Robert Reich Reality Checks GOP’s Absurd Ideas About Addressing Income Inequality

On January 26, 2015, Robert Reich writes on AlterNet:

You have to go pretty far back in history to find a Republican president who brought broad-based prosperity.

Jeb Bush and Mitt Romney are zeroing in on inequality as America’s fundamental economic problem.

Bush’s new Political Action Committee, called “The Right to Rise,” declares “the income gap is real” but that “only conservative principles can solve it.”

Mitt Romney likewise promised last week that if he runs for president he’ll change the strategy that led to his 2012 loss to President Obama (remember the “makers” versus the “takers?”) and focus instead on income inequality, poverty, and “opportunity for all people.”

The Republican establishment’s leading presidential hopefuls know the current upbeat economy isn’t trickling down to most Americans.

But they’ve got a whopping credibility problem, starting with trickle-down economics.

Since Ronald Reagan moved into the White House, Republican policies have widened inequality.

Neither party deserves a medal for reversing the trend, but evidence shows that middle-class and poor Americans have faired better under Democratic presidents.

Personal disposable income has grown nearly 6 times more with Democrats in the White House than Republicans.

Under Bill Clinton, in whose administration I am proud to have served, even the wages of the poorest fifth rose.

According to research by economists Alan Blinder and Mark Watson, more jobs have been created under Democratic presidents as well.

These broad-based job and wage gains haven’t hampered economic growth. To the contrary, they’ve fueled it by putting more money into the pockets of people who spend it — thereby boosting business profits and hiring.

Which is why the economy has grown faster when Democrats have occupied the Oval Office.

I’m not saying Democrats have always had it right or done everything they should. The lion’s share of economic gains over the past thirty-five years has gone to the top regardless of whether Democrats or Republicans inhabit the White House.

The most recent recovery has been particularly lopsided, President Obama’s intentions notwithstanding.

Nor can presidents alone determine how the economy performs. At best they orchestrate a set of policies that nudge the economy in one direction or another.

But that’s exactly the point: Since Reagan, Republican policies have nudged it toward big gains at the top and stagnation for everyone else.

The last Republican president to deliver broad-based prosperity was Dwight D. Eisenhower, in the 1950s.

Then, the gains from growth were so widely shared that the incomes of the poorest fifth actually grew faster than the incomes of the top fifth. As a result, America became more equal than ever before or since.

Under Ike, the marginal tax rate on the richest Americans reached 91 percent.

Eisenhower also presided over the creation of the interstate highway system – the largest infrastructure project in American history — as well as the nation’s biggest expansion of public schools.

It’s no coincidence that when Eisenhower was president, over a third of all private sector workers were unionized. Ike can’t be credited for this but at least he didn’t try to stop it or legitimize firing striking workers, as did Ronald Reagan.

Under Reagan, Republican policy lurched in the opposite direction: Lower taxes on top incomes and big wealth, less public investment, and efforts to destroy labor unions.

Not surprisingly, that’s when America took its big U-turn toward inequality.

These Reaganomic principles are by now so deeply embedded in the modern Republican Party they’ve come to define it.

As a matter of fact, they’re just about all that unite the warring factions of the GOP – libertarians, tea partiers, and big corporations and Wall Street.

Yet because these very principles have contributed to the stagnation of American incomes and the widening gap between the rich and everyone else, Republican aspirants who says they want to reverse widening inequality are faced with an awkward dilemma.

How can they be credible on the issue while embracing these principles? Yet if they want to be nominated, how can they not embrace them?

When Jeb Bush admits that the income gap is real but that “only conservative principles can solve it,” one has to wonder what principles he’s talking about if not these.

And when Mitt Romney promises to run a different campaign than he did in 2012 and focus on “opportunity for all people,” the real question is whether he’ll run on different economic principles.

That the leading Republican hopefuls recognize the economy has to work for everyone and not just a few is progress.

But unless they disavow the legacy of Ronald Reagan and adopt the legacy of Dwight Eisenhower, their words are nothing more than soothing rhetoric — akin to George W. Bush’s meaningless “compassionate conservatism.”

http://www.alternet.org/economy/robert-reich-reality-checks-gops-absurd-ideas-about-addressing-income-inequality

Daily you read assessments of the truth about the deteriorating state of the economy, including numerous problem-defining articles by  Robert Reich and other economists. Yet, you virtually NEVER see these economists offering up any REAL solutions that would reverse income and wealth ownership inequality and put us on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice. It is always just the same old problem-defining writings. Unbelievably, they NEVER turn their brains on to realize that their own problem-defining writings suggest the inherently obvious solutions––that the reason the rich are rich is because they OWN wealth-creating, income-producing capital assets and the American majority to not to any significant degree, and because the system is rigged to empower the 1 percent to continually acquire more and more capital ownership, while the vast majority of Americans struggle daily, weekly, and monthly to earn wages to pay for basic necessities of living as individuals and as providers of families.

