be concerned. This is why rent-controlled apartments fall into disrepair.

When rents are controlled and landlords can only get $200 per month for an apartment that is worth 10 times that, what happens to people who build apartments? They stop. Because the market value of a finished apartment (counting the cost of the land) is far below what the rents would support, construction of new apartments would cease. Then you have no new supply and supply-and-demand puts pressure on rents to make them more expensive. The opposite goal of lowering rents is achieved!

Rent control really only "works" because the government has illegally and immorally converted valuable property (already in existence) into something worth a lot less, with the property owners footing the entire bill. Basically it is an illegal taking, much like eminent domain but with no requirement that the government provide compensation to the building owners.

If the government were to cap massage payments at $15 per hour, many more people would want massages and many fewer massage therapists would be around. You might not be able to find the service, or you would have to wait months for an appointment. New massage therapists would not be joining the profession because it would be too much work for too little money. Those in the profession who had no other options would likely feel coerced into continuing to stay in business, but I'll bet most would fold up. So instead of extending the benefits of this service to more people, price caps would eventually end up reducing the number of massages, achieving the exact opposite result that the government bureaucrats and liberal democrats would expect when they enacted the law.

The quality of the service would also decrease. You'd have less qualified people doing a worse job. Quality of service is very important. How many restaurants would stay in business if nobody liked the food? This type of harm may be below what those in government are able to measure. So even if the same number of massage therapists were in business, there would definitely be another harmful effect to the price-cap law.

Note how being a personal beneficiary of a rent-controlled apartment helped shape the thinking of the therapist. She couldn't afford to stay in NY without rent control, so she is a rent-control supporter. Too bad for the person who invested his money in real estate only to have its value drop by half or two-thirds or whatever.

Unless there is a war, government could never impose price-controls across large sectors. So they pick out one or two areas and get "the majority" to agree, even though there is a minority that is being harmed. And this is why I tried to find a personal example to show the massage therapist the error in her logic. If the person who is really paying for the service is faceless or "rich," then people don't mind taking their property. But if they can see that these people are real people (like themselves), then perhaps they see the unfairness of the proposal.

I haven't studied this issue, but I do think that the way we create affordable housing in Massachusetts is definitely better than rent-control. Many new projects are required to build some "affordable housing" as part of a development. While I'm sure there are many negative consequences, at least the builders and investors know up front what the rules are before they start, and they can make their own business decision about whether to proceed. Rent control after the fact without compensation is just wrong.

Democrats love playing the giveaway game. This rationale underscores the thinking of the left. If there is a personal benefit, someone will tend to support it. That I guess is human nature. So if Democratic politicians promise more government goodies to people, they will vote for Democrats. And I guess Democrats are fine with that bargain until the government comes looking to take their assets one way or another.

Hillary is coming out with a whole host of new spending proposals and she plans to raise taxes. She talks about "the rich" as paying for everything but we know that is a blatant lie. The rich don't have enough money to afford all the spending we've already done, let alone what she is promising to increase it to in the future. We have trillions in debt and hundreds of trillions in future liabilities. We are running a big Ponzi scheme and we are allowing this to continue rather than insisting that it stop. We stop it by requiring a balanced federal budget and debt payments, and we cut government spending (not raise taxes) to pay for it. We make government as small as necessary to perform its vital functions, not as large as possible to assist citizens in every aspect of their lives, from birth to death.

You know that our children and their children (and probably several more generations) are going to end up having to pay off these debts and obligations, don't you? Is that really the legacy that our generation wants to pass along?




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