Grassroot Perspective – July 16, 2003-Stocks Soar, Dividends Abound in Q2; Congress Seeks to Ban Competition?; Penn Central: The Supreme Court’s Big Mistake that Led to Smart Growth

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”Shoots (News, Views and Quotes)”


– Stocks Soar, Dividends Abound in Q2

President Bush’s Tax Cuts Drive Markets to Best Quarter Since 1998

WASHINGTON – The Standard & Poor’s 500-stock index finished its best
quarter since 1998 yesterday, rising 14.8 percent since March 1. Meanwhile, hundreds of companies have responded to President Bush’s dividend tax cut by raising dividend yields or issuing their very first dividends. These developments have investor advocates praising Bush’s tax cuts for stimulating the markets.

“The double tax on dividends made dividends a bad deal, discouraged
investment, and hurt the economy,” said Daniel Clifton, executive
director of American Shareholders Association (ASA). “Since that burden
has been significantly reduced, markets are soaring and investors are
reaping new dividends.”

On Jan. 7th, Bush proposed abolishing the double taxation of dividends
and, by the end of May, Congress had passed a 65 percent reduction of
that double tax. The bold policy change forced companies to reevaluate
their investment policies. As such, many prominent companies have begun
issuing dividends for the first time. These include Microsoft, Cendant,
Qualcomm, Polo Ralph Lauren, Mandalay Resort Group, and World Wrestling
Entertainment. ASA’s initial research finds that well over 100 major
companies have increased their dividends in that same period.

Many other companies are considering issuing dividends in response to
the tax changes. During the tax cut debate, Larry Ellison, CEO of
cash-rich Oracle, said, “[W]e certainly might very well have a dividend.
But it certainly will depend on the Congress enacting a tax change.”

And companies in some industries are feeling pressure to issue
dividends: After two major gaming companies announced last month that
they would begin paying dividends, expectations rose that the rest of
the industry would do so as well. Following Mandalay and International
Game Technology’s dividend announcements, the Las Vegas Sun reported
that it is “likely Harrah’s Entertainment, Park Place Entertainment
Corp., MGM Mirage and Station Casinos will start paying dividends.”

“When companies issue dividends, investors win,” continued Clifton. “Dividend payments signal the true financial health of companies, return profits to their rightful owners, and discourage corporate malfeasance. That’s why Bush’s tax reform was so essential and the markets are correctly responding to the president’s bold action.”

Above article is quoted from The American Shareholders Association Press
Release July 1, 2003

– Congress Seeks to Ban Competition?

President Bush has been pushing an effort to require federal agencies to
allow private companies to compete for the work done by all 850,000
federal workers who perform commercial activities. But now federal
employee unions are spearheading an effort in Congress to ban those
competitions. The first targets have been the Federal Aviation
Administration, the Department of Interior, and the Department of

The Reason Public Policy Institute has released a report, “Frequently
Asked Questions about Federal Competitive Sourcing,” which calls for an
opportunity for federal commercial activities to move to the private
sector, where they usually belong.

To access the report, of for more information about The Reason Public
Policy Institute, visit

Above article is quoted from The James Madison Institute, The Madison
Policy Digest

”Roots (Food for Thought)”

– Penn Central: The Supreme Court’s Big Mistake that Led to Smart Growth

By Randall O’Toole

This month’s issue of “Planning” magazine, published by the American
Planning Association, celebrates the twenty-fifth anniversary of the
Supreme Court’s decision in Penn Central vs. New York City — but
this should be a cause for mourning for supporters of the American
dream. In that case, the Penn Central Railroad wanted to build a
skyscraper above Grand Central Terminal, the much-admired Manhattan
passenger train station. Historic preservationists, upset over the
recent destruction of Pennsylvania Station, Manhattan’s other classic
train station, convinced the city to deny the railroad a permit to
build the skyscraper.

Penn Central sued, claiming this was a taking of property and
required compensation under the fifth amendment to the Constitution.
The skyscraper would have returned millions of dollars per year to
the railroad and would not have significantly changed the appearance
of the terminal. In fact, the terminal was originally designed to
have a skyscraper-hotel built on top of it.

