BERNIE SANDERS ON INFRASTRUCTURE

On August 27, 2015, FeelTheBern.org posted:

America built the first train, but now it has one of the oldest rail systems in the world — woefully inadequate for a 21st-century society. Many of us may remember the images of the Minneapolis Bridge collapsing in Minnesota in 2007. Bernie sees rebuilding our infrastructure as a way to both create jobs and address the rampant infrastructure problems that are accumulating in our country.

Rebuild America’s Infrastructure

Bernie believes we are long overdue to refurbish our country’s infrastructure. Any American who deals with potholes, slow internet service, and the unavailability of public transit – among other numerous and regular inconveniences – knows this first-hand.

What is infrastructure?

Infrastructure is the basic physical stuff which makes our civilization work: roads, bridges, dams, electrical grids, railways, airports, waterways, and phone and internet lines. Well-maintained infrastructure increases transportation efficiency, decreases threats posed by natural disasters, and promotes economic growth.

The most identifiable piece of American infrastructure is the Interstate Highway System. This development was signed into law by Republican president Dwight D. Eisenhower in 1956. Its benefits have been overwhelmingly positive for both business and everyday citizens.

Is our infrastructure really “crumbling”?

Yes. In its annual report card on the nation’s infrastructure, the American Society of Civil Engineers (ASCE) gave the United States a cumulative grade of D+. In 2010 alone, it was estimated that deficiencies in surface infrastructure from potholes and outdated rail lines to collapsing bridges cost us $130 billion between property damage and lost time.

Recent examples of bridge collapses in California, Washington, Texas, Missouri, and Minnesota only serve to underline this growing problem. Here’s the video from Minnesota in 2007

While arguing to garner to support for his proposed infrastructure legislation, Bernie expounded:

“America once led the world in building and maintaining a nationwide network of safe and reliable bridges and roads. Today, nearly a quarter of the nation’s 600,000 bridges have been designated as structurally deficient or functionally obsolete. Let’s rebuild our crumbling infrastructure. Let’s make our country safer and more efficient. Let’s put millions of Americans back to work.”

How can we afford investing $1 trillion in infrastructure?

We can’t afford not to! According to a report by the Congressional Budget Office (CBO), federal spending on transportation and water infrastructure since 2003 has decreased by 19 percent (23 percent with respect to new infrastructure) while only a 6 percent increase in spending on operations and maintenance has developed in its place. According to theaforementioned ACSE report:

  • 24.9 percent of bridges are functionally obsolete or structurally deficient, over which more than 200 million trips are taken daily
  • 42 percent of major urban highways are congested, costing us $101 billion annually and increasing carbon emissions
  • 32 percent of roads are in poor or mediocre condition, which adds up to a cost of $324 per motorist every year

As Bernie has noted, the cost of the Iraq war — which included rebuilding much of the infrastructure that was destroyed — is now hovering at $1.7 trillion dollars. Furthermore, Bernie has introduced a number of bills to curb corporate tax dodging, which would account for over half of the required revenue in addition to the previously mentioned savings. Investing in infrastructure boosts our economy now and saves money long-term.

Rebuilding Will Provide Jobs

Bernie believes that the fastest way to create millions of jobs is to rebuild our crumbling infrastructure; he’s been saying so for decades! In his introduction to the The Rebuild America Act of 2015, he noted, “There’s a reason that investing in our infrastructure has traditionally enjoyed bipartisan support in Congress. It’s a good idea. It creates jobs, income, profits and tax revenues. It lays a foundation for the efficient operation of our economy in the future.”

How does investing in infrastructure help the economy?

Fixing our infrastructure would give American workers good-paying jobs, stimulate our economy, and boost our national productivity.

According to a research paper by Standard & Poor, infrastructure investment would create about 29,000 construction jobs for a mere $1.3 billion in spending, and many more jobs indirectly. Additionally it estimated a $2 billion growth in real GDP for the same amount, making it a deficit-negative investment.

Bernie has suggested a conservative estimate of 13 million good paying jobs for the 5-year, $1 trillion investment. Forbes, on the other hand, puts the estimate at closer to 27 million for a similar $1.2 trillion investment over 5 years.

Increased jobs result in increased spending among average Americans, which further stimulates economic growth in other sectors. Increased efficiency results in lower transportation costs, as well as saving companies and individual citizens money on both fuel and time. Last, but not least, increasing the safety and reliability of infrastructure prevents extended damage and emergency repairs, avoiding the costs of medical emergencies, related property damage, and human lives.

What has Bernie specifically proposed to improve our infrastructure?

Bernie recently introduced the The Rebuild America Act of 2015, which would invest $1 trillion over the next 5 years toward rebuilding and expanding on our country’s infrastructure.

http://feelthebern.org/bernie-sanders-on-infrastructure/

There is no question that  rebuilding and expanding our infrastructure is an effective way to both create jobs and address the rampant infrastructure problems that are accumulating in our country.

But the “create jobs” justification does not position working people where they need to be in our future economy. There is MORE INCOME to be earned by workers through OWNING the companies (corporations) who are awarded the taxpayer-supported contracts to do the work. As a major component of Bernie Sanders initiative there must be included the stipulation that the companies bidding and ultimately awarded the contract work be EMPLOYEE OWNED. These companies can transform to employee-owned companies by structuring themselves using an Employee Stock Ownership Plan (ESOP), which Bernie Sanders supports. Already there are over 11,000 companies who are structured using an ESOP.

To fully understand and undertake this policy approach see http://www.cesj.org/learn/capital-homesteading/ch-vehicles/employee-stock-ownership-plans-esops/, http://www.cesj.org/learn/capital-homesteading/ch-vehicles/employee-stock-ownership-plans-esops/infrastructural-reforms-tax-incentives-encouraging-employee-stock-ownership-plans-esops/, http://www.cesj.org/resources/articles-index/whose-pie-and-why-esops/ and http://www.cesj.org/resources/articles-index/beyond-esop-steps-toward-tax-justice/

BERNIE SANDERS ON THE FEDERAL BUDGET & NATIONAL DEBT

On August 26, 2015, FeelTheBurn,org posted the following:

The United States currently faces a $468 billion deficit. There are many politicians who want to reduce this deficit by cutting back on social programs. For years Bernie Sanders has sharply criticized politicians who support such policies – which he considers regressive – as seen here in his fiery 2003 exchange with former Federal Reserve Chairman Alan Greenspan:

 

Bernie has different ideas:

A progressive estate tax, also known as the “billionaire tax,” may be the fairest way to begin reducing the federal deficit. Bernie has introduced a bill that closes many of the loopholes used by the extremely wealthy to avoid having to pay their fair share of taxes. An estate tax also serves to prevent the creation of an American aristocracy — a family that can continually hand down its wealth across generations without working or contributing to society in a meaningful way.

At the same time, Bernie wants to increase income taxes on the richest Americans so that they finally pay a decent share of America’s budget. That means taxing capital gains and dividends as ordinary income, which are currently taxed at a comparatively low rate.

Who are the “richest Americans”?

These are the Americans who qualify for the top income tax bracket. Right now, the top tax bracket begins with money made beyond $400,000, and any additional money is taxed at 39.6 percent.

Does this mean these individuals pay 39.6 percent of their entire income in taxes?

Not at all. It means that money earned beyond $400,000 is taxed at 39.6 percent. The first $400,000 they make is taxed at the lower tax bracket rates.

This is actually how all tax brackets work in a progressive tax system.

I heard Bernie wants to raise the top tax bracket to 90 percent. That seems too high.

That’s actually not true. Bernie has never said he wants to do that. He has recently said that he is “working right now on a comprehensive tax package, which I suspect will, for the top marginal rates, go over 50 percent.”

But has it ever been that high?

Actually, yes. The top tax rate was over 90 percent from 1944 until 1964, including while Republican Dwight D. Eisenhower was president. This article in Business Insider shows just how low the 39.6 percent tax is compared to historical tax rates.

OK, what’s the estate tax?

The estate tax is a tax on the estate of someone after they pass away.

What does Bernie think is wrong with it?

While for many years this tax unfairly affected the estates and farms of many working- and middle-class Americans, it has been significantly changed to only affect large estates, worth over several millions of dollars. The problem is that the rate has been lowered and the cap raised to such an extent that it has amounted to a huge tax break for the super-rich.

OK, so what is Bernie’s answer to reforming the estate tax?

Bernie has proposed lowering the bar on estate taxes, so individuals’ estates worth more than $3.5 million and couples’ estates worth more than $7 million will be affected. This bill also increases the amount of tax on these estates, and closes loopholes used to avoid paying these taxes.

How much revenue can raising taxes on dividends and capital gains yield?

Bernie estimates that it will raise over $319 billion over ten years.

To see a full explanation of Bernie’s tax reform ideas, read the tax section of the Addressing Economic Inequality issues page.

Tax Corporations and the Wealthy Fairly

Despite record breaking profits, the share of the federal budget paid by corporate income tax is down from 33 percent in 1950 to just 9 percent today. Meanwhile, the past decades have seen large corporation closing their American offices and moving headquarters overseas to avoid paying taxes. Bernie believes that closing tax loopholes for corporations is an absolute necessity for fixing the federal budget.

Bernie also wants to expand Wall Street regulation and discourage reckless gambling in the financial sector by instating the Financial Transaction Tax (FTT). Closing loopholes like this and others could be enough to raise $590 billion over the next ten years. For more info on the FTT and closing loopholes, see the Financial Regulation issues page.

What kind of loopholes are being used now?

There are many different ways that corporations and other businesses are able to avoid paying their fair share of taxes, but offshore headquarters used for avoiding taxes is one of the most costly. Bernie has personally penned a letter to President Obama highlighting six of the top loopholes corporations use in a plea for the president to close them.

How much are closing tax loopholes worth?

Bernie has stated that loopholes created by these corporations are costing the country an estimated $100 billion per year in lost revenue. That is a trillion dollars over ten years!

What about ending tax breaks and subsidies for oil, coal, and gas companies?

Removing these tax breaks will generate an impressive $113 billion in revenue over ten years.

Reduce the Defense Budget

America’s defense spending is three times more than the number two spender: China. Evenamong members of the military, many believe that the budget could be drastically reduced.

Will reducing military spending leave America vulnerable to attack?

The defense budget can and should be reduced without presenting any risk to our country.

By how much can the military budget be safely reduced?

Currently there is no clear plan for defense spending cuts, and anything will have to be done very carefully. The real problem now is that defense spending has risen dramatically since 9/11 and can eat up as much as 20 percent of the federal budget.

To learn more Bernie’s stance on the Military Budget, click here

Investment in Infrastructure

An estimated 1 in 9 bridges in the US are considered structurally deficient, and many of the country’s dams are high-hazard. Unfortunately, that doesn’t even scratch the surface ofAmerica’s deep infrastructure problems. Bernie believes the country has sacrificed its own needs in favor of spending on foreign wars and other wasteful expenditures. He has proposed an infrastructure plan to spend $1 trillion over five years to rebuild America’s dilapidated roads, water mains, and congested railways.

How will spending $1 trillion help the economy?

The most obvious answer is that it will get the country back to work again, and will get Americans spending money. But beyond that, there are huge added benefits to a properly functioning infrastructure. For example, according to a study by Duke University, every dollar invested in transportation infrastructure returns $3.54 in economic impact. That is over three and a half trillion dollars in economic benefit over five years!

How many jobs will this create?

An estimated 13 million people will be put to work rebuilding America’s infrastructure. A $1 trillion investment would modernize our physical infrastructure, making our country’s systems safer and more efficient, while also creating millions of well-paying jobs. Here’s Bernie talking about it:

 

To learn more about this proposal, read what Bernie has to say about infrastructure.

http://feelthebern.org/bernie-sanders-on-the-federal-budget-and-national-debt/

While many of Bernie Sanders policy ideas are excellent, I would propose some refinement, which is covered in my article “Democratic Capitalism And Binary Economics: Solutions For A Troubled Nation and Economy” at http://foreconomicjustice.org/11/economic-justice/

In essence we need justice-committed leaders, such as Bernie Sanders, and activists who will advance inclusive prosperity, inclusive opportunity, and inclusive economic justice for ALL Americans.

This is what I propose:

  • Eliminate all tax loopholes and subsidies,
  • Provide an exemption of $100,000 for a family of four to meet their ordinary living needs,
  • Encourage corporations to pay out all their profits to their owners as taxable personal incomes to avoid paying corporate income taxes and to finance their growth by issuing new full-voting, full-dividend payout shares for broad-based citizen ownership,
  • Eliminate the payroll tax on workers and their employers, but
  • Pay out of general revenues for all promises for Social Security, Medicare, government pensions, health, education, rent and subsistence vouchers for the poor until their new jobs and ownership accumulations provide new incomes to substitute for the taxpayer dollars to fill these needs.
  • While the tax rate should be progressive, eventually the tax rate should be a single rate for all incomes from all sources above the personal exemption levels so that the budget could be balanced automatically and even allow the government to pay off the growing unsustainable long-term debt, but the poor would pay the first dollar over their exemption levels as would the hedge fund operator and others now earning billions of dollars from capital gains, dividends, rents and other property incomes which under some tax proposals would be exempted from any taxes.
  • As a substitute for inheritance and gift taxes, a transfer tax should be imposed on the recipients whose holdings exceeded $1 million, thus encouraging the super-rich to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.
  • The Federal Reserve should stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and
  • Begin creating an asset-backed currency that could enable every child, woman and man to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.
  • The CHA would process an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets.
  • The shares would be purchased using interest-free credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the added technology, renewable energy systems, manufacturing factories, rentable space for entrepreneurial endeavor and infrastructure, both repair and new, added to the economy.
  • Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, but
  • Would not require citizens to reduce their funds for consumption to purchase shares.

Furthermore, enact the proposed Capital Homestead Act. (See http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.) The Capital Homestead Act will enable EVERY child, woman, and man to borrow newly created money to purchase a pro rata share of the capital “growth ring” added to the economy each year, to be repaid with future dividends received on the shares purchased.

immediately reinstitute Glass-Steagall legislation, except with much stronger provisions. Within 90 days there must be a complete separation between investment banking, commercial banking, insurance, and all other discrete forms of banking and financial services. Commercial banks may temporarily continue to offer consumer banking services, but these must be phased out or spun off from the commercial banking function within three to five years. Credit unions, savings and loans, and similar institutions were designed to handle consumer banking services, and specialization in financial services is one of the keys to good internal control.

Immediately open the Federal Reserve Discount Window to rediscount “qualified agricultural, commercial, and industrial paper” from commercial banks.  This is what the Federal Reserve was designed to do as authorized under Section 13 of the Federal Reserve Act. Make certain, however, that “qualified” is defined as including a provision that expands ownership of newly formed capital, and is limited to financially feasible capital projects adequately collateralized, and “acceptable collateral” is defined as capital credit insurance. Extend the term of qualified paper to up to ten or fifteen years, as was done in part in the 1930s in an effort to provide funding for new capital. (Back then it didn’t work very well because otherwise qualified borrowers lacked collateral in the form of capital credit insurance to be able to take advantage of the program.) Short-term paper (90 day or less) may qualify without the expanded capital ownership provision, unless renewed past 360 days. (This will institute 100 percent reserves for all loans rediscounted at the Federal Reserve.) All of this is either currently in the law, or could be added without legislation with regulations. Also, begin phasing out open market operations in government debt paper, with the goal of retiring the debt completely and backing the money supply 100 percent with private sector assets.

Phase out the progressive tax with the phasing in of growing capital income simultaneously with the broadening of capital owners, and reform the tax code, simplifying it by treating all personal income from whatever source exactly the same for tax purposes. Exempt from taxation $20,000 for dependents, $30,000 for non-dependents, eliminate all other deductions and credits at the personal level, and give a lifetime deferral of $1 million on the current value of capital in a Capital Homestead Account. Tax all personal income above the exemption and deferral at the same rate for everybody. Increase the corporate tax substantially, but make dividends paid out to owners tax deductible at the corporate level, and treated as regular income at the personal level, unless used to acquire dividend-paying assets in a Capital Homestead account. A corporation or other business that pays out all profits and finances growth with new equity issues would thereby avoid all corporate income taxes.

The end result is that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on the State and whatever elite controls the coercive powers of government.

Executive Excess: CEOs Gain From Massive Downsizing

This is an enlightening article from May 1997, in which Marc Bayard and Chuck Collins of the United For A Fair Economy and Sarah Anderson and John Cavanagh of the Institute For Policy Studies write the Fourth Annual Executive Compensation Survey:

Foreword

U.S. Representative Martin Olav Sabo

For the last two decades, our nation has seen the gap between incomes of the rich and the poor grow by leaps and bounds. Nothing exemplifies this income gap better than the large disparity between executive pay and worker pay.

I believe that when many Americans complain about excessive executive pay, they are not really as upset about high pay as they are about the inequity that exists within so many companies. Part of the American work ethic has been that when a company succeeds, workers should get their fair share, and should be able to advance along with the company. Accordingly, many people are repelled when the workers at the bottom of the ladder have stagnant wages while executives prosper.

If economic opportunity is not extended to all Americans, we face the possibility of becoming a nation that is, in the words of former Labor Secretary Robert Reich, “sharply divided between the very rich and very poor.” Clearly, such a development—the elimination of a strong middle class as the defining element of American society—would threaten the very fabric of our economy and society. It is therefore in our common interest for the government to address economic inequality in America.

We have made some headway in reducing inequality by expanding the Earned Income Tax Credit and increasing the minimum wage. Nevertheless, the government must do more. I have proposed using the tax code to eliminate what is essentially a subsidy for excessive executive pay. My legislation, the Income Equity Act of 1997, does this by limiting the tax deduction for executive compensation to 25 times the salary of the lowest-paid full-time worker in a firm.

My bill is only one way to address the persistent income gap in America. This report is an important contribution to this struggle. The report highlights a troubling trend that we must address: CEO compensation has risen even faster in firms that have slashed their workforces over the past year. I congratulate the Institute for Policy Studies and United for a Fair Economy on this report, and on their continuing efforts to gain economic security for American workers.

Martin Olav Sabo represents the Fifth Congressional District of Minnesota. iii

Foreword

Morton Bahr

I n 1994, I thought I had seen corporate greed in the communications and entertainment industry peak when Ray Smith of Bell Atlantic took home a million stock options. Then in 1995, AT&T’s Robert Allen received options worth as much as $84.5 million—and announced 40,000 job cuts. And now in 1996 comes Disney’s Michael Eisner, with a pay package of $8,650,000 and options worth up to $984,000,000. There seems to be no end to CEO greed.

The pay gap between workers and CEOs has become enormous. CEOs in the United States make more than 200 times what average workers make. Compare this to Europe, where CEOs make only 20 to 30 times what the average workers are paid. And, as CEOs get richer, the rest of us are falling further and further behind, despite rising productivity and corporate profits.