These economist-critics should KNOW the solutions that will REALLY reform the system and abate further concentration of capital ownership, but when they do speak of solutions, which is hardly ever, they ONLY resort to wealth redistributive policies, which are the essence of socialism and undermine our nation’s founding principles of individual strength through private property capital ownership whereby citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens.

I have made it a practice to continuously comment on these conventional economists’ writings, always pointing to the obvious––if you want to solve income and wealth inequality then the system needs to be reformed to empower EVERY child, woman, and man to acquire wealth-creating, income-producing capital assets simultaneously with the growth of the economy, thereby creating new capital owners and “customers with money” to drive the growth of an economy that can support general affluence for EVERY citizen.  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 HOW to achieve this objective is to support and implement the following:

Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice

Support the Capital Homestead Act at 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.

Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

 

Super Bowl For The Rich: Upper-Class 91, Middle-Class 9

Super Bowl XLVI

The super-rich team tries to convince us that all is well with America’s economy. Because to them, it’s all a game and the middle-class keeps losing.

On January 26, 2015, Paul Buchheit writes on Nation Of Change:

Just 10 percent of Americans own 91 percent of the nation’s stocks and mutual funds, according to economist Edward Wolff (Table 7). Most of the remainder is held by a “middle class” that is steadily losing ground. The bottom 60 percent is almost entirely shut out (Table 2).

Stock owners, some of whom made billions of dollars last year, can defer their income taxes indefinitely, pay a reduced capital gains tax when they decide to cash in, or pass on the capital gains tax-free to their heirs.

Making money is all a game to the super-rich — redistribution toward the top, trickle-down delusions, tax avoidance, and even, for some of them, dabbling in criminal activities. Sen. Lindsey Graham (R-SC) once said, “It’s really American to avoid paying taxes, legally…It’s a game we play…I see nothing wrong with playing the game because we set it up to be a game.” Here’s part of their game plan:

Blitz

$2 of every $5 owned today was created in the last five years, most of it from the financial markets, and almost all of it going to the richest 10 percent.

Unfathomably, the richest 1 percent took anywhere from 95 percent to 116 percent of the new income gains after the recession. Yes, 116 percent, because almost everyone else went backwards. Median wealth dropped about 40 percent from 2007 to 2013.

Taunting

JP Morgan CEO Jaime Dimon said, “I am not embarrassed to be a banker.” On the contrary, he and his banking buddies can sit back and gloat, knowing that not a single Wall Street banker has been prosecuted for the financial collapse, and that the little fines they pay for their misconduct simply amount to the cost of doing business.

Their crimes include faulty mortgages, lying to the U.S. Senate, andconspiring to hide billions of dollars of trading losses from regulators. The Financial Crisis Inquiry Commission used variations of the word ‘fraud’ over 150 times in describing the buildup to the crisis.

Piling On

The superrich team tries to convince us that all is well. From the Wall Street Journal: The U.S. economy is on a tear. From a Moody’s analyst: Our economy is firing on most cylinders. And from President Obama himself:Tonight, we turn the page.

People with stocks are happy, but the news is a lot different for middle America, which has seen its pay drop a stunning 23 percent since 2009, and its median wealth plummet by about 40 percent.

Holding

Even though corporate profits are at their highest level in 85 years, corporations aren’t pumping it back into the economy. Instead they’reholding it. S&P companies last year spent an incredible 95% of their profits on stock buybacks to enrich executives and shareholders.

Meanwhile, as the rest of us dutifully pay our taxes, we get blind-sided by wealthy individuals and corporations who defer their taxes, stash income intax havens, enjoy a special capital gains tax rate, invest their money intax-free foundations, or simply don’t pay. Boeing, Ford, Chevron, Citigroup, Verizon, JP Morgan, and General Motors, with a combined income last year of $74 billion, paid no taxes, and instead received a combined refund of nearly $2 billion.

And the Middle Class Keeps Losing

This is the middle class of a nation in which over half of public school students are poor enough to qualify for lunch subsidies.

It is a middle class so poor that almost two-thirds of polled Americans said they didn’t have enough money to cover a $500 repair bill or a $1,000 emergency room visit.