The case began in 1965 when the Penn Central was one of the nation’s
largest companies. By the time the Supreme Court made its decision,
thirteen years later, the railroad had suffered the largest
bankruptcy in the nation’s history up to that point, a bankruptcy
that could have been averted if the railroad had not had to suffer
the kind of regulation exemplified by the Grand Central Terminal
case. (Railroad deregulation in 1980 led to railroad prosperity that
had not been seen since railroad regulation in 1907.)

In a six-to-three decision, the Supreme Court held that New York had
the right to preserve the character and aesthetic features of the
city. Moreover, no compensation was required because the railroad was
still able to earn a profit from managing Grand Central Terminal as a
train station. As University of Chicago law professor Richard Epstein
points out, this reasoning is absurd: What if the railroad had sold
the right to build a skyscraper to someone else? Then the historic
preservation law would take 100 percent of the value of that right.
Why would compensation be justified in that case but not in the
actual case?

In considering the Penn Central decision, Planning magazine claims
that it had “very little” effect on the definition of private
property. After all, the magazine reasons, it is merely a restatement
of the Supreme Court’s 1926 Euclid decision, which authorized zoning.

In fact, Penn Central was vastly different from Euclid. In early
zoning laws such as that contested by Euclid, neighborhoods of
single-family homes sought to protect themselves and their property
values from nuisances such as industrial, commercial, or multi-family
developments. No one ever questioned the right of cities to control
nuisances. If in a residential neighborhood you have a factory that
emits a vile odor, or a vacant lot that you turn into a junkyard
filled with old cars and refrigerators, your actions represent a
nuisance to your neighbors and the city can force you to clean up.

When the village of Euclid, Ohio, enacted a zoning law in 1922, a
local Realtor objected that the ordinance zoned land as residential
that he wanted to sell for industrial use. As in the Penn Central
case, the attorney for Euclid argued that zoning was needed to
preserve the character of the village. But the Supreme Court of 1926
was not impressed by this argument. The Court instead supported the
argument of an early land-use planning attorney, Alfred Bettman, who
filed an amicus brief arguing that zoning was a valid form of
nuisance control. In a six-to-three decision, the Court supported
that view.

Euclid was about maintaining property values by controlling
nuisances. Penn Central was not. No one ever maintained that one more
skyscraper in Manhattan would reduce the value of adjacent
properties. No one ever maintained that a skyscraper was a nuisance.
They just said, “Penn Central has something we want, and we want to
make them pay for it while we get the benefit.”

Penn Central opened the door for downzoning such as that found in
rural Oregon, where no one is allowed to build a house on their own
land unless they own 160 acres and, if it is farm land, actually earn
(depending on soil productivity) $40,000 to $80,000 a year farming
it. Penn Central opened the door for upzoning, such as zoning to
transform a neighborhood of single-family homes into apartments by
requiring, among other things, that if your house burns down you must
rebuild it as an apartment.

Where Euclid allowed zoning to protect local property values, Penn
Central allowed zoning to reduce local property values. Where Euclid
allowed zoning to prevent nuisances in neighborhoods, Penn Central
allowed zoning to impose nuisances on neighborhoods. In short,
without Penn Central in 1978, we would not have smart growth today.

One of the dissenters from the Penn Central case was then-Associate
Justice William Rehnquist. Since he became Chief Justice in 1986,
several cases have chipped away at Penn Central, but most have been
five-to-four decisions. Let’s hope that a larger majority of the
Supreme Court sees fit to completely overturn Penn Central before its
thirtieth anniversary.

Above article is quoted from The Thoreau Institute’s Vanishing
Automobile update #38 Randall O’Toole heads The American
Dream Coalition, you can reach him at

”Evergreen (Today’s Quote)”

“The best means of forming a manly, virtuous, and happy people will be
found in the right education of youth. Without this foundation, every
other means, in my opinion, must fail.” — George Washington

”’Edited by Richard O. Rowland, president of Grassroot Institute of Hawaii. He can be reached at (808) 487-4959 or by email at:”’ ”’For more information, see its Web site at:”’