The fortunes of all Americans used to rise together, but the last 15 years have brought prosperity only to the richest. To take just one example, from 1983 to 1989, the richest one-half of one percent of American families increased their wealth by $1.45 trillion. If that money were invested at a conservative rate of 7 percent, it would generate $100 billion per year, enough to create 18 million $50,000 a year jobs. America created the wealth but not the jobs. Just imagine 18 million more teachers, firefighters, or police officers. Instead, real incomes for the poorest in our society have fallen and working families are struggling with mounting debt and working longer hours, often juggling multiple jobs with minimal or no benefits.

We at the Communications Workers of America and the labor movement join with the Institute for Policy Studies, United for a Fair Economy, and many other allies in calling for a new vision of corporate accountability, one that embraces the interests of all: workers, managers, stockholders, customers, and neighbors. Transforming the U.S. corporate economy from one that focuses only on profits for Wall Street and excessive pay packages for CEOs to one that promotes jobs with justice for Main Street is our challenge for the 21st century.

Morton Bahr is the President of the Communications Workers of America, AFL-CIO. iv

Foreword

Robert B. Zevin

For those of us who want to see our children grow up as good citizens and productive workers in a democratic and fair society, there is something corrosive and disheartening about the well-publicized tributes which are lavished annually upon the lords of our corporate fiefdoms.

The 30 worthy gentlemen tabulated in this study were paid an average of $4,610,200 for their efforts in 1996. But they were perhaps entitled to extra compensation for bearing the collective burden of serving as executioners of the dreams of 209,015 workers and their families—a staggering 6967 average layoffs per CEO. Not to mention spreading fear and reducing morale for millions of additional employees.

If the total compensation received by the average American CEO in 1996 alone were invested in U.S. Government bonds, the interest on that investment would pay 15 employees their average wage for the rest of their lives and still leave the whole pay package for the CEO to bequeath to his business school.

As social investors, we have brought the issue of executive compensation to executive suites and shareholder meetings. However, the problem of excessive compensation at the top is ubiquitous in the private economy. The forces of competition, conspicuous display and measuring success against others are driving executive compensation farther and farther above the earnings of the ordinary millions.

This problem can best be addressed by a steeply progressive income tax or consumption tax. Similar top-down social policies have helped other countries contain the gap between boss and employee. Among many benefits from reduced inefficiencies, higher taxes on gargantuan pay packages would protect corporations from wasting their resources on a competitive compensation race and would protect society from further demoralization and despair.

I commend United for a Fair Economy and the Institute for Policy Studies for this report and hope that its message is heard in boardrooms across the nation and in Congress.

Robert B. Zevin is Economist and Senior Vice President of United States Trust Company of Boston and a pioneer of Socially Responsible Investing for the past thirty years.

Executive Summary

In 1996, 30 firms announced U.S. layoffs of between 2,800 and 48,640 workers. Our analysis of these leading job-cutters reveals that their top executives, for the most part, were handsomely rewarded for wielding the axe.

MAJOR FINDINGS:

1. Layoff Leaders Get Massive Compensation Hike In 1996, the layoff leaders enjoyed an average increase in total direct compensation (including salary, bonus, and long-term compensation) of 67.3 percent—far above the average increase of 54 percent for executives at the top 365 U.S. firms. Most of the job-cutters’ increased earnings came in the form of gains from stock options, reflecting the continued trend on Wall Street to reward downsizers. In salary and bonuses, the layoff leaders received a 22 percent raise, which placed them far ahead of the average U.S. worker, who earned only a 3 percent raise in wages in 1996.

2. Enormous Wage Gap at Job-Cutting Firms Of the 12 top job-cutting companies for which data were available, the average gap between the top executive’s salary and bonus (not including stock options) and the wage of the lowest-paid full-time worker was 178 to 1.

3. Efforts to Control Excessive Pay are Gaining Strength A national coalition of community, labor, and business organizations is working to eliminate the massive loophole that presently allows corporations to deduct excessive salaries from their taxes. One proposed law, the Income Equity Act (H.R. 687), would prohibit corporate tax deductions on salary and bonuses that exceed 25 times the wage of a firm’s lowest-paid full-time worker. This “CEO Subsidy” costs U.S. taxpayers billions. Capping the deduction for only the top two executives at the 365 U.S. firms surveyed in Business Week would generate over $514 million in increased revenue.

Introduction

Editorializing on skyrocketing CEO pay, Business Week’s editors recently quipped: “Making 200 times the average paycheck, simply because the market has a good year, doesn’t generate respect.”1 Such excessive pay should garner even less respect when the beneficiary is a leading job-slasher. However, for the fourth year in a row, our analysis of the executives who announced the largest layoffs of the year shows that these CEOs, for the most part, continue to make out very well on pay day.

This report focuses on the 30 CEOs who announced layoffs of between 2,800 and 48,640 workers in 1996. These layoff leaders’ fat pay packages, detailed in Table 1 in the appendix, underscore the perverse incentives and devastating inequalities that permeate the U.S. economy. Last year saw a staggering 54-percent rise in total compensation for the top two executives at 365 leading U.S. firms (to an average of $5.8 million)2 and a hefty 11-percent hike in corporate profits.3 At the same time, U.S. companies continued to shed workers and the average U.S. wage barely kept pace with inflation.

Will it ever end? Section Three of this report documents a broad range of efforts—by legislators, investor activists, and even some businesses—that are aimed at putting the brakes on runaway pay. These efforts are a sign that American society is getting fed up with excessive compensation—particularly for executives who are throwing thousands of workers out on the street.

See http://www.ips-dc.org/wp-content/uploads/1997/05/Executive_Excess_1997.pdf for the main body of the report.

 

Bernie Sanders’ Big Idea To Spread The Wealth — Let Workers Own A Piece Of The Business They Work For

On August 18, 2015, Dave Johnson writes on AlterNet:

Businesses are run for a profit that goes into the pockets of the business’ “investors.” To be an investor requires that you have money. This is a rigged system that by definition channels the returns and gains of our economy to the people who have money in the first place.

That system forces a terrible business model: investors try to squeeze money out of businesses as fast as they can. Then they move on. People who put the money in have even more money, but leave behind them a trail of squeezed-out ruin. This squeezing of the business involves squeezing the workers, squeezing the product, squeezing the customers and squeezing the government out of any taxes that might be owed.

This is bad for America’s long-term economy, people, environment and — since it brings about intense concentration of wealth — bad for our democracy, too. But hey, it’s great for a few already-wealthy people at the top.

What If The Workers Are The Investors?

What happens if a business is owned and run by the people who work there, and not by some distant investors interested only in profit?

Worker co-ops are businesses owned and operated by the people who work at the company. Instead of squeezing and draining the company, workers, customers and surrounding communities to provide an increasing return for investors, worker-owned companies have an incentive to be responsible, obviously to pay good wages, to respect surrounding communities and the environment (where the workers/owners live) and to make the business a viable long-term operation.

There are great outcomes for worker co-op workers who get decent pay, benefits and dignity on the job. Employee productivity goes up, and they want to come to work so sick days and other absenteeism goes down. This helps the company, and on a large scale would help the economy.

This idea sounds great, but what are conservatives going to say about any plan that boosts working people? Sarah Jaffe, writing at Al Jazeera, in “Can worker cooperatives alleviate income inequality?”, found a quote by Ronald Reagan praising the idea of workers owning the businesses where they work,

“…Gar Alperovitz in his book ‘What Then Must We Do?’ notes that it’s not only the historical left that has touted worker ownership. As proof, he offers this 1987 quote from Republican icon Ronald Reagan: ‘I can’t help but believe that in the future we will see in the United States and throughout the Western world an increasing trend toward the next logical step, employee ownership. It is a path that befits a free people.’”

Enter Bernie Sanders

In December, before he was a presidential candidate, Senator Sanders wrote in “An Economic Agenda for America: 12 Steps Forward”, “here are 12 initiatives that I will be fighting for which can restore America’s middle class.” One was his proposal for worker cooperatives,

“3. We need to develop new economic models to increase job creation and productivity. Instead of giving huge tax breaks to corporations which ship our jobs to China and other low-wage countries, we need to provide assistance to workers who want to purchase their own businesses by establishing worker-owned cooperatives. Study after study shows that when workers have an ownership stake in the businesses they work for, productivity goes up, absenteeism goes down and employees are much more satisfied with their jobs.”

Sanders is serious about this and had previously offered legislation to this effect in 2012, 2009 and previously. In June 2014 Sanders’ website described the plan for legislation he was introducing with Vermont’s Senator Patrick Leahy. He proposed to get the government involved in starting and maintaining worker cooperatives and creating a bank to fund worker ownership. From the post:

“Under one bill in Sanders’ package, the U.S. Department of Labor would provide funding to states to establish and expand employee ownership centers. These centers would provide training and technical support for programs promoting employee ownership and participation throughout the country. This legislation is modeled on the success of the Vermont Employee Ownership Center which has done an excellent job in educating workers, retiring business owners, and others about the benefits of worker ownership.

“A second bill would create a U.S. Employee Ownership Bank to provide loans to help workers purchase businesses through an employee stock ownership plan or a worker-owned cooperative.”

Conor Lynch explains at Salon in, “The radical Bernie Sanders idea that could reclaim America for the 99 percent,” that short of a badly-needed re-engineering of our system, worker co-ops might be a model for getting past the terrible working situation where companies squeeze everyone and unions are not succeeding in fixing things:

“This is where worker co-ops, which could be a major and crucial part of future worker movements, come in. After 40 years of crumbling unions, we can say quite honestly that the 20th century union movement, while it helped pave the way for basic worker rights within capitalism, was only a temporary solution. A capitalist must always look for ways to better exploit labor, or cease to be a capitalist — Marx called this the ‘coercive laws of competition.’ As long as we operate within this system (where the very few own capital), worker gains can only be temporary, before they are lost to technology or cheap labor overseas.

“Worker co-ops could provide a new platform for future workers movements. Last year, Sanders introduced a bill that would provide states with funding from the Department of Labor to ‘establish and expand employee ownership centers,’ which would ‘provide training and technical support for programs promoting employee ownership and participation throughout the country.’ Another bill would create a U.S. Employee Ownership Bank to ‘provide loans to help workers purchase businesses through an employee stock ownership plan or a worker-owned cooperative.’”

At AlterNet, Zaid Jilani also writes about Sanders’ plan, in Bernie Sanders’ Campaign Issues Truly Extraordinary Campaign Plank”:

“Today, there are 11,000 worker-owned companies in America, and there are up to 120 million Americans who are involved in some form of co-op if you include credit unions in the tally. By endorsing their expansion, Sanders is proving that his differences with his opponents are not just in style but in substance – providing an alternative to the top-down corporations that run our economy.”

Jilani provides the example of about Spain’s Mondragon corporation, which describes itself as “one of the leading Spanish business groups, integrated by autonomous and independent cooperatives with production subsidiaries and corporate offices in 41 countries and sales in more than 150.” Mondragon has 74,000 employees and almost 12 billion Euros in total revenue. Jilani writes:

“Within the various units of the corporation, workers decide on the direction of production for the company as well as what to do with the profits. While CEO-to-worker pay ratios in the United States have reached over 300-to-1, in Mondragon the cooperative model ensures that in most of its operations, ‘the ratio of compensation between top executives and the lowest-paid members is between three to one and six to one.’”

Why should our system be designed to work only for the already wealthy and encourage business models that squeeze workers, customers, communities, the environment and our country? It is time to take a serious look at the ways our government could work for We the People by helping us to start and buy out companies and otherwise invest in worker-owned businesses.

http://www.alternet.org/news-amp-politics/bernie-sanders-big-idea-spread-wealth-let-workers-own-piece-business-they-work?sc=fb

A far better invisible incorporation structure for worker-owned corporations is the Employee Stock Ownership Plan (ESOP), which Bernie Sanders advocates. In fact, the reference to 11,000 corporations owned by workers should inform the reader that they are ESOP-structured S-corporations whose owners elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes. But there is a limitation to worker-owned corporations, that is: ONE MUST BE AN EMPLOYEE/WORKER. That means that millions and millions of Americans are by definition left out and even those Americans working now may not be working in the near future as tectonic shifts in the technologies of production and the globalization of production at the lowest cost destroy jobs and devalue the worth of labor.

A cooperative is member-owned and -controlled, rather than controlled by investors as in a corporation. But this is not to say that a corporation cannot be broadly owned by its workers and other citizens (as mentioned, there are presently over 11,000 employee-owned corporations structured under an Employee Stock Ownership Plan), all with voting rights and entitlement to their share of full earnings dividend income. Unlike a cooperative in which all members and shareholders have to be active in the co-operative, in a corporation the shareholders elect a board who in turn hires a CEO to oversee the day-to-day operation of the corporation. As cooperatives are formed to provide a service to their members rather than a return on investment, it is difficult to attract potential members/shareholders whose primary interest is a financial return. The idea to broaden personal/individual ownership of corporations, is to create new owners and empower each to benefit fully from a return on investment. While cooperatives are not obligated to seek profit for investors, but are created to meet members’ needs, there is still the requirement, as with corporations, that the investment to create them will generate a profit. Otherwise, there would be no income to sustain the business. So both cooperatives and corporations must operate using the logic of corporate finance that investments must pay for themselves.

Both cooperatives and business corporations are legally corporations under state charters. Both structures can be broadly OWNED (cooperatives: member/shareholder/investors; corporations: shareholder/investors) with operations overseen by vote of the members or owners. The problem today with respect to corporations is that they are NARROWLY OWNED and thus a say in decisions is restricted to those who OWN the most shares. The idea behind the proposed Capital Homestead Act is to use financial mechanisms that broaden the ownership of corporations, broaden decision making and operational oversight, and return fully the profit earnings to the owners, rather than retain those earnings or debt finance for reinvestment, neither of which creates ANY new capital owners.

As for financing business growth, the corporation would issue and sell new stock, which would be acquired broadly by children, women, and men using insured, interest-free capital credit, repayable out of the future earnings of the growth investment. Thus, by re-invisioning the corporation, we can achieve the full benefits of the corporate structure, controlled by the people, for the people. Broadly owned corporations would empower all current and future generations to take priority over profits (for shareholders and executives) by operating in the best interests of the well-being of people, communities, and the planet.

For a comparative structure tutorial see http://www.uwcc.wisc.edu/whatisacoop/BusinessStructureComparison/

Bernie Sanders, while a long-time advocate for and supporter of employee-owned business corporations, now needs to take this concept to its fullest outcome and introduce legislation for the proposed Capital Homestead Act. See http://www.cesj.org/learn/capital-homesteading/http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.

The Capital Homestead Act is the fulfillment of the promise to broaden FUTURE wealth-creating, income-producing capital assets by creating millions and millions of NEW capital owners. Using financial mechanisms that provide insured, interest-free capital credit, repayable out of the FUTURE earnings of investments in the corporations growing America would empower EVERY child, woman, and man, whether employed or not, to acquire personal OWNERSHIP stakes in America’s viable and successful corporations simultaneously with their growth, without the requirement of past savings or ANY reduction in wages or benefits, if employed.

The Capital Homestead Act would facilitate the transformation of America’s corporations, now OWNED by a tiny minority wealthy ownership class, into a nation of universal capital owners, who would earn income through profit sharing and the full-earnings dividend payout of corporations, and enable America to finance its future economic prosperity while simultaneously creating new capital owners.

Norman Kurland, President of the Center for Economic and Social Justice (www.cesj.org) argues, “The haves represent a tiny fraction of humanity. Our ideas will split them between those who see our point and understand that they would benefit everyone without taking anything away from them during their lives, and those who want to keep ownership in an exclusive club. The latter cannot publicly attack the institution of private property without threatening the legal foundation that gives them their monopoly over the money system and the ownership system.”

Bernie Sanders is the ONLY candidate for president that will provide leadership to awaken all American citizens to force the politicians to follow the people and lift all legal barriers to universal capital ownership access by every child, woman, and man as a fundamental right of citizenship and the basis of personal liberty and empowerment. The goal should be to enable every child, woman, and man to become an owner of ever-advancing labor-displacing technologies, new and sustainable energy systems, new rentable space, new enterprises, new infrastructure assets, and productive land and natural resources as a growing and independent source of their future incomes.

The Evidence Keeps Pouring In: Capitalism Just Isn’t Working

Capitalism82415

Everything is a potential market to the capitalist, but it’s time to end the suffering of ordinary Americans, which is very good for the profit margins, and make human life a top concern.

Paul Buchheit, a college teacher, pretty much accurately identifies the failure of monopoly greed capitalism, which, for a long time, I have termed “Hoggism,” propelled by greed and the sheer love of power over others. “Hoggism” institutionalizes greed (creating concentrated capital ownership, monopolies, and special privileges). “Hoggism” is about the ability of greedy rich people to manipulate the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the money through monopolized productive capital ownership. Our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital “worker” owner more productive. How much employment can be destroyed by substituting machines for people is a measure of their success––always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming. The result is the consumer populous is not able to earn the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.

But Buchheit offers no solutions to reform the system. If only Buchheit could grasp the economics of reality wherein fundamentally, economic value is created through human and non-human contributions. NOTE, real physical productive capital, which is what Buchheit implies as “money owned,” isn’t money; it is measured in money (financial capital), but it is really producing power and earning power through ownership of the non-human factor of production. Financial capital, such as stocks and bonds, is just an ownership claim on the productive power of real capital. In the law, property is the bundle of rights that determines one’s relationship to things. As binary economists Louis Kelso and Patricia Hetter put it, “Money is not a part of the visible sector of the economy; people do not consume money. Money is not a physical factor of production, but rather a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers and privileges. It provides a means whereby certain individuals can accumulate claims against others, or against the economy as a whole, or against many economies. It is a system of symbols that many economists substitute for the visible sector and its productive enterprises, goods and services, thereby losing sight of the fact that a monetary system is a part only of the invisible sector of the economy, and that its adequacy can only be measured by its effect upon the visible sector.”

Buchheit needs to expand his thinking to address concentrated capital asset ownership and how the pursuit of the lowest cost production of production of products and services has led to and will continue to lead to globalization of production and replacement of human labor with “machines” that will replace work. And without work, under the present capitalist system, there will be  hordes of citizens of zero economic value, unable to earn enough money to support themselves or their families and become “customers with money” to support the system. Thus, once the wealthy ownership class has completely acquired the OWNERSHIP of the non-human means of production there will be no “customers with money” to pursue as the vast majority of the worlds population will simply be economically enslaved, dependent on what welfare and charity the wealthy ownership class and their puppet politicians decide to extend.

Of course this does not have to be the case when ONLY measured by work, a majority of people will cease to provide a means to earn an income.  The economic and political alternative is to reform the system to empower EVERY citizen to acquire ownership in FUTURE wealth-creating, income-producing capital assets resulting from technological invention and innovation.