The only hope of the middle class may be for someone like Elizabeth Warren to lead it against the team of Wall Street bankers who keep winning year after year.

http://www.nationofchange.org/2015/01/26/super-bowl-rich-upper-class-91-middle-class-9/

Daily you read assessments of the truth about the deteriorating state of the economy, including numerous problem-defining articles by  Paul Buchheit and other economists. Yet, you virtually NEVER see these economists offering up any REAL solutions that would reverse income and wealth ownership inequality and put us on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice. It is always just the same old problem-defining writings. Unbelievably, they NEVER turn their brains on to realize that their own problem-defining writings suggest the inherently obvious solutions––that the reason the rich are rich is because they OWN wealth-creating, income-producing capital assets and the American majority to not to any significant degree, and because the system is rigged to empower the 1 percent to continually acquire more and more capital ownership, while the vast majority of Americans struggle daily, weekly, and monthly to earn wages to pay for basic necessities of living as individuals and as providers of families.

These economist-critics should KNOW the solutions that will REALLY reform the system and abate further concentration of capital ownership, but when they do speak of solutions, which is hardly ever, they ONLY resort to wealth redistributive policies, which are the essence of socialism and undermine our nation’s founding principles of individual strength through private property capital ownership whereby citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens.

I have made it a practice to continuously comment on these conventional economists’ writings, always pointing to the obvious––if you want to solve income and wealth inequality then the system needs to be reformed to empower EVERY child, woman, and man to acquire wealth-creating, income-producing capital assets simultaneously with the growth of the economy, thereby creating new capital owners and “customers with money” to drive the growth of an economy that can support general affluence for EVERY citizen.  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 HOW to achieve this objective is to support and implement the following:

Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice

Support the Capital Homestead Act at 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.

Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.

 

 

Roads And Bridges Need $1 Trillion. It Is Time To Rebuild The US

A crumbling overpass support in Marlborough, Massachusetts. (Photo: Richard Klein)A crumbling overpass support in Marlborough, Massachusetts. (Photo: Richard Klein)

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On January 23, 2015, Senator Bernie Sanders writes on Truth-Out:

Our infrastructure is collapsing, and the American people know it. The Interstate 75 bridge collapse in Cincinnati on Monday is only the latest example. Every day, motorists across the United States drive over bridges that are in disrepair and on roads with unforgiving potholes. They take railroad and subway trains that arrive late and are overcrowded. They see airports bursting at the seams. They worry that a local levee could fail in a storm.

For many years we have underfunded the maintenance of our nation’s physical infrastructure. That has to change. It is time to rebuild America. I will soon be introducing legislation for a $1 trillion investment, over five years, to modernize our country’s physical infrastructure. This bill will not just rebuild our country but it will create and maintain 13 million good-paying jobs that our economy desperately needs.

For most of our history, the United States proudly led the world in building innovative infrastructure, from a network of canals, to the transcontinental railroad, to the interstate highway system. We launched an ambitious rural electrification program, massive flood control projects and more.

These innovations grew our economy, gave our businesses a competitive advantage, provided our workers a decent standard of living and were the envy of the world. Sadly, that is no longer the case. The World Economic Forum’s Global Competitiveness Report for 2015 ranks the U.S.’s overall infrastructure at 12th in the world.

How bad is the situation? Almost one-third of our roads are in poor or mediocre condition, and more than 40 percent of urban highways are congested. One of nine bridges is structurally deficient, and nearly a quarter are functionally obsolete. Transit systems face major unfunded repairs, while 45 percent of American households lack access to any transit at all.

Our nation’s rail network is largely antiquated, even though our energy-efficient railroads move more freight than ever and Amtrak’s ridership has never been higher. Our crowded airports still rely on 1960s radar technology.

The list goes on and on. More than 4,000 of our dams are “deficient” and nearly 9 percent of our levees are likely to fail during a major flood. Many drinking water systems are nearing the end of their useful lives, and wastewater treatment plants often fail during heavy rains. We rank 16th in the world in terms of broadband Internet access, which has serious implications for commerce, education, telemedicine and public safety. We even underfund the parks that preserve our nation’s heritage and natural wonders for future generations.

The United States now spends just 2.4 percent of GDP on infrastructure, less than at any point in the last 20 years. Europe spends twice that amount, and China spends close to four times our rate. We are falling further and further behind, and the longer we wait, the more it will cost us later. Deteriorating infrastructure does not magically get better by ignoring it.

To get our infrastructure to a state of good repair by 2020, the American Society of Civil Engineers says we must invest $1.6 trillion more than what we now spend.

There is no question that the economy has improved significantly since the worst days of the recession. However, the U.S. Department of Labor says the real unemployment rate – which counts those who have settled for part-time work but who would like to work full time, and those who have given up looking for jobs entirely – is a completely unacceptable 11.2 percent.

