Councilman Robbins sounds completely off the mark in his latest op-ed, “Lake Tahoe Needs Change,” like a student just out of his first economics class. He laments the changes in the area’s demographics, business diversity, and home prices over the past 25 years, diagnoses these changes as problems that must be fixed, and then denounces the shadowy forces that are trying to sabotage his heroic act.
Many of his arguments would be persuasive if South Lake Tahoe were an isolated island with no economic ties to the outside world, but his oversimplifications and misplaced nostalgia lead to prescriptions that only hurt patients and should be resisted.
A major flaw in Robbins’ argument is that it completely ignores economic specialization. There’s a reason why iPhones are “designed in California, assembled in China.” Over the past few decades, accelerating globalization, falling transportation costs, and the widespread use of the Internet have dramatically changed how and where goods and services are produced. Communities that found niche markets (such as Silicon Valley and Shenzhen) have thrived and grown, while communities that could not compete on cost or efficiency (such as the Rust Belt) have declined. While not everyone has benefited equally, the overall standard of living has improved dramatically. Simply put, things get better slowly. South Lake Tahoe’s economic hallmarks are tourism, government subsidies, and remote work (which is what brought Robbins and my family here).
Every change has its pros and cons, and nothing comes for free. Tourism brings billions of dollars from outside the region, creating businesses and jobs that would never have come here otherwise, at the expense of traffic congestion and pollution. Government subsidies bring protected wilderness areas and world-class hospitals, at the expense of economic growth. Remote work brings wages and families, creating demand for higher-value goods and services, but at the expense of gentrification and soaring housing costs. Overall, South Lake Tahoe is one of the most subsidized places on earth. We are taking more money from people who don’t stay here (tourists, taxpayers, second homeowners, etc.) and primarily exporting our problems overseas.
In 2000, Amazon primarily sold books and music, Kmart and Sears were major retailers, gambling was legal only in Nevada and Atlantic City, and 737s ferried thousands of tourists to South Lake Tahoe Airport. In 2010, California’s unemployment rate was 12.4%. It’s not surprising that housing was more affordable then. Any wistful, selective nostalgia for either of these eras is misplaced. Both are economic worlds that don’t exist today and (with any luck, in the case of the second example) will never exist again.
He also seems not to recognize another fundamental force in the economy: demographics. The population is not uniform in age, and population spikes and drops drive markets. Today, the most populous cohort is 30-34 years old, followed by 20-24 and 25-29 years old. In 2010, the most populous cohorts were 45-49 and 50-54 years old, the Baby Boomers. These demographic trends alone, accelerated by the pandemic, remote work, and TRPA’s unscientific growth restrictions, will cause housing markets to tighten and school enrollment to decline.
But this isn’t a market failure. The unstoppable forces of time are slowly pushing homeownership out of reach for people now in their 70s. We’re starting to see the first signs: The rental market is softer than it has been in years, and the months’ supply of homes for sale may exceed pre-pandemic levels later this year.
Robbins, confident in his misdiagnosis, begins prescribing a cure: taxing and expanding the size of local government. Tax tourists, tax small businesses, tax Heavenly, tax first-time home buyers, tax builders. Given enough time, you might come up with a way to tax government. Needless to say, I am against this.
Imagine the local economy as a sailboat on Lake Tahoe. The wind waxes and wanes and changes direction. Robbins’ solution is to attach a gasoline-powered fan to the back of the boat and blow wind into the sails. Of course, sailors don’t do that. They sail into the wind and let the wind take them, even if it means their boat doesn’t go in a straight line.
Local governments are shockingly inefficient and ineffective at playing the role of housing developers, landlords, hoteliers, and entrepreneurs (tax-powered fans). Instead, they should focus on what they do best: public goods like roads, police, fire, and parks. These needs are almost entirely funded by existing tax rates. The city recently released a study on how to spend its $2 million surplus, an amount that exceeds its multimillion-dollar emergency fund.
Whether market failures are real or perceived to have occurred, their solutions are best left to those with the resources to make a difference. That means state and federal governments can spend billions of dollars instead of millions, or, in the latter case, create money out of thin air. Even if all of Robbins’ proposed taxes were enacted, South Lake Tahoe would never be able to compete economically with Nevada. The metaphorical iPhone will never be manufactured in Lake Tahoe. Local governments can never hope to raise or generate enough money to do more than fan the sails.
I agree with Mr. Robbins. Tahoe needs change. Mr. Robbins should be defeated in the next election just as an incompetent doctor should lose his license. We can do better.
Sincerely yours, Seth Darob