In the larger picture, globalization is enabling multi-national corporations (those that produce not only in the United States but in other countries as well to produce and sell products and services internationally using the cheapest labor rates, as well as non-human productive capital. In real growth measures, productive capital is increasingly the source of the world’s economic growth and will continue to be so at an exponential rate, resulting in far less need for people to work. Because globalization and tectonic shifts in the technologies of production will accelerate the end of work by destroying jobs and devaluing the worth of labor, it is imperative that productive capital assets become the source of added property ownership incomes for all. The reality is if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. 

The question that Buchheit should be raising that requires an answer is now timely before us. It was first posed by Kelso in the 1950s but has never been thoroughly discussed on the national stage. Nor has there been the proper education of our citizenry that addresses what economic justice is and what capital ownership is. Therefore, by ignoring such issues of economic justice and capital ownership, our leaders are ignoring the concentration of power through monopoly ownership of productive capital, with the result of denying the 99 percenters equal opportunity and access to become capital owners. The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” and thus, “how do we get from a world in which the most productive factor—physical capital—is owned by a handful of people, to a world where the same factor is owned by a majority—and ultimately 100 percent—of the consumers, while respecting all the constitutional rights of present capital owners?”

Those seriously interested in exploring non-conventional solutions need  to read the article A New Look at Prices and Money: The Kelsonian Model for Achieving Rapid Growth Without Inflation at http://www.cesj.org/wp-content/uploads/2013/11/pricesandmoney.pdf. In this paper, a case is made for a major transformation of any nation’s monetary system so that in the future new money would be created in ways that would unharness the full productive potential of society, while closing the growing wealth gap between the richest 10 percent and the rest of society — and to do so voluntarily without the need to redistribute existing wealth. Prices, wages and interest rates would be controlled under the proposed model of development completely by competitive market forces, not by the whim of central bankers, politicians or organized power blocs.

It is imperative that we address  the structural problems of the system and reform the system to result in forward-looking growth.

Each year our national public debt has become harder to service because pretend-and-extend policy making has created a depression in real, capital asset investment and consumption (not the gambling casino stock market trading second-hand [owned] stock, because the extent of all productive capital asset OWNERSHIP is concentrated.

In concentrated capital ownership terms, roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages (saving from denial of consumption) to purchase capital assets. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor work by workers with capital work by the owners of productive capital assets. As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes physical capital ever more productive. Corporate decision makers know this, whether in the United States or China, or anywhere organized assemblies of people engage in production. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through make-work job creation, minimum wage requirements, and welfare programs. Such policies do not function effectively.

Even with historically low interest rates when the federal government borrows, say to repair obvious deficiencies in roads, rails, water systems and more and to upgrade such or finances the military-industrial complex, which perpetuates continuous war, only the people who already own productive capital are the beneficiaries of debt through contract work sold in the name of job creation, but in reality systematically concentrates more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming, and instead “re-invest” to further accumulate ever more capital wealth ownership. The result is the consumer populous is not able to earn the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.

The ever-growing trillions of dollar debt liability will come due on the heirs of today’s Americans.

Nor is the suggested solution by Reich and others to spread wealth by extracting a more heavy tax on the growing share of wealth accumulated by the owners of wealth-creating, income-producing capital to redistribute as a “universal basic income” viable and sustainable. Those who are productive, either through their labor or through the application of the productive capital assets they own will object to taxing their productive input to subsidize the idleness of millions of “takers.”

Under this proposed scheme, there would still be OWNERS of private property, and the productive, wealth-creating, income-producing private property OWNERS would be taxed to support a substantial REDISTRIBUTION of wealth in order to provide a “basic income” to EVERY citizen. This is the very essence of socialism.

The outcome is that the wealthy ownership class will still be the OWNERS of America’s productive capital assets and essentially, as OWNERSHIP LORDS, dominate the vast majority of citizens, who through a powerfully political government elite will be their “slaves”––”slaves” as in welfare and charity slaves, which the advocates of this proposal refuse to acknowledge.

The ONLY way out of the deepening economic inequality and the national debt hole is not to pursue austerity and cut spending (consumption), especially since there is a level below which you cannot go, but to increase income (production).

This is “Say’s Law of Markets.” It is based on Adam Smith’s first principle of economics, articulated in The Wealth of Nations: “Consumption is the sole end and purpose of all production.” The obvious corollary, of course, is that you can’t consume what hasn’t been produced — which is exactly the United States’ problem as well as other debt-ridden countries.

In short, you can mint, print, or borrow all the money you want, but if you’re not producing a marketable good or service for consumption, even if you have a mountain of gold, silver, or government debt paper backing your currency, you are trying to get out of a hole by digging it deeper.

If something doesn’t exist, you can’t consume it. the only thing that’s going to get the United States and other debt-ridden countries out of the hole they are in is to increase production dramatically, not cut consumption and pursue austerity.

Rather than focus on Job Creation that holds back technological invention and innovation, our economic policies should focus on wealth-creating, income-producing capital Ownership Creation, whose result will be REAL job creation where necessary to support rapid technological and societal development as we build a future economy that can support general affluence for EVERY citizen and provide inclusive prosperity, inclusive opportunity, and inclusive economic justice.

Given that there is no question that robotic technology will continue to expand the productivity and in large measure destroy jobs and devalue the value of human labor, the question that SHOULD be urgently addressed is WHO SHOULD OWN THE FUTURE TECHNOLOGY ECONOMY? Will ownership continue to concentrate among the 10 percent wealthy ownership class who now OWNS America, or will we reform the system to provide equal opportunity for EVERY child, woman, and man to acquire personal ownership in FUTURE productive capital assets paid for with the FUTURE earnings of the investments in our technological future?

The article asks that you ask yourself: “How is anyone going to make any money when there is ever less opportunity to work?” This is manifested in the myth that labor work is the ONLY way to participate in production and earn income, and that individual talent and effort are what distinguish the wealthy from the non-wealthy.

A sounder solution is to empower EVERY child, woman, and man to acquire personal OWNERSHIP stakes in America’s future productive capital assets by providing equal opportunity for EVERY citizen to OWN and to have access to acquiring wealth-creating, income-producing capital wealth (the whys and hows of becoming rich). And to ensure at death, using a transfer tax, that concentrated wealth estates are dispersed so that no “family” stays permanently wealthy and politically powerful.

The financial mechanism required must provide EVERY citizen an equal annual amount of newly issued money to be specifically used to form new productive assets determined by feasibility analysis using the logic of corporate finance––that the investments will produce earnings out of which to pay for the initial investment and provide the asset value for the new money issued for the extension of capital credit. The actual capital credit loans also must by interest-free as there is no conventional borrowing involved from people who have denied themselves consumption and saved in order to invest. This is all new money essentially issued by the Federal Reserve. The capital credit also must be insurable using private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). Thus, no citizen would ever be exposed to a reduction in their wages, if they are employed, or any other extraction of their personal equity wealth.

This solution, which upholds the principles of private property that our nation was founded upon and abates the further concentration of capital wealth ownership by providing equal opportunity to acquire and OWN future capital asset wealth, in which EVERY citizen becomes an OWNER and is thus a productive contributor to our societal development through “tools” they OWN, is the essence of the proposed Capital Homestead Act. See  http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.

The whole discussion on reforming the money and credit system leads to defined policy actions, as does tax reform. Let’s take taxes first.

Four principles must guide the tax reform. 1) Efficiency: the tax system raises enough money to run the government without giving too much disincentive to produce. 2) Understandability: people should be able to pay their taxes without having to become an expert. 3) Equitability: people must be taxed in accordance with their ability to pay. 4) Benefit: people who receive the benefit should pay for it.

Thus, the fairest tax given these principles is a single rate imposed equally on all income above an exemption sufficient to enable people to live in reasonable comfort. In addition, the tax laws must permit a tax deferral on income used to purchase capital assets, up to an amount sufficient to generate an adequate and secure income.

Thus, every citizen should have a Capital Homestead Account (CHA) or Economic Democracy Account in which he or she can accumulate a reasonable ownership stake of income-generating assets on a tax-deferred basis. A CHA (a super-IRA or asset tax-shelter for citizens) would be available at their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Now — how do they buy the assets in the first place on which to defer the taxes?

That’s where the necessary money and credit reforms kick in. Obviously, if a rich person or a corporation can finance new capital without using past savings, so can everyone else — and it’s better for the economy. The fact is, the more people who are productive, the more income there is, and the more income there is, the more demand there is, and the more demand there is, the more people can produce and sell ad infinitum.

Thus, every child, woman, and man can open up a Capital Homestead Account or Economic Democracy Account in which every individual can accumulate up to, let’s say, $1 million on a tax-deferred basis.  And at a ROI (“Return On Investment”) of a conservative 20 percent (in direct new asset-based new stock issues), would generate taxable income of $200,000 every year.

Further, companies can be encouraged to pay out all earnings as dividends by making dividends tax-deductible by the corporation — and substantially raising the corporate tax rate to give more encouragement. That way a corporation has a choice: avoid all taxation of income by paying it out to the shareholders (who can pay taxes on their dividends the same as any other income), or pay even more taxes than they do now.

Besides, if they finance growth by selling new shares instead of retaining earnings, the new shareholders are going to need the full stream of profit attributable to their shares to pay for those shares. Issuing shares instead of retaining earnings to finance growth will create a lot of new shareholders, and create a lot of new demand to justify more growth and jobs.

Thus, if everybody has the right to borrow money to purchase new shares that pay for themselves out of future dividends — and all profits are paid out as dividends — ordinary people can become capital owners without risking anything they might have at present, which for most people in the United States is not a risk because they don’t have anything to lose at present as it is. If the money is created using interest-free capital credit, there will always be enough money for new capital formation — and for creating new owners without taking anything from anybody else.

What about security for the capital credit loans? What if the borrower defaults, i.e., doesn’t make the loan payments?

There’s an entire industry that already exists to help people handle risk. It’s called “insurance.” Using the risk premium on all loans as an actual insurance premium (ala the Federal Housing Administration concept), a borrower or lender can take out a capital credit insurance policy that pays off in the event of default.

Instead of tax, monetary and inheritance policies favoring the top 1 percent at the expense of the 99 percent, these comprehensive policy and program reforms should become national policy as a necessary solution to correct the systemic injustices of monopoly capitalism. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.

The unworkability of the traditional market economy is evidenced by the diverse and growing deficits––federal budget deficit, trade deficit, city, county and state budget deficits––which are making it increasingly impossible for governments at every level to function. The increasing deficit burden is the result of the growing numbers of people who cannot earn, from legitimate participation in production, enough income to support themselves and their families. Thus government is obliged to “redistribute” to starve off economic collapse. The key means of redistribution is taxation––taking from the legitimate producers and giving to the non- or under-producers––to make up the economy’s ever wider income and purchasing power shortfalls.

The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to contribute productively to the economy as a capital owner as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.

Robert Reich: In The New Economy, Workers Take On All The Risk

On August 24, 2015, Robert Reich writes on AlterNet:

As Labor Day looms, more Americans than ever don’t know how much they’ll be earning next week or even tomorrow.

This varied group includes independent contractors, temporary workers, the self-employed, part-timers, freelancers, and free agents. Most file 1099s rather than W2s, for tax purposes.

On demand and on call – in the “share” economy, the “gig” economy, or, more prosaically, the “irregular” economy – the result is the same: no predictable earnings or hours.

It’s the biggest change in the American workforce in over a century, and it’s happening at lightening speed. It’s estimated that in five years over 40 percent of the American labor force will have uncertain work; in a decade, most of us.

Increasingly, businesses need only a relatively small pool of “talent” anchored in the enterprise –  innovators and strategists responsible for the firm’s unique competitive strength.

Everyone else is becoming fungible, sought only for their reliability and low cost.

Complex algorithms can now determine who’s needed to do what and when, and then measure the quality of what’s produced. Reliability can be measured in experience ratings. Software can seamlessly handle all transactions – contracts, billing, payments, taxes.

All this allows businesses to be highly nimble – immediately responsive to changes in consumer preferences, overall demand, and technologies.

While shifting all the risks of such changes to workers.

Whether we’re software programmers, journalists, Uber drivers, stenographers, child care workers, TaskRabbits, beauticians, plumbers, Airbnb’rs, adjunct professors, or contract nurses – increasingly, we’re on our own.

And what we’re paid, here and now, depends on what we’re worth here and now – in a spot-auction market that’s rapidly substituting for the old labor market where people held jobs that paid regular salaries and wages.

Even giant corporations are devolving into spot-auction networks. Amazon’s algorithms evaluate and pay workers for exactly what they contribute.

Apple directly employs fewer than 10 percent of the 1 million workers who design, make and sell iMacs and iPhones.

This giant risk-shift doesn’t necessarily mean lower pay. Contract workers typically make around $18 an hour, comparable to what they earned as “employees.”

Uber and other ride-share drivers earn around $25 per hour, more than double what the typical taxi driver takes home.

The problem is workers don’t know when they’ll earn it. A downturn in demand, or sudden change in consumer needs, or a personal injury or sickness, can make it impossible to pay the bills.

So they have to take whatever they can get, now: ride-shares in mornings and evenings, temp jobs on weekdays, freelance projects on weekends, Mechanical Turk or TaskRabbit tasks in between.

Which partly explains why Americans are putting in such long work hours – longer than in any other advanced economy.

And why we’re so stressed. According to polls, almost a quarter of American workers worry they won’t be earning enough in the future. That’s up from 15 percent a decade ago.

Irregular hours can also take a mental toll. Studies show people who do irregular work for a decade suffer an average cognitive decline of 6.5 years relative people with regular hours.

Such uncertainty can be hard on families, too. Children of parents working unpredictable schedules or outside standard daytime working hours are likely to have lower cognitive skills and more behavioral problems, according to new research.

For all these reasons, the upsurge in uncertain work makes the old economic measures – unemployment and income – look far better than Americans actually feel.

It also renders irrelevant many labor protections such as the minimum wage, worker safety, family and medical leave, and overtime – because there’s no clear “employer.”

And for the same reason eliminates employer-financed insurance – Social Security, workers compensation, unemployment benefits, and employer-provided health insurance under the Affordable Care Act.

What to do?  Courts are overflowing with lawsuits over whether companies have misclassified “employees” as “independent contractors,” resulting in a profusion of criteria and definitions.

We should aim instead for simplicity: Whatever party – contractor, client, customer, agent, or intermediary – pays more than half of someone’s income, or provides more than half their working hours, should be responsible for all the labor protections and insurance an employee is entitled to.

Presumably that party will share those costs and risks with its own clients, customers, owners, and investors. Which is the real point – to take these risks off the backs of individuals and spread them as widely as possible.

In addition, to restore some certainty to peoples’ lives, we’ll need to move away from unemployment insurance and toward income insurance.

Say, for example, your monthly income dips more than 50 percent below the average monthly income you’ve received from all the jobs you’ve taken over the preceding five years. Under one form of income insurance, you’d automatically receive half the difference for up to a year.

But that’s not all. Ultimately, we’ll need a guaranteed minimum basic income. But I’ll save this for another column.

Robert Reich continues to be stuck in one-factor thinking –– labor ONLY.  Reich dabbles in the issue of the future of “work”  but fails to come right out and state that without work there will be  hordes of citizens of zero economic value. Of course this does not have to be the case except for Reich’s view of that when ONLY measured by work, a majority of people will cease to provide a means to earn an income.  That is, unless the system can be reformed to empower EVERY citizen to acquire ownership in FUTURE wealth-creating, income-producing capital assets resulting from technological invention and innovation.

Reich states that “we’ll need to move away from unemployment insurance and toward income insurance”…and “Ultimately, we’ll need a guaranteed minimum basic income.

Reich ignores the further impact that legal and illegal immigration will have on the competitive labor market. Of the future he outlines there is one aspect of this future that is not addressed. It is legal and illegal immigration, which, according to government data, has since 2000 represented all of the net gain in the number of working-age (16 to 65) people holding a job.

The sharing economy Reich refers to is a desperate economy, in which people are renting their homes or parts of their home or using their own automobiles in service others who are looking for a lower cost means to lodge when traveling or to get from place to place without incurring costlier taxi services. People are desperate to earn more income to support themselves and their families, even if that means a non-traditional, non-benefit job or service they provide.

Shifting to the larger picture, which Reich does not address, is globalization, which is enabling multi-national corporations (those that produce not only in the United States but in other countries as well to produce and sell products and services internationally using the cheapest labor rates, as well as non-human productive capital. Productive capital is increasingly the source of the world’s economic growth and will continue to be so at an exponential rate, resulting in far less need for people to work. Because globalization and tectonic shifts in the technologies of production will accelerate the end of work by destroying jobs and devaluing the worth of labor, it is imperative that productive capital assets become the source of added property ownership incomes for all. The reality is if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. 

The question that Reich should be raising that requires an answer is now timely before us. It was first posed by binary economist Louis Kelso in the 1950s but has never been thoroughly discussed on the national stage. Nor has there been the proper education of our citizenry that addresses what economic justice is and what capital ownership is. Therefore, by ignoring such issues of economic justice and capital ownership, our leaders are ignoring the concentration of power through monopoly ownership of productive capital, with the result of denying the 99 percenters equal opportunity and access to become capital owners. The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” and thus, “how do we get from a world in which the most productive factor—physical capital—is owned by a handful of people, to a world where the same factor is owned by a majority—and ultimately 100 percent—of the consumers, while respecting all the constitutional rights of present capital owners?”

Those seriously interested in exploring non-conventional solutions need  to read the article A New Look at Prices and Money: The Kelsonian Model for Achieving Rapid Growth Without Inflation at http://www.cesj.org/wp-content/uploads/2013/11/pricesandmoney.pdf. In this paper, a case is made for a major transformation of any nation’s monetary system so that in the future new money would be created in ways that would unharness the full productive potential of society, while closing the growing wealth gap between the richest 10 percent and the rest of society — and to do so voluntarily without the need to redistribute existing wealth. Prices, wages and interest rates would be controlled under the proposed model of development completely by competitive market forces, not by the whim of central bankers, politicians or organized power blocs.

It is imperative that we address  the structural problems of the system and reform the system to result in forward-looking growth.

Each year our national public debt has become harder to service because pretend-and-extend policy making has created a depression in real, capital asset investment and consumption (not the gambling casino stock market trading second-hand [owned] stock, because the extent of all productive capital asset OWNERSHIP is concentrated.

In concentrated capital ownership terms, roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages (saving from denial of consumption) to purchase capital assets. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor work by workers with capital work by the owners of productive capital assets. As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes physical capital ever more productive. Corporate decision makers know this, whether in the United States or China, or anywhere organized assemblies of people engage in production. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through make-work job creation, minimum wage requirements, and welfare programs. Such policies do not function effectively.