My legislation puts 13 million people to work repairing the backlog of infrastructure projects all across this country. Moreover, each project will require equipment, supplies and services, and the hard-earned salaries from the jobs created will be spent in countless restaurants, shops and other local businesses. And, all of this economic activity will generate new tax revenues to pay for the services that Americans expect and deserve.

It is no wonder that groups from across the political spectrum – from organized labor to the U.S. Chamber of Commerce – agree that investing in infrastructure makes sound economic sense.

The good news is that it is not too late to get back on track. Let’s rebuild America.

http://www.truth-out.org/opinion/item/28691-roads-and-bridges-need-1-trillion-it-is-time-to-rebuild-the-us

We need our infrastructure repaired and updated with modern infrastructure to service and support our nation. But Senator Bernie Sanders proposal would further enrich those companies awarded taxpayer-supported government contracts to do the work. The condition for support of Senator Bernie Sanders’ proposed $1 trillion taxpayer-supported infrastructure spending bill should be if it stipulates that the companies qualifying for the government contracts are fully employee owned with full voting rights and full payout of earnings to their owners. Otherwise, this is just another taxpayer handout to companies who are narrowly owned on the basis that they will hire more people, who in reality only end up as wage slaves and dependent on a job for their sole livelihood.

The choice for our nation is to build broad personal ownership of wealth-creating, income-producing capital assets that will provide over time financial security for every child, woman and man, OR continue to support greed concentrated capital ownership with big government programs that promise job creation, and result in the continuance of wage slavery and welfare slavery.

Why These 5 Companies Are Laying Off Thousands Of Workers

150122_EM_eBayLayoffs

On January 22, 2015, Brad Tuttle writes on Money:

The economy is on the mend. Unemployment rates are down. So what’s up with all these companies slashing jobs by the thousands?

Here’s some explanation—note we used the word “explanation” not “justification”—for why a handful of companies are laying off large chunks of their workforces even as theeconomy is on the upswingand unemployment is fallingmonth after month.

eBay: 2,400 jobs
On Wednesday, eBay announced it would be cutting 2,400 jobs in the first quarter of 2015. The company says that the layoff figure includes positions that are unfilled, so the actual number of people losing their jobs will be less than 2,400. What’s more, eBay points out that the figure represents only 7% of the company’s total workforce. (Are we the only ones surprised to hear that eBay currently employs 34,600 people?)

Among the factors influencing the layoff decision: “Weak holiday sales” and revenues that have been lower than analysts expected, as well as a company restructuring in anticipation of the spinoff of eBay’s online payment service PayPal. The company said it may also spin off a third division, eBay Enterprises, which runs e-commerce operations for other companies, explaining in a statement: “It has become clear that [eBay Enterprise] has limited synergies with either business, and a separation will allow both to focus exclusively on their core markets.”

As for weak sales, one reason eBay is suffering is that, unlike Amazon—which effectively uses its Amazon Prime membership program to create legions of shoppers who make the vast majority of their purchases at its site—many eBay customers use the site randomly and haphazardly rather than habitually. “It’s the infrequent shopper that comes two, three, four times a year,” eBay CEO Donahoe toldUSA Today. “They didn’t come back at the rate we thought.”

American Express: 4,000 jobs
During the course of 2015, AmEx plans on cutting costs by trimming 4,000 jobs after failing to meet long-term revenue growth target of 8%. The Wall Street Journal pointed to “a stronger dollar, a weak December for retail sales and the sharp drop in gas prices” as forces that hurt the company’s fourth quarter results—which actually showed revenue and profits increasing, just not enough to satisfy investors. The 4,000 layoffs represent 6% of AmEx’s total workforce of roughly 63,000.

Baker Hughes & Halliburton: 8,000 jobs
The two energy companies agreed to merge last autumn, and bothended the year strongly, with Halliburton posting revenues up nearly 15% and Baker Hughes achieving record revenues for the quarter. Nonetheless, in light of plunging crude oil and gas prices, oilfield services provider Baker Hughes announced plans for layoffs of 11% of its workforce, roughly 7,000 employees, while Halliburton plans for about 1,000 job cuts of its own.

“This is really the crappy part of the job, and this is what I hate about this industry frankly,” Baker Hughes CEO Martin Craighead said this week in a conference call with analysts. “This is the industry, and it’s throwing us another one of these downturns, and we’re going to be good stewards of our business and do the right thing. But these are never decisions that are done mechanically.”