Even with historically low interest rates when the federal government borrows, say to repair obvious deficiencies in roads, rails, water systems and more and to upgrade such or finances the military-industrial complex, which perpetuates continuous war, only the people who already own productive capital are the beneficiaries of debt through contract work sold in the name of job creation, but in reality systematically concentrates more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming, and instead “re-invest” to further accumulate ever more capital wealth ownership. The result is the consumer populous is not able to earn the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.

The ever-growing trillions of dollar debt liability will come due on the heirs of today’s Americans.

Nor is the suggested solution by Reich and others to spread wealth by extracting a more heavy tax on the growing share of wealth accumulated by the owners of wealth-creating, income-producing capital to redistribute as a “universal basic income” viable and sustainable. Those who are productive, either through their labor or through the application of the productive capital assets they own will object to taxing their productive input to subsidize the idleness of millions of “takers.”

Under this proposed scheme, there would still be OWNERS of private property, and the productive, wealth-creating, income-producing private property OWNERS would be taxed to support a substantial REDISTRIBUTION of wealth in order to provide a “basic income” to EVERY citizen. This is the very essence of socialism.

The outcome is that the wealthy ownership class will still be the OWNERS of America’s productive capital assets and essentially, as OWNERSHIP LORDS, dominate the vast majority of citizens, who through a powerfully political government elite will be their “slaves”––”slaves” as in welfare and charity slaves, which the advocates of this proposal refuse to acknowledge.

The ONLY way out of the deepening economic inequality and the national debt hole is not to pursue austerity and cut spending (consumption), especially since there is a level below which you cannot go, but to increase income (production).

This is “Say’s Law of Markets.” It is based on Adam Smith’s first principle of economics, articulated in The Wealth of Nations: “Consumption is the sole end and purpose of all production.” The obvious corollary, of course, is that you can’t consume what hasn’t been produced — which is exactly the United States’ problem as well as other debt-ridden countries.

In short, you can mint, print, or borrow all the money you want, but if you’re not producing a marketable good or service for consumption, even if you have a mountain of gold, silver, or government debt paper backing your currency, you are trying to get out of a hole by digging it deeper.

If something doesn’t exist, you can’t consume it. the only thing that’s going to get the United States and other debt-ridden countries out of the hole they are in is to increase production dramatically, not cut consumption and pursue austerity.

Rather than focus on Job Creation that holds back technological invention and innovation, our economic policies should focus on wealth-creating, income-producing capital Ownership Creation, whose result will be REAL job creation where necessary to support rapid technological and societal development as we build a future economy that can support general affluence for EVERY citizen and provide inclusive prosperity, inclusive opportunity, and inclusive economic justice.

Given that there is no question that robotic technology will continue to expand the productivity and in large measure destroy jobs and devalue the value of human labor, the question that SHOULD be urgently addressed is WHO SHOULD OWN THE FUTURE TECHNOLOGY ECONOMY? Will ownership continue to concentrate among the 10 percent wealthy ownership class who now OWNS America, or will we reform the system to provide equal opportunity for EVERY child, woman, and man to acquire personal ownership in FUTURE productive capital assets paid for with the FUTURE earnings of the investments in our technological future?

The article asks that you ask yourself: “How is anyone going to make any money when there is ever less opportunity to work?” This is manifested in the myth that labor work is the ONLY way to participate in production and earn income, and that individual talent and effort are what distinguish the wealthy from the non-wealthy.

A sounder solution is to empower EVERY child, woman, and man to acquire personal OWNERSHIP stakes in America’s future productive capital assets by providing equal opportunity for EVERY citizen to OWN and to have access to acquiring wealth-creating, income-producing capital wealth (the whys and hows of becoming rich). And to ensure at death, using a transfer tax, that concentrated wealth estates are dispersed so that no “family” stays permanently wealthy and politically powerful.

The financial mechanism required must provide EVERY citizen an equal annual amount of newly issued money to be specifically used to form new productive assets determined by feasibility analysis using the logic of corporate finance––that the investments will produce earnings out of which to pay for the initial investment and provide the asset value for the new money issued for the extension of capital credit. The actual capital credit loans also must by interest-free as there is no conventional borrowing involved from people who have denied themselves consumption and saved in order to invest. This is all new money essentially issued by the Federal Reserve. The capital credit also must be insurable using private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). Thus, no citizen would ever be exposed to a reduction in their wages, if they are employed, or any other extraction of their personal equity wealth.

This solution, which upholds the principles of private property that our nation was founded upon and abates the further concentration of capital wealth ownership by providing equal opportunity to acquire and OWN future capital asset wealth, in which EVERY citizen becomes an OWNER and is thus a productive contributor to our societal development through “tools” they OWN, is the essence of the proposed Capital Homestead Act. See  http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.

The whole discussion on reforming the money and credit system leads to defined policy actions, as does tax reform. Let’s take taxes first.

Four principles must guide the tax reform. 1) Efficiency: the tax system raises enough money to run the government without giving too much disincentive to produce. 2) Understandability: people should be able to pay their taxes without having to become an expert. 3) Equitability: people must be taxed in accordance with their ability to pay. 4) Benefit: people who receive the benefit should pay for it.

Thus, the fairest tax given these principles is a single rate imposed equally on all income above an exemption sufficient to enable people to live in reasonable comfort. In addition, the tax laws must permit a tax deferral on income used to purchase capital assets, up to an amount sufficient to generate an adequate and secure income.

Thus, every citizen should have a Capital Homestead Account (CHA) or Economic Democracy Account in which he or she can accumulate a reasonable ownership stake of income-generating assets on a tax-deferred basis. A CHA (a super-IRA or asset tax-shelter for citizens) would be available at their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Now — how do they buy the assets in the first place on which to defer the taxes?

That’s where the necessary money and credit reforms kick in. Obviously, if a rich person or a corporation can finance new capital without using past savings, so can everyone else — and it’s better for the economy. The fact is, the more people who are productive, the more income there is, and the more income there is, the more demand there is, and the more demand there is, the more people can produce and sell ad infinitum.

Thus, every child, woman, and man can open up a Capital Homestead Account or Economic Democracy Account in which every individual can accumulate up to, let’s say, $1 million on a tax-deferred basis.  And at a ROI (“Return On Investment”) of a conservative 20 percent (in direct new asset-based new stock issues), would generate taxable income of $200,000 every year.

Further, companies can be encouraged to pay out all earnings as dividends by making dividends tax-deductible by the corporation — and substantially raising the corporate tax rate to give more encouragement. That way a corporation has a choice: avoid all taxation of income by paying it out to the shareholders (who can pay taxes on their dividends the same as any other income), or pay even more taxes than they do now.

Besides, if they finance growth by selling new shares instead of retaining earnings, the new shareholders are going to need the full stream of profit attributable to their shares to pay for those shares. Issuing shares instead of retaining earnings to finance growth will create a lot of new shareholders, and create a lot of new demand to justify more growth and jobs.

Thus, if everybody has the right to borrow money to purchase new shares that pay for themselves out of future dividends — and all profits are paid out as dividends — ordinary people can become capital owners without risking anything they might have at present, which for most people in the United States is not a risk because they don’t have anything to lose at present as it is. If the money is created using interest-free capital credit, there will always be enough money for new capital formation — and for creating new owners without taking anything from anybody else.

What about security for the capital credit loans? What if the borrower defaults, i.e., doesn’t make the loan payments?

There’s an entire industry that already exists to help people handle risk. It’s called “insurance.” Using the risk premium on all loans as an actual insurance premium (ala the Federal Housing Administration concept), a borrower or lender can take out a capital credit insurance policy that pays off in the event of default.

Instead of tax, monetary and inheritance policies favoring the top 1 percent at the expense of the 99 percent, these comprehensive policy and program reforms should become national policy as a necessary solution to correct the systemic injustices of monopoly capitalism. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.

The unworkability of the traditional market economy is evidenced by the diverse and growing deficits––federal budget deficit, trade deficit, city, county and state budget deficits––which are making it increasingly impossible for governments at every level to function. The increasing deficit burden is the result of the growing numbers of people who cannot earn, from legitimate participation in production, enough income to support themselves and their families. Thus government is obliged to “redistribute” to starve off economic collapse. The key means of redistribution is taxation––taking from the legitimate producers and giving to the non- or under-producers––to make up the economy’s ever wider income and purchasing power shortfalls.

The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to contribute productively to the economy as a capital owner as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.

A World Without Work

In the July/August edition of The Atlantic, Derek Thompson writes:

1. Youngstown, U.S.A.

The end of work is still just a futuristic concept for most of the United States, but it is something like a moment in history for Youngstown, Ohio, one its residents can cite with precision: September 19, 1977.

For much of the 20th century, Youngstown’s steel mills delivered such great prosperity that the city was a model of the American dream, boasting a median income and a homeownership rate that were among the nation’s highest. But as manufacturing shifted abroad after World War  II, Youngstown steel suffered, and on that gray September afternoon in 1977, Youngstown Sheet and Tube announced the shuttering of its Campbell Works mill. Within five years, the city lost 50,000 jobs and $1.3 billion in manufacturing wages. The effect was so severe that a term was coined to describe the fallout: regional depression.

Youngstown was transformed not only by an economic disruption but also by a psychological and cultural breakdown. Depression, spousal abuse, and suicide all became much more prevalent; the caseload of the area’s mental-health center tripled within a decade. The city built four prisons in the mid-1990s—a rare growth industry. One of the few downtown construction projects of that period was a museum dedicated to the defunct steel industry.

This winter, I traveled to Ohio to consider what would happen if technology permanently replaced a great deal of human work. I wasn’t seeking a tour of our automated future. I went because Youngstown has become a national metaphor for the decline of labor, a place where the middle class of the 20th century has become a museum exhibit.

Derek Thompson talks with editor in chief James Bennet about the state of jobs in America. (See article)

“Youngstown’s story is America’s story, because it shows that when jobs go away, the cultural cohesion of a place is destroyed,” says John Russo, a professor of labor studies at Youngstown State University. “The cultural breakdown matters even more than the economic breakdown.”

In the past few years, even as the United States has pulled itself partway out of the jobs hole created by the Great Recession, some economists and technologists have warned that the economy is near a tipping point. When they peer deeply into labor-market data, they see troubling signs, masked for now by a cyclical recovery. And when they look up from their spreadsheets, they see automation high and low—robots in the operating room and behind the fast-food counter. They imagine self-driving cars snaking through the streets and Amazon drones dotting the sky, replacing millions of drivers, warehouse stockers, and retail workers. They observe that the capabilities of machines—already formidable—continue to expand exponentially, while our own remain the same. And they wonder: Is any job truly safe?
Futurists and science-fiction writers have at times looked forward to machines’ workplace takeover with a kind of giddy excitement, imagining the banishment of drudgery and its replacement by expansive leisure and almost limitless personal freedom. And make no mistake: if the capabilities of computers continue to multiply while the price of computing continues to decline, that will mean a great many of life’s necessities and luxuries will become ever cheaper, and it will mean great wealth—at least when aggregated up to the level of the national economy.
But even leaving aside questions of how to distribute that wealth, the widespread disappearance of work would usher in a social transformation unlike any we’ve seen. If John Russo is right, then saving work is more important than saving any particular job. Industriousness has served as America’s unofficial religion since its founding. The sanctity and preeminence of work lie at the heart of the country’s politics, economics, and social interactions. What might happen if work goes away?

The U.S. labor force has been shaped by millennia of technological progress. Agricultural technology birthed the farming industry, the industrial revolution moved people into factories, and then globalization and automation moved them back out, giving rise to a nation of services. But throughout these reshufflings, the total number of jobs has always increased. What may be looming is something different: an era of technological unemployment, in which computer scientists and software engineers essentially invent us out of work, and the total number of jobs declines steadily and permanently.

This fear is not new. The hope that machines might free us from toil has always been intertwined with the fear that they will rob us of our agency. In the midst of the Great Depression, the economist John Maynard Keynes forecast that technological progress might allow a 15-hour workweek, and abundant leisure, by 2030. But around the same time, President Herbert Hoover received a letter warning that industrial technology was a “Frankenstein monster” that threatened to upend manufacturing, “devouring our civilization.” (The letter came from the mayor of Palo Alto, of all places.) In 1962, President John F. Kennedy said, “If men have the talent to invent new machines that put men out of work, they have the talent to put those men back to work.” But two years later, a committee of scientists and social activists sent an open letter to President Lyndon B. Johnson arguing that “the cybernation revolution” would create “a separate nation of the poor, the unskilled, the jobless,” who would be unable either to find work or to afford life’s necessities.

Adam Levey

The job market defied doomsayers in those earlier times, and according to the most frequently reported jobs numbers, it has so far done the same in our own time. Unemployment is currently just over 5 percent, and 2014 was this century’s best year for job growth. One could be forgiven for saying that recent predictions about technological job displacement are merely forming the latest chapter in a long story called The Boys Who Cried Robot—one in which the robot, unlike the wolf, never arrives in the end.

The end-of-work argument has often been dismissed as the “Luddite fallacy,” an allusion to the 19th-century British brutes who smashed textile-making machines at the dawn of the industrial revolution, fearing the machines would put hand-weavers out of work. But some of the most sober economists are beginning to worry that the Luddites weren’t wrong, just premature. When former Treasury Secretary Lawrence Summers was an MIT undergraduate in the early 1970s, many economists disdained “the stupid people [who] thought that automation was going to make all the jobs go away,” he said at the National Bureau of Economic Research Summer Institute in July 2013. “Until a few years ago, I didn’t think this was a very complicated subject: the Luddites were wrong, and the believers in technology and technological progress were right. I’m not so completely certain now.”

2. Reasons to Cry Robot

What does the “end of work” mean, exactly? It does not mean the imminence of total unemployment, nor is the United States remotely likely to face, say, 30 or 50 percent unemployment within the next decade. Rather, technology could exert a slow but continual downward pressure on the value and availability of work—that is, on wages and on the share of prime-age workers with full-time jobs. Eventually, by degrees, that could create a new normal, where the expectation that work will be a central feature of adult life dissipates for a significant portion of society.

After 300 years of people crying wolf, there are now three broad reasons to take seriously the argument that the beast is at the door: the ongoing triumph of capital over labor, the quiet demise of the working man, and the impressive dexterity of information technology.

Labor’s losses. One of the first things we might expect to see in a period of technological displacement is the diminishment of human labor as a driver of economic growth. In fact, signs that this is happening have been present for quite some time. The share of U.S. economic output that’s paid out in wages fell steadily in the 1980s, reversed some of its losses in the ’90s, and then continued falling after 2000, accelerating during the Great Recession. It now stands at its lowest level since the government started keeping track in the mid‑20th century.

A number of theories have been advanced to explain this phenomenon, including globalization and its accompanying loss of bargaining power for some workers. But Loukas Karabarbounis and Brent Neiman, economists at the University of Chicago, have estimated that almost half of the decline is the result of businesses’ replacing workers with computers and software. In 1964, the nation’s most valuable company, AT&T, was worth $267 billion in today’s dollars and employed 758,611 people. Today’s telecommunications giant, Google, is worth $370 billion but has only about 55,000 employees—less than a tenth the size of AT&T’s workforce in its heyday.

The spread of nonworking men and underemployed youth. The share of prime-age Americans (25 to 54 years old) who are working has been trending down since 2000. Among men, the decline began even earlier: the share of prime-age men who are neither working nor looking for work has doubled since the late 1970s, and has increased as much throughout the recovery as it did during the Great Recession itself. All in all, about one in six prime-age men today are either unemployed or out of the workforce altogether. This is what the economist Tyler Cowen calls “the key statistic” for understanding the spreading rot in the American workforce. Conventional wisdom has long held that under normal economic conditions, men in this age group—at the peak of their abilities and less likely than women to be primary caregivers for children—should almost all be working. Yet fewer and fewer are.

Economists cannot say for certain why men are turning away from work, but one explanation is that technological change has helped eliminate the jobs for which many are best suited. Since 2000, the number of manufacturing jobs has fallen by almost 5 million, or about 30 percent.

Young people just coming onto the job market are also struggling—and by many measures have been for years. Six years into the recovery, the share of recent college grads who are “underemployed” (in jobs that historically haven’t required a degree) is still higher than it was in 2007—or, for that matter, 2000. And the supply of these “non-college jobs” is shifting away from high-paying occupations, such as electrician, toward low-wage service jobs, such as waiter. More people are pursuing higher education, but the real wages of recent college graduates have fallen by 7.7 percent since 2000. In the biggest picture, the job market appears to be requiring more and more preparation for a lower and lower starting wage. The distorting effect of the Great Recession should make us cautious about overinterpreting these trends, but most began before the recession, and they do not seem to speak encouragingly about the future of work.

The shrewdness of software. One common objection to the idea that technology will permanently displace huge numbers of workers is that new gadgets, like self-checkout kiosks at drugstores, have failed to fully displace their human counterparts, like cashiers. But employers typically take years to embrace new machines at the expense of workers. The robotics revolution began in factories in the 1960s and ’70s, but manufacturing employment kept rising until 1980, and then collapsed during the subsequent recessions. Likewise, “the personal computer existed in the ’80s,” says Henry Siu, an economist at the University of British Columbia, “but you don’t see any effect on office and administrative-support jobs until the 1990s, and then suddenly, in the last recession, it’s huge. So today you’ve got checkout screens and the promise of driverless cars, flying drones, and little warehouse robots. We know that these tasks can be done by machines rather than people. But we may not see the effect until the next recession, or the recession after that.”

Ryan Carson, the CEO of Treehouse, discusses the benefits of a 32-hour workweek. (See article)

Some observers say our humanity is a moat that machines cannot cross. They believe people’s capacity for compassion, deep understanding, and creativity are inimitable. But as Erik Brynjolfsson and Andrew McAfee have argued in their book The Second Machine Age, computers are so dexterous that predicting their application 10 years from now is almost impossible. Who could have guessed in 2005, two years before the iPhone was released, that smartphones would threaten hotel jobs within the decade, by helping homeowners rent out their apartments and houses to strangers on Airbnb? Or that the company behind the most popular search engine would design a self-driving car that could soon threaten driving, the most common job occupation among American men?

In 2013, Oxford University researchers forecast that machines might be able to perform half of all U.S. jobs in the next two decades. The projection was audacious, but in at least a few cases, it probably didn’t go far enough. For example, the authors named psychologist as one of the occupations least likely to be “computerisable.” But some research suggests that people are more honest in therapy sessions when they believe they are confessing their troubles to a computer, because a machine can’t pass moral judgment. Google and WebMD already may be answering questions once reserved for one’s therapist. This doesn’t prove that psychologists are going the way of the textile worker. Rather, it shows how easily computers can encroach on areas previously considered “for humans only.”

After 300 years of breathtaking innovation, people aren’t massively unemployed or indentured by machines. But to suggest how this could change, some economists have pointed to the defunct career of the second-most-important species in U.S. economic history: the horse.

For many centuries, people created technologies that made the horse more productive and more valuable—like plows for agriculture and swords for battle. One might have assumed that the continuing advance of complementary technologies would make the animal ever more essential to farming and fighting, historically perhaps the two most consequential human activities. Instead came inventions that made the horse obsolete—the tractor, the car, and the tank. After tractors rolled onto American farms in the early 20th century, the population of horses and mules began to decline steeply, falling nearly 50 percent by the 1930s and 90 percent by the 1950s.

Humans can do much more than trot, carry, and pull. But the skills required in most offices hardly elicit our full range of intelligence. Most jobs are still boring, repetitive, and easily learned. The most-common occupations in the United States are retail salesperson, cashier, food and beverage server, and office clerk. Together, these four jobs employ 15.4 million people—nearly 10 percent of the labor force, or more workers than there are in Texas and Massachusetts combined. Each is highly susceptible to automation, according to the Oxford study.
Technology creates some jobs too, but the creative half of creative destruction is easily overstated. Nine out of 10 workers today are in occupations that existed 100 years ago, and just 5 percent of the jobs generated between 1993 and 2013 came from “high tech” sectors like computing, software, and telecommunications. Our newest industries tend to be the most labor-efficient: they just don’t require many people. It is for precisely this reason that the economic historian Robert Skidelsky, comparing the exponential growth in computing power with the less-than-exponential growth in job complexity, has said, “Sooner or later, we will run out of jobs.”
Is that certain—or certainly imminent? No. The signs so far are murky and suggestive. The most fundamental and wrenching job restructurings and contractions tend to happen during recessions: we’ll know more after the next couple of downturns. But the possibility seems significant enough—and the consequences disruptive enough—that we owe it to ourselves to start thinking about what society could look like without universal work, in an effort to begin nudging it toward the better outcomes and away from the worse ones.

To paraphrase the science-fiction novelist William Gibson, there are, perhaps, fragments of the post-work future distributed throughout the present. I see three overlapping possibilities as formal employment opportunities decline. Some people displaced from the formal workforce will devote their freedom to simple leisure; some will seek to build productive communities outside the workplace; and others will fight, passionately and in many cases fruitlessly, to reclaim their productivity by piecing together jobs in an informal economy. These are futures of consumption, communal creativity, and contingency. In any combination, it is almost certain that the country would have to embrace a radical new role for government.

3. Consumption: The Paradox of Leisure

Work is really three things, says Peter Frase, the author of Four Futures, a forthcoming book about how automation will change America: the means by which the economy produces goods, the means by which people earn income, and an activity that lends meaning or purpose to many people’s lives. “We tend to conflate these things,” he told me, “because today we need to pay people to keep the lights on, so to speak. But in a future of abundance, you wouldn’t, and we ought to think about ways to make it easier and better to not be employed.”

Frase belongs to a small group of writers, academics, and economists—they have been called “post-workists”—who welcome, even root for, the end of labor. American society has “an irrational belief in work for work’s sake,” says Benjamin Hunnicutt, another post-workist and a historian at the University of Iowa, even though most jobs aren’t so uplifting. A 2014 Gallup report of worker satisfaction found that as many as 70 percent of Americans don’t feel engaged by their current job. Hunnicutt told me that if a cashier’s work were a video game—grab an item, find the bar code, scan it, slide the item onward, and repeat—critics of video games might call it mindless. But when it’s a job, politicians praise its intrinsic dignity. “Purpose, meaning, identity, fulfillment, creativity, autonomy—all these things that positive psychology has shown us to be necessary for well-being are absent in the average job,” he said.

The post-workists are certainly right about some important things. Paid labor does not always map to social good. Raising children and caring for the sick is essential work, and these jobs are compensated poorly or not at all. In a post-work society, Hunnicutt said, people might spend more time caring for their families and neighbors; pride could come from our relationships rather than from our careers.
The post-work proponents acknowledge that, even in the best post-work scenarios, pride and jealousy will persevere, because reputation will always be scarce, even in an economy of abundance. But with the right government provisions, they believe, the end of wage labor will allow for a golden age of well-being. Hunnicutt said he thinks colleges could reemerge as cultural centers rather than job-prep institutions. The word school, he pointed out, comes from skholē,the Greek word for “leisure.” “We used to teach people to be free,” he said. “Now we teach them to work.”
Hunnicutt’s vision rests on certain assumptions about taxation and redistribution that might not be congenial to many Americans today. But even leaving that aside for the moment, this vision is problematic: it doesn’t resemble the world as it is currently experienced by most jobless people. By and large, the jobless don’t spend their downtime socializing with friends or taking up new hobbies. Instead, they watch TV or sleep. Time-use surveys show that jobless prime-age people dedicate some of the time once spent working to cleaning and childcare. But men in particular devote most of their free time to leisure, the lion’s share of which is spent watching television, browsing the Internet, and sleeping. Retired seniors watch about 50 hours of television a week, according to Nielsen. That means they spend a majority of their lives either sleeping or sitting on the sofa looking at a flatscreen. The unemployed theoretically have the most time to socialize, and yet studies have shown that they feel the most social isolation; it is surprisingly hard to replace the camaraderie of the water cooler.

Most people want to work, and are miserable when they cannot. The ills of unemployment go well beyond the loss of income; people who lose their job are more likely to suffer from mental and physical ailments. “There is a loss of status, a general malaise and demoralization, which appears somatically or psychologically or both,” says Ralph Catalano, a public-health professor at UC Berkeley. Research has shown that it is harder to recover from a long bout of joblessness than from losing a loved one or suffering a life-altering injury. The very things that help many people recover from other emotional traumas—a routine, an absorbing distraction, a daily purpose—are not readily available to the unemployed.

Adam Levey

The transition from labor force to leisure force would likely be particularly hard on Americans, the worker bees of the rich world: Between 1950 and 2012, annual hours worked per worker fell significantly throughout Europe—by about 40 percent in Germany and the Netherlands—but by only 10 percent in the United States. Richer, college-educated Americans are working more than they did 30 years ago, particularly when you count time working and answering e-mail at home.

In 1989, the psychologists Mihaly Csikszentmihalyi and Judith LeFevre conducted a famous study of Chicago workers that found people at work often wished they were somewhere else. But in questionnaires, these same workers reported feeling better and less anxious in the office or at the plant than they did elsewhere. The two psychologists called this “the paradox of work”: many people are happier complaining about jobs than they are luxuriating in too much leisure. Other researchers have used the term guilty couch potato to describe people who use media to relax but often feel worthless when they reflect on their unproductive downtime. Contentment speaks in the present tense, but something more—pride—comes only in reflection on past accomplishments.

The post-workists argue that Americans work so hard because their culture has conditioned them to feel guilty when they are not being productive, and that this guilt will fade as work ceases to be the norm. This might prove true, but it’s an untestable hypothesis. When I asked Hunnicutt what sort of modern community most resembles his ideal of a post-work society, he admitted, “I’m not sure that such a place exists.”

Less passive and more nourishing forms of mass leisure could develop. Arguably, they already are developing. The Internet, social media, and gaming offer entertainments that are as easy to slip into as is watching TV, but all are more purposeful and often less isolating. Video games, despite the derision aimed at them, are vehicles for achievement of a sort. Jeremy Bailenson, a communications professor at Stanford, says that as virtual-reality technology improves, people’s “cyber-existence” will become as rich and social as their “real” life. Games in which users climb “into another person’s skin to embody his or her experiences firsthand” don’t just let people live out vicarious fantasies, he has argued, but also “help you live as somebody else to teach you empathy and pro-social skills.”

But it’s hard to imagine that leisure could ever entirely fill the vacuum of accomplishment left by the demise of labor. Most people do need to achieve things through, yes, work to feel a lasting sense of purpose. To envision a future that offers more than minute-to-minute satisfaction, we have to imagine how millions of people might find meaningful work without formal wages. So, inspired by the predictions of one of America’s most famous labor economists, I took a detour on my way to Youngstown and stopped in Columbus, Ohio.

4. Communal Creativity: The Artisans’ Revenge

Artisans made up the original American middle class. Before industrialization swept through the U.S. economy, many people who didn’t work on farms were silversmiths, blacksmiths, or woodworkers. These artisans were ground up by the machinery of mass production in the 20th century. But Lawrence Katz, a labor economist at Harvard, sees the next wave of automation returning us to an age of craftsmanship and artistry. In particular, he looks forward to the ramifications of 3‑D printing, whereby machines construct complex objects from digital designs.

The factories that arose more than a century ago “could make Model Ts and forks and knives and mugs and glasses in a standardized, cheap way, and that drove the artisans out of business,” Katz told me. “But what if the new tech, like 3-D-printing machines, can do customized things that are almost as cheap? It’s possible that information technology and robots eliminate traditional jobs and make possible a new artisanal economy … an economy geared around self-expression, where people would do artistic things with their time.”

In other words, it would be a future not of consumption but of creativity, as technology returns the tools of the assembly line to individuals, democratizing the means of mass production.

Something like this future is already present in the small but growing number of industrial shops called “makerspaces” that have popped up in the United States and around the world. The Columbus Idea Foundry is the country’s largest such space, a cavernous converted shoe factory stocked with industrial-age machinery. Several hundred members pay a monthly fee to use its arsenal of machines to make gifts and jewelry; weld, finish, and paint; play with plasma cutters and work an angle grinder; or operate a lathe with a machinist.

When I arrived there on a bitterly cold afternoon in February, a chalkboard standing on an easel by the door displayed three arrows, pointing towardbathrooms, pewter casting, and zombies. Near the entrance, three men with black fingertips and grease-stained shirts took turns fixing a 60-year-old metal-turning lathe. Behind them, a resident artist was tutoring an older woman on how to transfer her photographs onto a large canvas, while a couple of guys fed pizza pies into a propane-fired stone oven. Elsewhere, men in protective goggles welded a sign for a local chicken restaurant, while others punched codes into a computer-controlled laser-cutting machine. Beneath the din of drilling and wood-cutting, a Pandora rock station hummed tinnily from a Wi‑Fi-connected Edison phonograph horn. The foundry is not just a gymnasium of tools. It is a social center.

Adam Levey

Alex Bandar, who started the foundry after receiving a doctorate in materials science and engineering, has a theory about the rhythms of invention in American history. Over the past century, he told me, the economy has moved from hardware to software, from atoms to bits, and people have spent more time at work in front of screens. But as computers take over more tasks previously considered the province of humans, the pendulum will swing back from bits to atoms, at least when it comes to how people spend their days. Bandar thinks that a digitally preoccupied society will come to appreciate the pure and distinct pleasure of making things you can touch. “I’ve always wanted to usher in a new era of technology where robots do our bidding,” Bandar said. “If you have better batteries, better robotics, more dexterous manipulation, then it’s not a far stretch to say robots do most of the work. So what do we do? Play? Draw? Actually talk to each other again?”

You don’t need any particular fondness for plasma cutters to see the beauty of an economy where tens of millions of people make things they enjoy making—whether physical or digital, in buildings or in online communities—and receive feedback and appreciation for their work. The Internet and the cheap availability of artistic tools have already empowered millions of people to produce culture from their living rooms. People upload more than 400,000 hours of YouTube videos and 350 million new Facebook photos every day. The demise of the formal economy could free many would-be artists, writers, and craftspeople to dedicate their time to creative interests—to live as cultural producers. Such activities offer virtues that many organizational psychologists consider central to satisfaction at work: independence, the chance to develop mastery, and a sense of purpose.After touring the foundry, I sat at a long table with several members, sharing the pizza that had come out of the communal oven. I asked them what they thought of their organization as a model for a future where automation reached further into the formal economy. A mixed-media artist named Kate Morgan said that most people she knew at the foundry would quit their jobs and use the foundry to start their own business if they could. Others spoke about the fundamental need to witness the outcome of one’s work, which was satisfied more deeply by craftsmanship than by other jobs they’d held.

Late in the conversation, we were joined by Terry Griner, an engineer who had built miniature steam engines in his garage before Bandar invited him to join the foundry. His fingers were covered in soot, and he told me about the pride he had in his ability to fix things. “I’ve been working since I was 16. I’ve done food service, restaurant work, hospital work, and computer programming. I’ve done a lot of different jobs,” said Griner, who is now a divorced father. “But if we had a society that said, ‘We’ll cover your essentials, you can work in the shop,’ I think that would be utopia. That, to me, would be the best of all possible worlds.”

5. Contingency: “You’re on Your Own”

One mile to the east of downtown Youngstown, in a brick building surrounded by several empty lots, is Royal Oaks, an iconic blue-collar dive. At about 5:30 p.m. on a Wednesday, the place was nearly full. The bar glowed yellow and green from the lights mounted along a wall. Old beer signs, trophies, masks, and mannequins cluttered the back corner of the main room, like party leftovers stuffed in an attic. The scene was mostly middle-aged men, some in groups, talking loudly about baseball and smelling vaguely of pot; some drank alone at the bar, sitting quietly or listening to music on headphones. I spoke with several patrons there who work as musicians, artists, or handymen; many did not hold a steady job.

“It is the end of a particular kind of wage work,” said Hannah Woodroofe, a bartender there who, it turns out, is also a graduate student at the University of Chicago. (She’s writing a dissertation on Youngstown as a harbinger of the future of work.) A lot of people in the city make ends meet via “post-wage arrangements,” she said, working for tenancy or under the table, or trading services. Places like Royal Oaks are the new union halls: People go there not only to relax but also to find tradespeople for particular jobs, like auto repair. Others go to exchange fresh vegetables, grown in urban gardens they’ve created amid Youngstown’s vacant lots.

When an entire area, like Youngstown, suffers from high and prolonged unemployment, problems caused by unemployment move beyond the personal sphere; widespread joblessness shatters neighborhoods and leaches away their civic spirit. John Russo, the Youngstown State professor, who is a co-author of a history of the city, Steeltown USA, says the local identity took a savage blow when residents lost the ability to find reliable employment. “I can’t stress this enough: this isn’t just about economics; it’s psychological,” he told me.

Russo sees Youngstown as the leading edge of a larger trend toward the development of what he calls the “precariat”—a working class that swings from task to task in order to make ends meet and suffers a loss of labor rights, bargaining rights, and job security. In Youngstown, many of these workers have by now made their peace with insecurity and poverty by building an identity, and some measure of pride, around contingency. The faith they lost in institutions—the corporations that have abandoned the city, the police who have failed to keep them safe—has not returned. But Russo and Woodroofe both told me they put stock in their own independence. And so a place that once defined itself single-mindedly by the steel its residents made has gradually learned to embrace the valorization of well-rounded resourcefulness.

Karen Schubert, a 54-year-old writer with two master’s degrees, accepted a part-time job as a hostess at a café in Youngstown early this year, after spending months searching for full-time work. Schubert, who has two grown children and an infant grandson, said she’d loved teaching writing and literature at the local university. But many colleges have replaced full-time professors with part-time adjuncts in order to control costs, and she’d found that with the hours she could get, adjunct teaching didn’t pay a living wage, so she’d stopped. “I think I would feel like a personal failure if I didn’t know that so many Americans have their leg caught in the same trap,” she said.

Among Youngstown’s precariat, one can see a third possible future, where millions of people struggle for years to build a sense of purpose in the absence of formal jobs, and where entrepreneurship emerges out of necessity. But while it lacks the comforts of the consumption economy or the cultural richness of Lawrence Katz’s artisanal future, it is more complex than an outright dystopia. “There are young people working part-time in the new economy who feel independent, whose work and personal relationships are contingent, and say they like it like this—to have short hours so they have time to focus on their passions,” Russo said.

Schubert’s wages at the café are not enough to live on, and in her spare time, she sells books of her poetry at readings and organizes gatherings of the literary-arts community in Youngstown, where other writers (many of them also underemployed) share their prose. The evaporation of work has deepened the local arts and music scene, several residents told me, because people who are inclined toward the arts have so much time to spend with one another. “We’re a devastatingly poor and hemorrhaging population, but the people who live here are fearless and creative and phenomenal,” Schubert said.Whether or not one has artistic ambitions as Schubert does, it is arguably growing easier to find short-term gigs or spot employment. Paradoxically, technology is the reason. A constellation of Internet-enabled companies matches available workers with quick jobs, most prominently including Uber (for drivers), Seamless (for meal deliverers), Homejoy (for house cleaners), and TaskRabbit (for just about anyone else). And online markets like Craigslist and eBay have likewise made it easier for people to take on small independent projects, such as furniture refurbishing. Although the on-demand economy is not yet a major part of the employment picture, the number of “temporary-help services” workers has grown by 50 percent since 2010, according to the Bureau of Labor Statistics.
Some of these services, too, could be usurped, eventually, by machines. But on-demand apps also spread the work around by carving up jobs, like driving a taxi, into hundreds of little tasks, like a single drive, which allows more people to compete for smaller pieces of work. These new arrangements are already challenging the legal definitions of employer and employee, and there are many reasons to be ambivalent about them. But if the future involves a declining number of full-time jobs, as in Youngstown, then splitting some of the remaining work up among many part-time workers, instead of a few full-timers, wouldn’t necessarily be a bad development. We shouldn’t be too quick to excoriate companies that let people combine their work, art, and leisure in whatever ways they choose. 

Today the norm is to think about employment and unemployment as a black-and-white binary, rather than two points at opposite ends of a wide spectrum of working arrangements. As late as the mid-19th century, though, the modern concept of “unemployment” didn’t exist in the United States. Most people lived on farms, and while paid work came and went, home industry—canning, sewing, carpentry—was a constant. Even in the worst economic panics, people typically found productive things to do. The despondency and helplessness of unemployment were discovered, to the bafflement and dismay of cultural critics, only after factory work became dominant and cities swelled.

The 21st century, if it presents fewer full-time jobs in the sectors that can be automated, could in this respect come to resemble the mid-19th century: an economy marked by episodic work across a range of activities, the loss of any one of which would not make somebody suddenly idle. Many bristle that contingent gigs offer a devil’s bargain—a bit of additional autonomy in exchange for a larger loss of security. But some might thrive in a market where versatility and hustle are rewarded—where there are, as in Youngstown, few jobs to have, yet many things to do.

6. Government: The Visible Hand

In the 1950s, Henry Ford II, the CEO of Ford, and Walter Reuther, the head of the United Auto Workers union, were touring a new engine plant in Cleveland. Ford gestured to a fleet of machines and said, “Walter, how are you going to get these robots to pay union dues?” The union boss famously replied: “Henry, how are you going to get them to buy your cars? 