Schlumberger: 9,000 jobs
Another oilfield services company, Schlumberger also reported surprisingly strong fourth quarter results despite the steep drop in oil and gas prices—and it too recently announced big-time layoffs. Last week, the company said it had laid off 9,000 employeesworldwide in late 2014 as profits fell and demand for oil retreated.

http://time.com/money/3678511/ebay-amex-baker-hughes-layoffs/

What needs to be understood, and is by people who OWN and manage businesses (generally), is that people are not in business to employ people but to earn income after all costs have been accounted for. The success of a business depends on how many customers the business attracts, as well as how often the customers return.

Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal cost, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price, or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 235 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

Customers are dependent on money that they can spend to purchase products and services. But ever constant are the tectonic shifts in the technologies of production that eliminate the necessity for human labor input and devalue the worth of labor, as increasingly more people are, by necessity, forced to work for less wages in order to stay competitive with others seeking the same jobs. With less money earned through their labor, people cannot afford to purchase the products and services that are presented to them, even though they have the mental desire to purchase them. They are essentially limited to purchasing essentials and for the majority of Americans their livelihood challenges persist on a daily, weekly and monthly basis, in a constant state of worry that they will not earn enough money to purchase the essentials of life.

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 and become “customers with money.”

 

How America’s Wealthy Stole The American Dream And Cashed It At An Offshore Bank

On January 14, 2015, Les Leopold writes on AlterNet:

America is the most unequal country in the developed world. We also pay the lowest taxes among all developed nations. Is there a connection?

Runaway inequality and declining taxes are linked together through a set of economic policies called the “Better Business Climate” model which came to America around 1980. (By then Margaret Thatcher had already put her version to work in England.)

After the turbulent 1970s, which featured oil boycotts, high unemployment and even higher inflation rates, the policy establishment was hungry for a new simple plan that promised renewed prosperity. The Better Business Climate model had two key components: cutting taxes on corporations and the super-rich, and reducing regulations, especially on Wall Street. This potent combination was to encourage the rich to invest, which in turn would lead to more jobs and increasing incomes for all. A massive boom would then ensue to make all boats rise. But as we painfully learned, tax cuts and the unleashing of Wall Street led to luxurious yachts for the few and leaky rowboats for the rest of us.

Mind-altering tax cuts

The massive tax cuts which followed changed the way we perceive government and how we think about taxes. Since everyone hates to pay taxes, a model that claimed tax cuts would actually be good for the economy was enormously seductive.

However, it is easy to forget that before the Better Business Climate model slashed taxes, there was a national consensus that the super-rich and corporations should carry a disproportionate share of the tax burden. It was generally understood that if the wealthy had too much money they might be tempted to gamble it on Wall Street, creating bubbles that would take down the economy as happened during the 1929 stockmarket crash which led to the Great Depression.

Money from the wealthy would be used to fight WWII, the Cold War and build the American Dream. Through high taxes on the largest corporations and on the wealthiest Americans, we could pay for a new national highway system, provide nearly free public higher education, build affordable housing, support full employment and pay for the largest military establishment in the history of the world.

The Great Depression and world war cast a sobering shadow over how we viewed economic stability and high taxes. Never again would we allow mass unemployment to take hold. Never again would we allow obscene and illegal financial speculation (or so we thought).

This tax-the-rich national mindset was so pervasive that both Democratic and Republican administrations from Roosevelt to Nixon supported enormously high taxes on the wealthy.

For example, during WWII all income over $2.6 million in today’s dollars was taxed at a 94% rate. Think about that for a moment. Basically this rate served as a cap on elite compensation. After bankers hit $2.6 million, they received only 6 cents on the next dollar.

In 1956, during the conservative Eisenhower administration, the tax rate was still 91% of all income over $3.4 million. In 1976, 70 cents of every dollar of income over $807,000 went to federal income taxes.

In sum, here was a national consensus that such tax rates were both necessary and proper. For more than a quarter century, we shared an inner sense of justice: To promote the interests of everyone, there should be some limit on what the wealthy could earn.

The current notion that the rich should be able to manipulate the tax codes to pay lower tax rates than the rest of us would have been revolting to previous generations. Not just revolting, but downright stupid. We once understood quite clearly that runaway inequality would surely lead to calamity.

Yet, today, the top tax rate is down to 39.6 percent on income over $440,000. The chart below shows the dramatic decline in these rates.

Top marginal tax rate, 1916-2013.
Click to enlarge.

The downward spiral of tax cuts and government services

During the period of high tax rates, America reached its peak of fairness, as Thomas Piketty demonstrates in his excellent charts on our distribution of wealth and income. Yes, there were still plenty of rich people and they still lived damn well. But nearly all of us experienced a rising standard-of-living year after year.