As Martin Ford (no relation) writes in his new book, The Rise of the Robots, this story might be apocryphal, but its message is instructive. We’re pretty good at noticing the immediate effects of technology’s substituting for workers, such as fewer people on the factory floor. What’s harder is anticipating the second-order effects of this transformation, such as what happens to the consumer economy when you take away the consumers.
Technological progress on the scale we’re imagining would usher in social and cultural changes that are almost impossible to fully envision. Consider just how fundamentally work has shaped America’s geography. Today’s coastal cities are a jumble of office buildings and residential space. Both are expensive and tightly constrained. But the decline of work would make many office buildings unnecessary. What might that mean for the vibrancy of urban areas? Would office space yield seamlessly to apartments, allowing more people to live more affordably in city centers and leaving the cities themselves just as lively? Or would we see vacant shells and spreading blight? Would big cities make sense at all if their role as highly sophisticated labor ecosystems were diminished? As the 40-hour workweek faded, the idea of a lengthy twice-daily commute would almost certainly strike future generations as an antiquated and baffling waste of time. But would those generations prefer to live on streets full of high-rises, or in smaller towns?

Today, many working parents worry that they spend too many hours at the office. As full-time work declined, rearing children could become less overwhelming. And because job opportunities historically have spurred migration in the United States, we might see less of it; the diaspora of extended families could give way to more closely knitted clans. But if men and women lost their purpose and dignity as work went away, those families would nonetheless be troubled.

The decline of the labor force would make our politics more contentious. Deciding how to tax profits and distribute income could become the most significant economic-policy debate in American history. In The Wealth of Nations,Adam Smith used the term invisible hand to refer to the order and social benefits that arise, surprisingly, from individuals’ selfish actions. But to preserve the consumer economy and the social fabric, governments might have to embrace what Haruhiko Kuroda, the governor of the Bank of Japan, has called the visible hand of economic intervention. What follows is an early sketch of how it all might work.

In the near term, local governments might do well to create more and more-ambitious community centers or other public spaces where residents can meet, learn skills, bond around sports or crafts, and socialize. Two of the most common side effects of unemployment are loneliness, on the individual level, and the hollowing-out of community pride. A national policy that directed money toward centers in distressed areas might remedy the maladies of idleness, and form the beginnings of a long-term experiment on how to reengage people in their neighborhoods in the absence of full employment.

We could also make it easier for people to start their own, small-scale (and even part-time) businesses. New-business formation has declined in the past few decades in all 50 states. One way to nurture fledgling ideas would be to build out a network of business incubators. Here Youngstown offers an unexpected model: its business incubator has been recognized internationally, and its success has brought new hope to West Federal Street, the city’s main drag.

Near the beginning of any broad decline in job availability, the United States might take a lesson from Germany on job-sharing. The German government gives firms incentives to cut all their workers’ hours rather than lay off some of them during hard times. So a company with 50 workers that might otherwise lay off 10 people instead reduces everyone’s hours by 20 percent. Such a policy would help workers at established firms keep their attachment to the labor force despite the declining amount of overall labor.

Spreading work in this way has its limits. Some jobs can’t be easily shared, and in any case, sharing jobs wouldn’t stop labor’s pie from shrinking: it would only apportion the slices differently. Eventually, Washington would have to somehow spread wealth, too.

One way of doing that would be to more heavily tax the growing share of income going to the owners of capital, and use the money to cut checks to all adults. This idea—called a “universal basic income”—has received bipartisan support in the past. Many liberals currently support it, and in the 1960s, Richard Nixon and the conservative economist Milton Friedman each proposed a version of the idea. That history notwithstanding, the politics of universal income in a world without universal work would be daunting. The rich could say, with some accuracy, that their hard work was subsidizing the idleness of millions of “takers.” What’s more, although a universal income might replace lost wages, it would do little to preserve the social benefits of work.

The most direct solution to the latter problem would be for the government to pay people to do something, rather than nothing. Although this smacks of old European socialism, or Depression-era “makework,” it might do the most to preserve virtues such as responsibility, agency, and industriousness. In the 1930s, the Works Progress Administration did more than rebuild the nation’s infrastructure. It hired 40,000 artists and other cultural workers to produce music and theater, murals and paintings, state and regional travel guides, and surveys of state records. It’s not impossible to imagine something like the WPA—or an effort even more capacious—for a post-work future.

What might that look like? Several national projects might justify direct hiring, such as caring for a rising population of elderly people. But if the balance of work continues to shift toward the small-bore and episodic, the simplest way to help everybody stay busy might be government sponsorship of a national online marketplace of work (or, alternatively, a series of local ones, sponsored by local governments). Individuals could browse for large long-term projects, like cleaning up after a natural disaster, or small short-term ones: an hour of tutoring, an evening of entertainment, an art commission. The requests could come from local governments or community associations or nonprofit groups; from rich families seeking nannies or tutors; or from other individuals given some number of credits to “spend” on the site each year. To ensure a baseline level of attachment to the workforce, the government could pay adults a flat rate in return for some minimum level of activity on the site, but people could always earn more by taking on more gigs.

Although a digital WPA might strike some people as a strange anachronism, it would be similar to a federalized version of Mechanical Turk, the popular Amazon sister site where individuals and companies post projects of varying complexity, while so-called Turks on the other end browse tasks and collect money for the ones they complete. Mechanical Turk was designed to list tasks that cannot be performed by a computer. (The name is an allusion to an 18th-century Austrian hoax, in which a famous automaton that seemed to play masterful chess concealed a human player who chose the moves and moved the pieces.)

A government marketplace might likewise specialize in those tasks that required empathy, humanity, or a personal touch. By connecting millions of people in one central hub, it might even inspire what the technology writer Robin Sloan has called “a Cambrian explosion of mega-scale creative and intellectual pursuits, a generation of Wikipedia-scale projects that can ask their users for even deeper commitments.”

Adam Levey

There’s a case to be made for using the tools of government to provide other incentives as well, to help people avoid the typical traps of joblessness and build rich lives and vibrant communities. After all, the members of the Columbus Idea Foundry probably weren’t born with an innate love of lathe operation or laser-cutting. Mastering these skills requires discipline; discipline requires an education; and an education, for many people, involves the expectation that hours of often frustrating practice will eventually prove rewarding. In a post-work society, the financial rewards of education and training won’t be as obvious. This is a singular challenge of imagining a flourishing post-work society: How will people discover their talents, or the rewards that come from expertise, if they don’t see much incentive to develop either?

Modest payments to young people for attending and completing college, skills-training programs, or community-center workshops might eventually be worth considering. This seems radical, but the aim would be conservative—to preserve the status quo of an educated and engaged society. Whatever their career opportunities, young people will still grow up to be citizens, neighbors, and even, episodically, workers. Nudges toward education and training might be particularly beneficial to men, who are more likely to withdraw into their living rooms when they become unemployed.

7. Jobs and Callings

Decades from now, perhaps the 20th century will strike future historians as an aberration, with its religious devotion to overwork in a time of prosperity, its attenuations of family in service to job opportunity, its conflation of income with self-worth. The post-work society I’ve described holds a warped mirror up to today’s economy, but in many ways it reflects the forgotten norms of the mid-19th century—the artisan middle class, the primacy of local communities, and the unfamiliarity with widespread joblessness.

The three potential futures of consumption, communal creativity, and contingency are not separate paths branching out from the present. They’re likely to intertwine and even influence one another. Entertainment will surely become more immersive and exert a gravitational pull on people without much to do. But if that’s all that happens, society will have failed. The foundry in Columbus shows how the “third places” in people’s lives (communities separate from their homes and offices) could become central to growing up, learning new skills, discovering passions. And with or without such places, many people will need to embrace the resourcefulness learned over time by cities like Youngstown, which, even if they seem like museum exhibits of an old economy, might foretell the future for many more cities in the next 25 years.

On my last day in Youngstown, I met with Howard Jesko, a 60-year-old Youngstown State graduate student, at a burger joint along the main street. A few months after Black Friday in 1977, as a senior at Ohio State University, Jesko received a phone call from his father, a specialty-hose manufacturer near Youngstown. “Don’t bother coming back here for a job,” his dad said. “There aren’t going to be any left.” Years later, Jesko returned to Youngstown to work, but he recently quit his job selling products like waterproofing systems to construction companies; his customers had been devastated by the Great Recession and weren’t buying much anymore. Around the same time, a left-knee replacement due to degenerative arthritis resulted in a 10-day hospital stay, which gave him time to think about the future. Jesko decided to go back to school to become a professor. “My true calling,” he told me, “has always been to teach.”

One theory of work holds that people tend to see themselves in jobs, careers, or callings. Individuals who say their work is “just a job” emphasize that they are working for money rather than aligning themselves with any higher purpose. Those with pure careerist ambitions are focused not only on income but also on the status that comes with promotions and the growing renown of their peers. But one pursues a calling not only for pay or status, but also for the intrinsic fulfillment of the work itself.

When I think about the role that work plays in people’s self-esteem—particularly in America—the prospect of a no-work future seems hopeless. There is no universal basic income that can prevent the civic ruin of a country built on a handful of workers permanently subsidizing the idleness of tens of millions of people. But a future of less work still holds a glint of hope, because the necessity of salaried jobs now prevents so many from seeking immersive activities that they enjoy.

After my conversation with Jesko, I walked back to my car to drive out of Youngstown. I thought about Jesko’s life as it might have been had Youngstown’s steel mills never given way to a steel museum—had the city continued to provide stable, predictable careers to its residents. If Jesko had taken a job in the steel industry, he might be preparing for retirement today. Instead, that industry collapsed and then, years later, another recession struck. The outcome of this cumulative grief is that Howard Jesko is not retiring at 60. He’s getting his master’s degree to become a teacher. It took the loss of so many jobs to force him to pursue the work he always wanted to do.

http://www.theatlantic.com/magazine/archive/2015/07/world-without-work/395294/

There are few articles that I have read that cover the topic of the future of ‘work” as well as this article by Derek Thompson in The Atlantic. This is a MUST READ article that looks at a future where there will be  hordes of citizens of zero economic value, when ONLY measured by work, which for a majority of people will cease to provide a means to earn an income.  That is, unless the system can be reformed to empower EVERY citizen to acquire ownership in FUTURE wealth-creating, income-producing capital assets resulting from technological invention and innovation.

I have bolded the passages that I believe are a MUST READ, so if nothing else please take the time to read these and think about what is being communicated. If there is one aspect of this future that is not addressed it is legal and illegal immigration, which, according to government data, has since 2000 represented all of the net gain in the number of working-age (16 to 65) people holding a job, at lower wage levels.

Not only is globalization enabling multi-national corporations (those that produce not only in the United States but in other countries as well), who produce and sell products and services internationally using the cheapest labor rates, but non-human productive capital is increasingly the source of the world’s economic growth and will continue to be so at an exponential rate. Because globalization and tectonic shifts in the technologies of production will accelerate the end of work by destroying jobs and devaluing the worth of labor, it is imperative that productive capital assets become the source of added property ownership incomes for all. The reality is if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. 

The question that this author raises that requires an answer is now timely before us. It was first posed by binary economist Louis Kelso in the 1950s but has never been thoroughly discussed on the national stage. Nor has there been the proper education of our citizenry that addresses what economic justice is and what capital ownership is. Therefore, by ignoring such issues of economic justice and capital ownership, our leaders are ignoring the concentration of power through monopoly ownership of productive capital, with the result of denying the 99 percenters equal opportunity and access to become capital owners. The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” and thus, “how do we get from a world in which the most productive factor—physical capital—is owned by a handful of people, to a world where the same factor is owned by a majority—and ultimately 100 percent—of the consumers, while respecting all the constitutional rights of present capital owners?”

Those seriously interested in exploring non-conventional solutions need  to read the article A New Look at Prices and Money: The Kelsonian Model for Achieving Rapid Growth Without Inflation at http://www.cesj.org/wp-content/uploads/2013/11/pricesandmoney.pdf. In this paper, a case is made for a major transformation of any nation’s monetary system so that in the future new money would be created in ways that would unharness the full productive potential of society, while closing the growing wealth gap between the richest 10 percent and the rest of society — and to do so voluntarily without the need to redistribute existing wealth. Prices, wages and interest rates would be controlled under the proposed model of development completely by competitive market forces, not by the whim of central bankers, politicians or organized power blocs.

It is imperative that we address  the structural problems of the system and reform the system to result in forward-looking growth.

Each year our national public debt has become harder to service because pretend-and-extend policy making has created a depression in real, capital asset investment and consumption (not the gambling casino stock market trading second-hand [owned] stock, because the extent of all productive capital asset OWNERSHIP is concentrated.

In concentrated capital ownership terms, roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages (saving from denial of consumption) to purchase capital assets. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor work by workers with capital work by the owners of productive capital assets. As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes physical capital ever more productive. Corporate decision makers know this, whether in the United States or China, or anywhere organized assemblies of people engage in production. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through make-work job creation, minimum wage requirements, and welfare programs. Such policies do not function effectively.

Even with historically low interest rates when the federal government borrows, say to repair obvious deficiencies in roads, rails, water systems and more and to upgrade such or finances the military-industrial complex, which perpetuates continuous war, only the people who already own productive capital are the beneficiaries of debt through contract work sold in the name of job creation, but in reality systematically concentrates more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming, and instead “re-invest” to further accumulate ever more capital wealth ownership. The result is the consumer populous is not able to earn the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.

The ever-growing trillions of dollar debt liability will come due on the heirs of today’s Americans.

Nor is the suggested solution to spread wealth by extracting a more heavy tax on the growing share of wealth accumulated by the owners of wealth-creating, income-producing capital to redistribute as a “universal basic income” viable and sustainable. Those who are productive, either through their labor or through the application of the productive capital assets they own will object to taxing their productive input to subsidize the idleness of millions of “takers.”

Under this proposed scheme, there would still be OWNERS of private property, and the productive, wealth-creating, income-producing private property OWNERS would be taxed to support a substantial REDISTRIBUTION of wealth in order to provide a “basic income” to EVERY citizen. This is the very essence of socialism.

The outcome is that the wealthy ownership class will still be the OWNERS of America’s productive capital assets and essentially, as OWNERSHIP LORDS, dominate the vast majority of citizens, who through a powerfully political government elite will be their “slaves”––”slaves” as in welfare and charity slaves, which the advocates of this proposal refuse to acknowledge.

The ONLY way out of the deepening economic inequality and the national debt hole is not to pursue austerity and cut spending (consumption), especially since there is a level below which you cannot go, but to increase income (production).

This is “Say’s Law of Markets.” It is based on Adam Smith’s first principle of economics, articulated in The Wealth of Nations: “Consumption is the sole end and purpose of all production.” The obvious corollary, of course, is that you can’t consume what hasn’t been produced — which is exactly the United States’ problem as well as other debt-ridden countries.

In short, you can mint, print, or borrow all the money you want, but if you’re not producing a marketable good or service for consumption, even if you have a mountain of gold, silver, or government debt paper backing your currency, you are trying to get out of a hole by digging it deeper.

If something doesn’t exist, you can’t consume it. the only thing that’s going to get the United States and other debt-ridden countries out of the hole they are in is to increase production dramatically, not cut consumption and pursue austerity.

Rather than focus on Job Creation that holds back technological invention and innovation, our economic policies should focus on wealth-creating, income-producing capital Ownership Creation, whose result will be REAL job creation where necessary to support rapid technological and societal development as we build a future economy that can support general affluence for EVERY citizen and provide inclusive prosperity, inclusive opportunity, and inclusive economic justice.

Given that there is no question that robotic technology will continue to expand the productivity and in large measure destroy jobs and devalue the value of human labor, the question that SHOULD be urgently addressed is WHO SHOULD OWN THE FUTURE TECHNOLOGY ECONOMY? Will ownership continue to concentrate among the 10 percent wealthy ownership class who now OWNS America, or will we reform the system to provide equal opportunity for EVERY child, woman, and man to acquire personal ownership in FUTURE productive capital assets paid for with the FUTURE earnings of the investments in our technological future?

The article asks that you ask yourself: “How is anyone going to make any money when there is ever less opportunity to work?” This is manifested in the myth that labor work is the ONLY way to participate in production and earn income, and that individual talent and effort are what distinguish the wealthy from the non-wealthy.

A sounder solution is to empower EVERY child, woman, and man to acquire personal OWNERSHIP stakes in America’s future productive capital assets by providing equal opportunity for EVERY citizen to OWN and to have access to acquiring wealth-creating, income-producing capital wealth (the whys and hows of becoming rich). And to ensure at death, using a transfer tax, that concentrated wealth estates are dispersed so that no “family” stays permanently wealthy and politically powerful.

The financial mechanism required must provide EVERY citizen an equal annual amount of newly issued money to be specifically used to form new productive assets determined by feasibility analysis using the logic of corporate finance––that the investments will produce earnings out of which to pay for the initial investment and provide the asset value for the new money issued for the extension of capital credit. The actual capital credit loans also must by interest-free as there is no conventional borrowing involved from people who have denied themselves consumption and saved in order to invest. This is all new money essentially issued by the Federal Reserve. The capital credit also must be insurable using private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). Thus, no citizen would ever be exposed to a reduction in their wages, if they are employed, or any other extraction of their personal equity wealth.

This solution, which upholds the principles of private property that our nation was founded upon and abates the further concentration of capital wealth ownership by providing equal opportunity to acquire and OWN future capital asset wealth, in which EVERY citizen becomes an OWNER and is thus a productive contributor to our societal development through “tools” they OWN, is the essence of the proposed Capital Homestead Act. See  http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/. See http://cesj.org/learn/capital-homesteading/ and http://cesj.org/…/uploads/Free/capitalhomesteading-s.pdf.

The whole discussion on reforming the money and credit system leads to defined policy actions, as does tax reform. Let’s take taxes first.

Four principles must guide the tax reform. 1) Efficiency: the tax system raises enough money to run the government without giving too much disincentive to produce. 2) Understandability: people should be able to pay their taxes without having to become an expert. 3) Equitability: people must be taxed in accordance with their ability to pay. 4) Benefit: people who receive the benefit should pay for it.

Thus, the fairest tax given these principles is a single rate imposed equally on all income above an exemption sufficient to enable people to live in reasonable comfort. In addition, the tax laws must permit a tax deferral on income used to purchase capital assets, up to an amount sufficient to generate an adequate and secure income.

Thus, every citizen should have a Capital Homestead Account (CHA) or Economic Democracy Account in which he or she can accumulate a reasonable ownership stake of income-generating assets on a tax-deferred basis. A CHA (a super-IRA or asset tax-shelter for citizens) would be available at their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Now — how do they buy the assets in the first place on which to defer the taxes?

That’s where the necessary money and credit reforms kick in. Obviously, if a rich person or a corporation can finance new capital without using past savings, so can everyone else — and it’s better for the economy. The fact is, the more people who are productive, the more income there is, and the more income there is, the more demand there is, and the more demand there is, the more people can produce and sell ad infinitum.

Thus, every child, woman, and man can open up a Capital Homestead Account or Economic Democracy Account in which every individual can accumulate up to, let’s say, $1 million on a tax-deferred basis.  And at a ROI (“Return On Investment”) of a conservative 20 percent (in direct new asset-based new stock issues), would generate taxable income of $200,000 every year.

Further, companies can be encouraged to pay out all earnings as dividends by making dividends tax-deductible by the corporation — and substantially raising the corporate tax rate to give more encouragement. That way a corporation has a choice: avoid all taxation of income by paying it out to the shareholders (who can pay taxes on their dividends the same as any other income), or pay even more taxes than they do now.

Besides, if they finance growth by selling new shares instead of retaining earnings, the new shareholders are going to need the full stream of profit attributable to their shares to pay for those shares. Issuing shares instead of retaining earnings to finance growth will create a lot of new shareholders, and create a lot of new demand to justify more growth and jobs.

Thus, if everybody has the right to borrow money to purchase new shares that pay for themselves out of future dividends — and all profits are paid out as dividends — ordinary people can become capital owners without risking anything they might have at present, which for most people in the United States is not a risk because they don’t have anything to lose at present as it is. If the money is created using interest-free capital credit, there will always be enough money for new capital formation — and for creating new owners without taking anything from anybody else.

What about security for the capital credit loans? What if the borrower defaults, i.e., doesn’t make the loan payments?

There’s an entire industry that already exists to help people handle risk. It’s called “insurance.” Using the risk premium on all loans as an actual insurance premium (ala the Federal Housing Administration concept), a borrower or lender can take out a capital credit insurance policy that pays off in the event of default.

Instead of tax, monetary and inheritance policies favoring the top 1 percent at the expense of the 99 percent, these comprehensive policy and program reforms should become national policy as a necessary solution to correct the systemic injustices of monopoly capitalism. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.

The unworkability of the traditional market economy is evidenced by the diverse and growing deficits––federal budget deficit, trade deficit, city, county and state budget deficits––which are making it increasingly impossible for governments at every level to function. The increasing deficit burden is the result of the growing numbers of people who cannot earn, from legitimate participation in production, enough income to support themselves and their families. Thus government is obliged to “redistribute” to starve off economic collapse. The key means of redistribution is taxation––taking from the legitimate producers and giving to the non- or under-producers––to make up the economy’s ever wider income and purchasing power shortfalls.

The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to contribute productively to the economy as a capital owner as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.

Krugman’s Dopey Diatribe Deifying The Public Debt

On August 23, 2015, David Stockman writes on Contra Corner:

Actually, dopey does not even begin to describe Paul Krugman’s latest spot of tommyrot. But least it appear that the good professor is being caricaturized, here are his own words. In a world drowning in government debt what we desperately need, by golly, is more of  the same:

“That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt.”

Yes, indeed. There is currently about $60 trillion of public debt outstanding on a worldwide basis compared to less than $20 trillion at the turn of the century. But somehow this isn’t enough, even though the gain in public debt——-from the US to Europe, Japan, China, Brazil and the rest of the debt-saturated EM world—–actually exceeds the $35 billion growth of global GDP during the last 15 years.

But rather than explain why economic growth in most of the world is slowing to a crawl despite this unprecedented eruption of public debt, Krugman chose to smack down one of his patented strawmen. Noting thatRand Paul had lamented that 1835 was the last time the US was “debt free”, the Nobel prize winner offered up a big fat non sequitir:

“Wags quickly noted that the U.S. economy has, on the whole, done pretty well these past 180 years, suggesting that having the government owe the private sector money might not be all that bad a thing. The British government, by the way, has been in debt for more than three centuries, an era spanning the Industrial Revolution, victory over Napoleon, and more.”

Neither Rand Paul nor any other fiscal conservative ever said that public debt per se would freeze economic growth or technological progress hard in the horse and boggy age. The question is one of degree and of whether at today’s unprecedented public debt levels we get economic growth—–even at a tepid rate—–in spite of rather than because of soaring government debt.

A brief recounting of US fiscal history leaves little doubt about Krugman’s strawman argument.  During the eighty years after President Andrew Jackson paid off the public debt until the eve of WWI, the US economy grew like gangbusters. Yet the nation essentially had no debt, as shown in the chart below, except for temporary modest amounts owing to wars that were quickly paid down.

In fact, between 1870 and 1914, the US economy grew at an average rate of 4% per year——the highest and longest sustained growth of real output and living standards ever achieved in America either before or since. But during that entire 45 year golden age of prosperity, the ratio of US public debt relative to national income was falling like a stone.

In fact, on the eve of World War I, the US had only $1.4 billion of debt. That is the same figure that had been reached before the Battle of Gettysburg in 1863.

That’s right. During the course of four decades, the nominal level of peak Civil War debt was steadily whittled down; the Federal  budget was in balance or surplus most of the time; and at the end of the period a booming US economy had debt of less than 5% of GDP or about $11 per capita!

In short, nearly a century of robust economic growth after 1835 was accompanied by hardly any public debt at all. The facts are nearly the opposite of Krugman’s smart-alecky insinuation that today’s giant, technologically advanced economy would not have happed without all of today’s massive public debt.

Indeed, on a net basis every dime that was added to the national debt between Jackson’s mortgage burning ceremony in 1835 and 1914 was 100% war debt that never contributed to domestic economic growth and was mostly repaid during peacetime. In effect, Rand Paul was right: In a modern Keynesian sense, the US was “debt free” during the 80 years when it emerged as a great industrial powerhouse with the highest living standard in the world.

Thereafter, there were two huge surges of wartime debt, but those eruptions had nothing to do with peacetime domestic prosperity;  and they were quickly rolled back after the war-time emergencies ended. Its plain to see in the graph below.

During WWI, for example, the national debt soared from  $1.4 billion to $27 billion, but the great Andrew Mellon, as Secretary of the Treasury during three Republican administrations, paid that down to less than $17 billion, even as the national income nearly doubled during the Roaring Twenties. That meant the public debt was back under 20% by the end of the 1920s.

To be sure, for the last 70 years the Keynesian professoriate has been falsely blaming the severity and duration of the Great Depression on Herbert Hoover’s balanced budget policies during 1930-1932. But none has ever charged that paying down the WW1 debt had actually caused the Great Depression. Nor have the Keynesian economic doctors ever claimed that had Mellon not paid down the peak WWI debt ratio of about 45% of GDP that the Roaring Twenties would have roared even more mightily!

Likewise, the national debt did soar from less than 50% of GDP in 1939, notwithstanding the chronic New Deal deficits, to nearly 120% at the 1945 WWII peak. But this was not your Krugman’s beneficent debt ratio, either. Nor is it proof, as per his current diatribe, that the recent surge to $18 trillion of national debt has been done before and has proven helpful to economic growth.

Instead, the 1945 ratio was a temporary and complete artifact of a command and control war economy. Indeed, the total mobilization of economic life by agencies of the state during WWII was so complete that Washington had essentially banished civilian goods including new cars, houses and most consumer durables, and had also tightly rationed everything else including sugar, butter, meat, tires, shoes, shirts, bicycles, peanut brittle and candied yams.

With retail shelves empty the household savings rate soared from 4% of disposable income in 1938-1939 to an astounding 35% by the end of the war.

“Consequently, the Keynesians have never acknowledged the single most salient statistic about the war debt: namely, that the debt burden actually fell during the war, with the ratio of total credit market debt to GDP declining from 210 percent in 1938 to 190 percent at the 1945 peak!”

This obviously happened because household and business debt was virtually eliminated by the wartime savings spree, dropping from 150 percent of GDP in 1938 to barely 60 percent by 1945, and thereby making vast headroom for the temporary surge of public debt.

In short, the nation did not borrow its way to victory via a Keynesian miracle.  Measured GDP did rise smartly because half of it was non-recurring war expenditure. But even then, the truth is that the American economy “regimented” and “saved” its way through the war.

Once the war mobilization was over Washington quickly reduced it massive wartime borrowing, and set upon a 35 year path of drastically reducing the government debt burden relative to national output. Looking at the chart’s veritable ski-slope from 120% of GDP in 1945 to barely 30% of GDP when Reagan took office in 1980 you would think that the US economy should have been buried in depression during that period if Professor Krugman silly syllogisms are to be given any credit.

Of course, just the opposite is true.  The greatest sustained period of post-war real GDP growth occurred between 1955 and 1973, with real output growth averaging nearly 3.8% per annum. But after that, as shown by the relative growth rates of real final sales in the chart below, the trend rate of growth steadily eroded. Thus, economic prosperity actually reached its highest level precisely when the national debt ratio was speeding down that ski-slope.

Capture5-480x305

Indeed, during the very period when the fiscal deficit got out of control during the early 1980’s owing to the Reagan Administration’s impossible budget equation of soaring defense, deep tax cuts and tepid restraint on domestic spending, young professor Krugman was toiling away in the White House as a staff member of the Council of Economic Advisors.

During the dark days of the 1981-1982 recession when the economy was collapsing and the deficit was soaring I heard some pretty whacky ideas from the White House economists on how to reverse the tide. But never once did I hear professor Krugman argue that with the GDP at about $3.5 trillion while the public debt stood at less than $1.5 trillion or about 40% of GDP that it was time to turn on the deficit spending after-burners and get the national debt up to 100% of GDP forthwith.

No, this whole case for mega-public debt has emerged since 2008. For crying out loud,  before the great financial crisis Krugman was one of the noisiest voices in the chorus denouncing George Bush’s massive tax cuts on the grounds that they would add to the national debt, which was then $6 trillion, not $18 trillion.

The fact is, the financial crisis was caused by the massive money printing campaigns of the Fed in the years after Greenspan assumed the helm in 1987. The resulting falsification of money market interest rates and distortion of prices and yields in the capital markets gave rise to serial booms and busts on Wall Street. But these financial market deformations had virtually nothing to do with fiscal policy and most certainly did not reflect an insufficiency of public debt.

These destructive busts——the dotcom crash, the 2008 mortgage bust and Wall Street meltdown and the stock market plunge just now getting underway——-are owing to the fact that Wall Street has been turned into a gambling casino by the Federal Reserve and the other major central banks.

But rather than acknowledge that obvious reality, Krugman actually manages to turn it upside-down. To wit, he argues that repairing the nation’s busted financial markets after September 2008 required the creation of  “safe assets” in the form of government debt so that investors would presumably have a place to hide from Wall Street’s toxic waste:

“Beyond that, those very low interest rates are telling us something about what markets want. I’ve already mentioned that having at least some government debt outstanding helps the economy function better. How so? The answer, according to M.I.T.’s Ricardo Caballero and others, is that the debt of stable, reliable governments provides “safe assets” that help investors manage risks, make transactions easier and avoid a destructive scramble for cash.”

Now that puts you squarely in mind of the young boy who killed his parents and then threw himself on the mercy of the courts on the grounds that he was an orphan. That is, having experienced a runaway financial bubble owing to excessive monetization of the public debt during the Greenspan era, the nation’s economy now needed even more public debt in order to subdue the very Wall Street gamblers that the Fed’s printing presses had unleashed.

Every phrase in the above quoted passage is nuts, even if it is attributable to an MIT rocket scientist, who is apparently handsomely paid for publishing pure drivel. After all, investors on the free market have known how to manage genuine financial risk from time immemorial; they didn’t need today’s vast emissions of public debt to help them.

In fact, treasury notes and bonds have no logical relationship to honest hedging in the first place. The most salient case of treasury based hedging was the spectacular blow-up of Long Term Capital in 1998. In that particular instance, the gamblers who ran a trillion dollar book of speculative assets including tens of billions of high yield Russian debt blew themselves up shorting the treasuring market to hedge their interest rate risk: During the panicked investor flight to safety in August 1998, their giant losses on risky assets were compounded by even larger losses on their short treasury hedge.

In fact, the real point about the government debt market in today’s central bank rigged financial system is that it has become a venue for state sponsored thievery. That is to say, when the Fed pegs the front end of the curve at zero for 80 months running and then pours $3.5 trillion of fiat purchasing power into buying the rest of the treasury curve including mortgage-backed agency securities in order to boost bonds prices and lower yields, it is creating a  virtually risk free arbitrage for Wall Street gamblers that serves no purpose except to transfer massive windfall profits to the most adept gamblers.

Professors Krugman and Caballero  actually think this helps?

The problem is that like all Keynesians they do not know the difference between fiat credit, which is manufactured out of thin air by fractional reserve commercial banks or money-printing central banks, and honest debt that is funded out of genuine savings from current income by households and business.

Allocating genuine savings to public versus private capital investment almost always results in a diminution of productivity and efficiency, thereby reducing society’s wealth and living standards, not raising them. That’s because government’s are invariably controlled by squeaky wheel special interest groups and lobbies which succeed in gaining in the halls of Congress what they cannot justify in the private market. Amtrak, subsidized mass transit and bus services, corps of engineers water projects and financial subsidies to Boeing and GE are only cases in point.

But are Keynesian professors have no sense of allocative efficiency because they think that any spending—-including having the unemployed dig holes with tablespoons and fill them up with teaspoons adds to GDP:

One answer is that “issuing debt is a way to pay for useful things, and we should do more of that when the price is right.” The United States suffers from obvious deficiencies in roads, rails, water systems and more; meanwhile, the federal government can borrow at historically low interest rates. So this is a very good time to be borrowing and investing in the future, and a very bad time for what has actually happened: an unprecedented decline in public construction spending adjusted for population growth and inflation.

You can’t make this stuff up. And here’s the rest of it for the purpose of any remaining doubt.

http://www.nytimes.com/2015/08/21/opinion/paul-krugman-debt-is-good-for-the-economy.html?_r=0

http://davidstockmanscontracorner.com/krugmans-dopey-diatribe-deifying-public-debt/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+Sunday+10+AM

Paul Krugman is wrong when he states that …”governments aren’t deep enough in debt.” The United States national debt is nearly 20 trillion dollars based on the promise that American taxpayers will eventually pay the debt.

Krugman needs to read the article “A New Look at Prices and Money: The Kelsonian Model for Achieving Rapid Growth Without Inflation.” at http://www.cesj.org/wp-content/uploads/2013/11/pricesandmoney.pdf. In this paper a case is made for a major transformation of any nation’s monetary system so that in the future new money would be created in ways that would unharness the full productive potential of society, while closing the growing wealth gap between the richest 10 percent and the rest of society — and to do so voluntarily without the need to redistribute existing wealth. Prices, wages and interest rates would be controlled under the proposed model of development completely by competitive market forces, not by the whim of central bankers, politicians or organized power blocs.

This paper also shows that Say’s Law of Markets — that supply can create its own demand and demand its own supply — can be made to work if capital credit is universally accessible to all. This new paradigm, first developed by Louis Kelso and later refined by Robert Ashford and Rodney Shakespeare (“Binary Economics: The New Paradigm”) would result in an asset-backed money supply that would provide sufficient liquidity to banks and other financial institutions for financing all or most of the new productive assets which are added each year to grow the economy.

Krugman does not address the structural problems of the system but instead proposes to simply buy more time by borrowing more at low interest rates. Buying more time is his solution, followed by pretending that this will result in forward-looking growth. Yet national public debt has become harder to service because pretend-and-extend policy making has created a depression in real, capital asset investment and consumption (not the gambling casino stock market trading second-hand (owned) stock, because the extent of all productive capital asset OWNERSHIP is concentrated.

In concentrated capital ownership terms, roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages to purchase capital assets. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor work by workers with capital work by the owners of productive capital assets. As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes physical capital ever more productive. Corporate decision makers know this, whether in the United States or China, or anywhere organized assemblies of people engage in production. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through make-work job creation, minimum wage requirements, and welfare programs. Such policies do not function effectively.

Even with historically low interest rates when the federal government borrows, say to repair obvious deficiencies in roads, rails, water systems and more and to upgrade such or finances the military-industrial complex, which perpetuates continuous war, only the people who already own productive capital are the beneficiaries of debt through contract work sold in the name of job creation, but in reality systematically concentrates more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming, and instead “re-invest” to further accumulate ever more capital wealth ownership. The result is the consumer populous is not able to earn the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.

The ever-growing trillions of dollar debt liability will come due on the heirs of today’s Americans.

Austerity is not a solution, however, but a way of buying time until a solution can be implemented. The only way out of the hole is not to cut spending (consumption), especially since there is a level below which you cannot go, but to increase income (production).

This is “Say’s Law of Markets.” It is based on Adam Smith’s first principle of economics, articulated in The Wealth of Nations: “Consumption is the sole end and purpose of all production.” The obvious corollary, of course, is that you can’t consume what hasn’t been produced — which is exactly the United States’ problem as well as other debt-ridden countries.

In short, you can mint, print, or borrow all the money you want, but if you’re not producing a marketable good or service for consumption, even if you have a mountain of gold, silver, or government debt paper backing your currency, you are trying to get out of a hole by digging it deeper.

If something doesn’t exist, you can’t consume it. the only thing that’s going to get the United States and other debt-ridden countries out of the hole they are in is to increase production dramatically, not just cut consumption, however essential austerity is in the short run.

The whole discussion on reforming the money and credit system leads right into this, as does tax reform. Let’s take taxes first.

Four principles must guide the tax reform. 1) Efficiency: the tax system raises enough money to run the government without giving too much disincentive to produce. 2) Understandability: people should be able to pay their taxes without having to become an expert. 3) Equitability: people must be taxed in accordance with their ability to pay. 4) Benefit: people who receive the benefit should pay for it.

Thus, the fairest tax given these principles is a single rate imposed equally on all income above an exemption sufficient to enable people to live in reasonable comfort. In addition, the tax laws must permit a tax deferral on income used to purchase capital assets, up to an amount sufficient to generate an adequate and secure income.

Thus, every citizen should have a Capital Homestead Account (CHA) or Economic Democracy Account in which he or she can accumulate a reasonable ownership stake of income-generating assets on a tax-deferred basis. A CHA (a super-IRA or asset tax-shelter for citizens) would be available at their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Now — how do they buy the assets in the first place on which to defer the taxes?

That’s where the necessary money and credit reforms kick in. Obviously, if a rich person or a corporation can finance new capital without using past savings, so can everyone else — and it’s better for the economy. The fact is, the more people who are productive, the more income there is, and the more income there is, the more demand there is, and the more demand there is, the more people can produce and sell ad infinitum.

Thus, every child, woman, and man can open up a Capital Homestead Account or Economic Democracy Account in which every individual can accumulate up to, let’s say, $1 million on a tax-deferred basis.  And at a ROI (“Return On Investment”) of a conservative 20 percent (in direct new asset-based new stock issues), would generate taxable income of $200,000 every year.

Further, companies can be encouraged to pay out all earnings as dividends by making dividends tax-deductible by the corporation — and substantially raising the corporate tax rate to give more encouragement. That way a corporation has a choice: avoid all taxation of income by paying it out to the shareholders (who can pay taxes on their dividends the same as any other income), or pay even more taxes than they do now.