But as soon as tax rates on the super-rich and corporations declined, inequality took off again.

Top 0.1 percent wealth share in the U.S., 1913-2012.
Click to enlarge.

Runaway inequality and runaway democracy

Every nation has a long and sordid history of money buying political favor. But rising inequality sets in motion a downward spiral that is so corrupt that democracy itself is in danger.

All of us have an intuitive grasp of how elites translate their increasing wealth into political power, which in turn leads to more tax breaks, more money for the few, and even more political power.

As the tax cuts associated with the Better Business Climate model set in, both political parties scrambled to raise money from those most enriched by the new economic policies. We now even refer to the “money primaries” in which newly declared political candidates scramble for financial support from the super-rich before the first vote is case. It is done so blatantly that we not accept it as normal politics.

But the consequences are not just that one politician wins over another. The rest of us pay dearly as we experience a decline in public services. And we don’t even see how why it’s happening.

Zero sum taxation

Buying political favor for the few inevitably leads to more hardship for the many. As the corporate contribution to federal taxes dropped from 32% in 1952 to only 9% in 2013, individual taxpayers had to make up the difference and to be sure, the super rich did all they could to avoid that burden. That left the broad section of American working people stuck with most of the tab.

More subversively, corporations and the wealthy discovered new ways to move money offshore in order to avoid taxes. What would have been impossible to even openly discuss in the 1960s is now common practice. Large corporations simply keep their global profits in foreign subsidiaries. (They often can do so just by switching accounts in Wall Street banks without the money ever leaving the country.) As the chart below shows, this practice is growing rapidly.

U.S. Profits Parked Abroad.
Photo Credit:
Audit Analytics and Rolling Stone, Aug. 27, 2014
Click to enlarge.

Contrary to the hype of the Better Business Climate model, they less the rich pay, the more tax pressure builds on the rest of us. This, in turn, increases the pressure to reduce public services, especially for those at the bottom of the income ladder. But it hits all of us as public employment and services deteriorate.

  • As we feel like we are getting less and less for our tax dollars, anti-government sentiment increases.
  • As we experience declining services, the pressure mounts for more tax cuts, which further erodes government services.
  • As we see our wages stagnate and our benefits deteriorate, we turn against public sector workers who seem to have it better.
  • Corporations then swoop in with privatization plans for public services which often cost us more and give us fewer services.

The net result is ever more money for those at the top and poorer services for the rest of us.

The black hole of runaway tax dollars 

Perhaps the biggest tax crime against American working people takes the form of individual wealth parked abroad. It is now considered normal practice to take money made in the USA and hide it offshore from the IRS. The numbers, compiled by the Tax Justice Network are staggering:

A significant fraction of global private financial wealth—by our estimates, at least $21 trillion to $32 trillion as of 2010—has been invested virtually tax-free through the world’s expanding black hole of more than 80 offshore secrecy jurisdictions. We believe the range to be conservative.

We don’t know precisely how much of this offshore wealth stems from American elites. But we can assume that most of it comes from the U.S. As thechart below shows, we have nearly half the world’s “ultra-high net worth” individuals (UHNW)—people with more than $50 million in wealth.

UHNW Individuals 2014: Selected Countries.
Click to enlarge.

How much tax money are we losing?

U.S. Public Interest Research Group (PIRG) reports that we’re losing about $184 billion a year due corporate and individual offshore tax evasion. That’s a big number, more than enough to eliminate tuition at every public university, college and community college in the country.

“Pirate Banking” brought to you by bailed-out Wall Street

The Better Business Climate model not only reduced taxes on corporations and the super-rich, but also deregulated Wall Street. By abandoning the prudent New Deal controls that prevented Wall Street from excessive gambling and outright criminal activity, the Better Business Climate advocates unleashed a new generation of financial manipulation followed by crashes and bailouts galore.

With massive financial deregulation came the rapid expansion of “wealth management” for high net worth individuals. The name of the new game was moving money into offshore facilities. Here’s how the Tax Justice Network puts it:

Of the top 10 players in global private banking, all 10 received substantial injections of government loans and capital during the 2008-2012 period. In effect, ordinary taxpayers have been subsidizing the world’s largest banks to keep them afloat, even as they help their wealthiest clients slash taxes.

Many of these market leaders in global pirate banking who are in the practice of hiding and managing offshore assets for the world’s elites have also been identified as market leaders in many other forms of dubious activity, from the irresponsible mortgage lending and high-risk securitization that produced the 2008 financial crisis, to the latest outrageous scandals involving LIBOR rate rigging and money laundering for the Mexican cartel.

No taxation without representation: revolutionary potential?