Besides, if they finance growth by selling new shares instead of retaining earnings, the new shareholders are going to need the full stream of profit attributable to their shares to pay for those shares. Issuing shares instead of retaining earnings to finance growth will create a lot of new shareholders, and create a lot of new demand to justify more growth and jobs.

Thus, if everybody has the right to borrow money to purchase new shares that pay for themselves out of future dividends — and all profits are paid out as dividends — ordinary people can become capital owners without risking anything they might have at present, which for most people in the United States is not a risk because they don’t have anything to lose at present as it is. If the money is created using interest-free capital credit, there will always be enough money for new capital formation — and for creating new owners without taking anything from anybody else.

What about security for the capital credit loans? What if the borrower defaults, i.e., doesn’t make the loan payments?

There’s an entire industry that already exists to help people handle risk. It’s called “insurance.” Using the risk premium on all loans as an actual insurance premium (ala the Federal Housing Administration concept), a borrower or lender can take out a capital credit insurance policy that pays off in the event of default.

Instead of tax, monetary and inheritance policies favoring the top 1 percent at the expense of the 99 percent, these comprehensive policy and program reforms should become national policy as a necessary solution to correct the systemic injustices of monopoly capitalism. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.

The unworkability of the traditional market economy is evidenced by the diverse and growing deficits––federal budget deficit, trade deficit, city, county and state budget deficits––which are making it increasingly impossible for governments at every level to function. The increasing deficit burden is the result of the growing numbers of people who cannot earn, from legitimate participation in production, enough income to support themselves and their families. Thus government is obliged to “redistribute” to starve off economic collapse. The key means of redistribution is taxation––taking from the legitimate producers and giving to the non- or under-producers––to make up the economy’s ever wider income and purchasing power shortfalls.

The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to contribute productively to the economy as a capital owner as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.

Debt Is Good

On August 21, 2015, Paul Krugman writes in The New York Times:

Rand Paul said something funny the other day. No, really — although of course it wasn’t intentional. On his Twitter account he decried the irresponsibility of American fiscal policy, declaring, “The last time the United States was debt free was 1835.”

Wags quickly noted that the U.S. economy has, on the whole, done pretty well these past 180 years, suggesting that having the government owe the private sector money might not be all that bad a thing. The British government, by the way, has been in debt for more than three centuries, an era spanning the Industrial Revolution, victory over Napoleon, and more.

But is the point simply that public debt isn’t as bad as legend has it? Or can government debt actually be a good thing?

Believe it or not, many economists argue that the economy needs a sufficient amount of public debt out there to function well. And how much is sufficient? Maybe more than we currently have. That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt.

I know that may sound crazy. After all, we’ve spent much of the past five or six years in a state of fiscal panic, with all the Very Serious People declaring that we must slash deficits and reduce debt now now now or we’ll turn into Greece, Greece I tell you.

But the power of the deficit scolds was always a triumph of ideology over evidence, and a growing number of genuinely serious people — most recently Narayana Kocherlakota, the departing president of the Minneapolis Fed — are making the case that we need more, not less, government debt.

Why?

One answer is that issuing debt is a way to pay for useful things, and we should do more of that when the price is right. The United States suffers from obvious deficiencies in roads, rails, water systems and more; meanwhile, the federal government can borrow at historically low interest rates. So this is a very good time to be borrowing and investing in the future, and a very bad time for what has actually happened: an unprecedented decline in public construction spending adjusted for population growth and inflation.

Beyond that, those very low interest rates are telling us something about what markets want. I’ve already mentioned that having at least some government debt outstanding helps the economy function better. How so? The answer, according to M.I.T.’s Ricardo Caballero and others, is that the debt of stable, reliable governments provides “safe assets” that help investors manage risks, make transactions easier and avoid a destructive scramble for cash.

Now, in principle the private sector can also create safe assets, such as deposits in banks that are universally perceived as sound. In the years before the 2008 financial crisis Wall Street claimed to have invented whole new classes of safe assets by slicing and dicing cash flows from subprime mortgages and other sources.

But all of that supposedly brilliant financial engineering turned out to be a con job: When the housing bubble burst, all that AAA-rated paper turned into sludge. So investors scurried back into the haven provided by the debt of the United States and a few other major economies. In the process they drove interest rates on that debt way down.

And those low interest rates, Mr. Kocherlakota declares, are a problem. When interest rates on government debt are very low even when the economy is strong, there’s not much room to cut them when the economy is weak, making it much harder to fight recessions. There may also be consequences for financial stability: Very low returns on safe assets may push investors into too much risk-taking — or for that matter encourage another round of destructive Wall Street hocus-pocus.

What can be done? Simply raising interest rates, as some financial types keep demanding (with an eye on their own bottom lines), would undermine our still-fragile recovery. What we need are policies that would permit higher rates in good times without causing a slump. And one such policy, Mr. Kocherlakota argues, would be targeting a higher level of debt.

In other words, the great debt panic that warped the U.S. political scene from 2010 to 2012, and still dominates economic discussion in Britain and the eurozone, was even more wrongheaded than those of us in the anti-austerity camp realized.

Not only were governments that listened to the fiscal scolds kicking the economy when it was down, prolonging the slump; not only were they slashing public investment at the very moment bond investors were practically pleading with them to spend more; they may have been setting us up for future crises.

And the ironic thing is that these foolish policies, and all the human suffering they created, were sold with appeals to prudence and fiscal responsibility.

http://www.nytimes.com/2015/08/21/opinion/paul-krugman-debt-is-good-for-the-economy.html?smid=fb-share

Paul Krugman is wrong when he states that …”governments aren’t deep enough in debt.” The United States national debt is nearly 20 trillion dollars based on the promise that American taxpayers will eventually pay the debt.

Krugman needs to read the article “A New Look at Prices and Money: The Kelsonian Model for Achieving Rapid Growth Without Inflation.” at http://www.cesj.org/wp-content/uploads/2013/11/pricesandmoney.pdf. In this paper a case is made for a major transformation of any nation’s monetary system so that in the future new money would be created in ways that would unharness the full productive potential of society, while closing the growing wealth gap between the richest 10 percent and the rest of society — and to do so voluntarily without the need to redistribute existing wealth. Prices, wages and interest rates would be controlled under the proposed model of development completely by competitive market forces, not by the whim of central bankers, politicians or organized power blocs.

This paper also shows that Say’s Law of Markets — that supply can create its own demand and demand its own supply — can be made to work if capital credit is universally accessible to all. This new paradigm, first developed by Louis Kelso and later refined by Robert Ashford and Rodney Shakespeare (“Binary Economics: The New Paradigm”) would result in an asset-backed money supply that would provide sufficient liquidity to banks and other financial institutions for financing all or most of the new productive assets which are added each year to grow the economy.

Krugman does not address the structural problems of the system but instead proposes to simply buy more time by borrowing more at low interest rates. Buying more time is his solution, followed by pretending that this will result in forward-looking growth. Yet national public debt has become harder to service because pretend-and-extend policy making has created a depression in real, capital asset investment and consumption (not the gambling casino stock market trading second-hand (owned) stock, because the extent of all productive capital asset OWNERSHIP is concentrated.

In concentrated capital ownership terms, roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages to purchase capital assets. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor work by workers with capital work by the owners of productive capital assets. As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes physical capital ever more productive. Corporate decision makers know this, whether in the United States or China, or anywhere organized assemblies of people engage in production. Technology is an easier and faster way to get a job done. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s work (via capital ownership of stock in corporations) to non-owners through make-work job creation, minimum wage requirements, and welfare programs. Such policies do not function effectively.

Even with historically low interest rates when the federal government borrows, say to repair obvious deficiencies in roads, rails, water systems and more and to upgrade such or finances the military-industrial complex, which perpetuates continuous war, only the people who already own productive capital are the beneficiaries of debt through contract work sold in the name of job creation, but in reality systematically concentrates more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming, and instead “re-invest” to further accumulate ever more capital wealth ownership. The result is the consumer populous is not able to earn the money to buy the products and services produced as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption made possible by “customers with money.” It is the exponential disassociation of production and consumption that is the problem in the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well-being.

The ever-growing trillions of dollar debt liability will come due on the heirs of today’s Americans.

Austerity is not a solution, however, but a way of buying time until a solution can be implemented. The only way out of the hole is not to cut spending (consumption), especially since there is a level below which you cannot go, but to increase income (production).

This is “Say’s Law of Markets.” It is based on Adam Smith’s first principle of economics, articulated in The Wealth of Nations: “Consumption is the sole end and purpose of all production.” The obvious corollary, of course, is that you can’t consume what hasn’t been produced — which is exactly the United States’ problem as well as other debt-ridden countries.

In short, you can mint, print, or borrow all the money you want, but if you’re not producing a marketable good or service for consumption, even if you have a mountain of gold, silver, or government debt paper backing your currency, you are trying to get out of a hole by digging it deeper.

If something doesn’t exist, you can’t consume it. the only thing that’s going to get the United States and other debt-ridden countries out of the hole they are in is to increase production dramatically, not just cut consumption, however essential austerity is in the short run.

The whole discussion on reforming the money and credit system leads right into this, as does tax reform. Let’s take taxes first.

Four principles must guide the tax reform. 1) Efficiency: the tax system raises enough money to run the government without giving too much disincentive to produce. 2) Understandability: people should be able to pay their taxes without having to become an expert. 3) Equitability: people must be taxed in accordance with their ability to pay. 4) Benefit: people who receive the benefit should pay for it.

Thus, the fairest tax given these principles is a single rate imposed equally on all income above an exemption sufficient to enable people to live in reasonable comfort. In addition, the tax laws must permit a tax deferral on income used to purchase capital assets, up to an amount sufficient to generate an adequate and secure income.

Thus, every citizen should have a Capital Homestead Account (CHA) or Economic Democracy Account in which he or she can accumulate a reasonable ownership stake of income-generating assets on a tax-deferred basis. A CHA (a super-IRA or asset tax-shelter for citizens) would be available at their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Now — how do they buy the assets in the first place on which to defer the taxes?

That’s where the necessary money and credit reforms kick in. Obviously, if a rich person or a corporation can finance new capital without using past savings, so can everyone else — and it’s better for the economy. The fact is, the more people who are productive, the more income there is, and the more income there is, the more demand there is, and the more demand there is, the more people can produce and sell ad infinitum.

Thus, every child, woman, and man can open up a Capital Homestead Account or Economic Democracy Account in which every individual can accumulate up to, let’s say, $1 million on a tax-deferred basis.  And at a ROI (“Return On Investment”) of a conservative 20 percent (in direct new asset-based new stock issues), would generate taxable income of $200,000 every year.

Further, companies can be encouraged to pay out all earnings as dividends by making dividends tax-deductible by the corporation — and substantially raising the corporate tax rate to give more encouragement. That way a corporation has a choice: avoid all taxation of income by paying it out to the shareholders (who can pay taxes on their dividends the same as any other income), or pay even more taxes than they do now.

Besides, if they finance growth by selling new shares instead of retaining earnings, the new shareholders are going to need the full stream of profit attributable to their shares to pay for those shares. Issuing shares instead of retaining earnings to finance growth will create a lot of new shareholders, and create a lot of new demand to justify more growth and jobs.

Thus, if everybody has the right to borrow money to purchase new shares that pay for themselves out of future dividends — and all profits are paid out as dividends — ordinary people can become capital owners without risking anything they might have at present, which for most people in the United States is not a risk because they don’t have anything to lose at present as it is. If the money is created using interest-free capital credit, there will always be enough money for new capital formation — and for creating new owners without taking anything from anybody else.

What about security for the capital credit loans? What if the borrower defaults, i.e., doesn’t make the loan payments?

There’s an entire industry that already exists to help people handle risk. It’s called “insurance.” Using the risk premium on all loans as an actual insurance premium (ala the Federal Housing Administration concept), a borrower or lender can take out a capital credit insurance policy that pays off in the event of default.

Instead of tax, monetary and inheritance policies favoring the top 1 percent at the expense of the 99 percent, these comprehensive policy and program reforms should become national policy as a necessary solution to correct the systemic injustices of monopoly capitalism. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.

The unworkability of the traditional market economy is evidenced by the diverse and growing deficits––federal budget deficit, trade deficit, city, county and state budget deficits––which are making it increasingly impossible for governments at every level to function. The increasing deficit burden is the result of the growing numbers of people who cannot earn, from legitimate participation in production, enough income to support themselves and their families. Thus government is obliged to “redistribute” to starve off economic collapse. The key means of redistribution is taxation––taking from the legitimate producers and giving to the non- or under-producers––to make up the economy’s ever wider income and purchasing power shortfalls.

The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to contribute productively to the economy as a capital owner as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.

Exploding Profits

Orbital cargo rocket explosion

On August 20, 2015, Melody Petersen writes in the Los Angeles Times:

Ten months after a cargo ship bound for the International Space Station exploded seconds after liftoff, profits are soaring for the NASA contractor that built it.

NASA is continuing to pay the Virginia aerospace firm millions of dollars for work on future cargo shipments under a contract that executives say has recently become more profitable.

The fiery explosion Oct. 28 cost taxpayers hundreds of millions of dollars in lost cargo, damage to the launch pad and required payments to the firm for the failed mission. It also left NASA scrambling to get needed supplies to astronauts.

 

The company, now known as Orbital ATK Inc. after a February merger, has redesigned its rocket, but it is not expected to fly again until sometime next year.

On Aug. 6, Garrett Pierce, Orbital’s chief financial officer, told Wall Street analysts that quarterly operating profit in the company’s space division, a large portion of which come from NASA, had soared 167% over the same period last year.

“One hundred and sixty-seven percent — I’m going to repeat that,” Pierce said.

Stephanie Schierholz, a NASA spokeswoman, said the agency would not disclose how much it has paid Orbital or SpaceX, the Hawthorne company that has a similar contract to haul cargo to the space station.

On June 28, eight months after Orbital’s failure, a SpaceX cargo ship disintegrated shortly after liftoff, destroying supplies that NASA said were worth $110 million.

Schierholz said that NASA protected “the commercial pricing” information in the contracts “to maintain fair competition.”

NASA makes payments to the companies as they build rockets, test them and reach other milestones. The companies get all but 20% of the price of a cargo mission even if the rocket explodes.

The agency allowed Orbital to do its own investigation into the Oct. 28 explosion — a report that is still pending.

The company must send the findings of its investigation to the Federal Aviation Administration for review. An FAA spokesman said the report is expected soon.

Yet it’s unclear whether the public will learn of the probe’s final conclusions.

Barron Beneski, Orbital’s vice president of communications, said the company would not release the report to the public because it contained confidential corporate information. And NASA and the FAA said they would not release it either.

The FAA said the company may release a summary of its findings.

Soon after the rocket blew apart, Orbital executives said preliminary evidence pointed to a failure in one of the two 50-year-old Soviet-made engines that powered it.

Both NASA officials and Orbital executives had known of the risk of using those engines, which had sat in a warehouse for decades before being refurbished.

 

In 2011, one of the engines caught fire during a test, showing that the aging metal could crack under pressure. But NASA and Orbital believed that they had successfully addressed the risk by X-raying the engines to find the cracks and then patching them with welding.

After its preliminary probe pointed to the Soviet-era engines, Orbital said it would switch to a newly manufactured Russian engine for future cargo launches. The work on that redesigned rocket is happening as planned, the company said this month, enabling it to recognize more profit from the contract on its accounting books.

Orbital is also receiving payments from NASA for a subcontract that the company gave to United Launch Alliance, a Boeing-Lockheed joint venture. Orbital hired ULA to blast a cargo ship to the space station as an interim measure until its own rocket can fly again. That flight is expected as soon as December.

The company says it is committed to resuming shipments as soon as possible.

“We are on track to meet our CRS cargo requirements for NASA,” Orbital Chief Executive David W. Thompson said in a statement last week, referring to the contract’s acronym.

The company’s investigation is aimed at pinpointing the root cause of the engine failure, which Orbital executives said earlier was related to the engine’s turbo pump.

Federal law allows commercial space companies to do their own investigations into accidents unless there are fatalities or significant damage to property beyond the launch site.

The Senate voted this month to extend that law, which allows America’s space industry to operate with little government oversight. The House earlier passed a bill allowing a similar extension. Final details of the bill must now be hammered out by representatives of both houses in a conference committee.

NASA recently received at least three letters from members of Congress questioning whether the companies should investigate their own accidents when millions of dollars in taxpayer money is at stake.

In one of those letters, 14 representatives, including Rep. J. Randy Forbes, a Virginia Republican, wrote that they had “serious reservations” about the corporate-led probes. They questioned “whether the investigation and engineering rigor applied will be sufficient” to prevent future accidents.

About a month after Orbital’s rocket erupted in a fireball, NASA decided internally to do its own investigation of what it calls the “mishap.” Asked whether the agency would publicly release the results of its investigation, NASA spokeswoman Schierholz did not answer.

This was not the first time that Orbital’s rockets have failed at massive expense to NASA and taxpayers.

In 2009, the nose cone on a rocket carrying the $273-million Orbiting Carbon Observatory failed to release on time, destroying the satellite. Two years later, the $424-million climate satellite known as Glory was lost because of a similar problem with Orbital’s rocket.

By last September, just before the latest explosion, Orbital had already received $1.3 billion of what was then a $1.9-billion contract with NASA — even though it had completed just two of eight required missions.

NASA has now extended the contract, buying additional cargo trips and increasing the price to as much as $3.1 billion.

Orbital ATK was created by the merger of Dulles, Va.-based Orbital Sciences Corp. and the aerospace and defense divisions of Arlington, Va.-based Alliant Techsystems Inc.

http://www.latimes.com/business/la-fi-orbital-crash-aftermath-20150820-story.html

This is an example of extremely narrow thinking with respect to the expenditure of taxpayer monies without stipulations that would enhance the broadening of wealth-creating, income-producing capital wealth assets. The company, now known as Orbital ATK Inc. after a February merger of Dulles, Virginia-based Orbital Sciences Corp. and the aerospace and defense divisions of Arlington, Virginia-based Alliant Techsystems Inc., along with Elon Musk’s SpaceX, are the recipients in billions of dollars worth of NASA contracts. This has boosted the profitability of the corporations 167 percent over the same period last year, which has further enrich the narrow group of significant OWNERS of these corporations, while ONLY providing jobs to Americans in the aerospace sector.

These OWNERS, who have “worked” the system with as well political contributions along the way to put themselves in a more favorable position with Senators and Congress persons, are benefiting from a system that needs reform to ensure that ALL taxpayer-supported private sector contract are ONLY awarded to corporations that are fully employee-owned.

As well, we need to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers. We need to free the system of dependency on Wall Street and the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting Federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency of with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings. The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today––management and banks––that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.