We’re in a whale of a tax mess. Runaway inequality will lead to even more runaway taxation. Meanwhile government will be starved for funds as the tax burden shifts from corporations and the wealthy onto the rest of us. Government services will decline while the rich evade their taxes and use their money to insulate themselves from the public services they don’t need.

Normally, we would expect to rectify the situation through electoral means. However, the wealth and power of financial elites thoroughly dominate the political process. Even the Democratic Party fears eliminating outrageous tax loopholes (“carried interest”) for billionaire hedge fund and private equity managers that cost the treasury billions of dollars each year.

The combination of deteriorating government services, tax avoidance by the rich, and unresponsive elected officials form a combustible mix. Nothing short of a massive movement that builds a new political organization will be needed to right these many wrongs. But it will have to be more than another Occupy Wall Street. We will need to do the painstaking work of spreading the word, and then organizing the 99 percent into a new political force to be reckoned with. It took 30 years to get us here. Expect it to take that long for us to effectively get our act together.

http://www.alternet.org/economy/how-americas-wealthy-stole-american-dream-and-cashed-it-offshore-bank

 

Robert Reich on Redefining Full-Time Work, Obamacare, And Employer Benefits

JAN15_21_131555260

On January 21, 2015, Walter Frick writes in the Harvard Business Review:

One of the U.S. Congress’s first acts of 2015? Trying to redefine what counts as full-time work, from 30 hours a week up to 40. It’s part of the latest attempt by Republicans to alter Obama’s signature healthcare law, the Affordable Care Act, and has already passed the House of Representatives. But it has also had the perhaps unexpected effect of putting the divide between full- and part-time workers front and center in American politics.

I asked former Clinton Labor Secretary and UC Berkeley professor Robert Reich about the debate, and what it means for employers, employees, and the future of American work. An edited version of our conversation follows.

The House has voted to change the definition of full-time work. It seems like the Senate may as well, and Obama has threatened to veto it. Why does the definition of full-time work end up mattering so much to our politics?

It matters under the Affordable Care Act because if full-time work is defined as 40 hours a week, employers can avoid the employer mandate [to provide health insurance] by cutting the work week down to 39 hours. It’s harder for them to do that if full-time work is defined as at least 30 hours. And of course if employers can avoid the employer mandate relatively easily, that means that more workers lose employer coverage, which, in turn, means that more workers have to rely on the government with regard to their health care, either through the Affordable Care Act or through extended Medicaid. That, in turn, puts a large and potentially growing burden on the federal budget, and could cause the deficit to expand.

Government has been a driving factor, along with unions, in defining how we think about what a workday looks like. How has that definition evolved over time?

Much of the tumultuous labor history of the 19th century centered on not just wages, but also on hours. At the center of all of that was the eight-hour workday. When Henry Ford moved to a 40-hour workweek in 1914, that went hand in glove with his increase in wages. And he did both for the same reason: he thought that workers would be more productive and that they would be more satisfied and loyal. And then by the late ‘30s organized labor began focusing on not only wages but also the conditions of work. The great GM strike of 1937, for example, was more about working conditions, such as sick pay and bathroom breaks and so forth, than it was directly about wages. Another important marker was the 1938 Fair Labor Standards Act where you had, for the first time, a national standard, which was a 40-hour work week, time-and-a-half for overtime, a minimum wage. There was a ban on child labor. Social security had been passed just three years before and social security was not just the social security for retirees, it was also disability insurance, worker compensation.

It was clear that in the 1930s we were thinking both about wage security, but also about benefits and various forms of social security, provided by government and ultimately by the private sector as well. I think the big change that started in the 1970s was the change in the employment contract itself, because you had a dramatic drop in the percentage of workers who were in the private sector and unionized. And that meant that you no longer had a system of prevailing wages or prevailing benefits. And we see from the 1970s onward a movement toward where we are right now, and that is more workers who are without benefits coming from their employment contract, whose wages are less a function of collective bargaining than they are a function of the workers’ own individual bargaining leverage, which is extremely small if the worker has no particular educational advantage over any other worker.

Is this part of a larger divide over how full-time workers and part-time workers are treated? Or is it just a specific policy debate over how the ACA works?

It’s a broader debate. The ACA certainly brings it into relief, but the more fundamental question is two-fold. First, are workers assets to be developed or are they costs to be cut? Some employers regard even low-wage workers as potential assets. These employers are not only concerned about the costs of turnover and recruiting and training employees who might otherwise leave, but they’re also aware that employee loyalty and relational capital [are] very important to their business, even with regard to frontline workers or workers who are relatively low paid. Other employers have taken a very different approach. They regard workers as costs to cut. They are concerned that payrolls are too high. They look to cutting payrolls as the easiest and most direct way of improving performance. Some empirical work has been done as to which of these views pays off. I don’t think there’s any question that over the longer term, employers who view their workers assets to be developed do better. But let’s face it, we’re working in a very short-term world right now and so there are many forces that are creating incentives for employers to join the camp of regarding workers as costs to be cut.

The other factor here has to do with what level of employee we’re dealing with. Many firms regard their lowest wage employees as fungible. Even if their view is that their talent represents an asset to be developed, they don’t regard their frontline workers or low-wage workers as talent, they regard those workers as fungible costs. And so you get this second divide in terms of where employers draw the line between their so-called talent and their fungible costs.

Economists tend to talk about health benefits as if they are totally fungible with wages. If that were true, and employers could get away with cutting a 40-hour work week down to 39 hours and no longer having to pay for benefits, they would have to offer superior wages to make up for it. What’s missing in that kind of economic reasoning?

Well, the market is not, by any measure, perfectly competitive. The labor market, especially, has a lot of stickiness to it. Workers are not perfectly substitutable. A lot of people cannot move easily from where they are now working to another opportunity. The labor market also is very weak. There are millions of people who are no longer even in the labor market. They have given up looking for work, but they could come back in if demand picked up. Wages are, as a result, very low. Most of the new jobs that have been created in the United States pay less than the jobs that were lost in the great recession. So for all these reasons the notion that if I, as an employer, have to pay less in one domain or one dimension, I have to make it up in another, simply doesn’t hold true.

What about from the workers’ perspective? In a pre-Obamacare landscape the argument is very clear. If you aren’t able to get health insurance at work, particularly if you don’t qualify for Medicaid and depending on your health status, you may be denied coverage or charged an exorbitant rate in the private market. Today community rating is in place and the private exchanges are subsidized. What does the equation look like from a worker’s perspective, in terms of just how much they really want to be on that employer plan versus the exchanges?

We don’t know very much yet. We’re going to find out a lot more over the next few years. But the preliminary evidence seems to show that workers are relatively indifferent as to whether they’re on an employer plan or are getting their insurance off an exchange. Their real concern is cost, not just the cost of premiums, but also copayments and deductibles. One story that has not been adequately talked about, and a problem that hasn’t been adequately addressed, is that we see deductibles and copayments skyrocketing. Even though many workers today are getting insurance who might not have got insurance before on an employer-based plan, they are indirectly paying a great deal because of the size of the copayments and deductibles. And I might add this is also the pattern with regard to employer-provided insurance.

The U.S. is unique in terms of employer-sponsored health insurance. But does this kind of divide, about the benefits that accrue to full-time workers versus part-timers, have a corollary in other countries?

There’s not much of a corollary. If you look at other advanced nations, you see that, because of various forms of national health insurance, employer benefits don’t figure in nearly as much. Meanwhile there is much more part-time and temporary work in the United States, for a variety of reasons, some of which are sociological. Americans are working longer hours — at least Americans who are employed are working longer hours on average than Europeans or even Japanese workers. American workers are also working on weekends and at night to a much greater extent than European or Japanese workers. In fact the latest data show that 29% of American workers work weekends, 26% work at night. These are the highest percentages of any industrialized nation.

How does all of this relate to the challenges that we might face if the “sharing” or access economy – Uber, Airbnb, etc. — ends up growing?

It’s definitely growing. We’re seeing, with regard to a majority of workers in America, that they are moving toward a world in which they have few, if any, employer benefits. They are more freelancers and independent contractors, temporary workers, and part-time workers. Their remuneration is set in what’s essentially a price auction, a spot auction market, [and] varies from day to day or even from week to week. Now if you’re young and well-educated, this kind of a system may be quite attractive. There are many young, well-educated people who don’t want to be as regulated as a typical full-time employee. They want to be more entrepreneurial, they don’t mind that they have to pay for the equivalent of all their benefits. But the older the worker, the less educated the worker, the more the worker has a family or other dependents, that worker is likely to regard this emerging system as a far greater burden and a far greater challenge, because most people have bills they have to pay that are fairly regular. But if their compensation is variable, they can find themselves in very big trouble.

I want to go just back to one point you alluded to awhile ago. Many of the benefits that became part of the standard American labor contract date back to World War II and the days when about a third of our private sector workforce belonged to a union. Those benefits were included in contracts for two important reasons: first because there were price controls and the benefits were a way of circumventing the price controls, at least with regards to labor. The second reason had to do with taxes. It became a very attractive feature of labor contracts to provide these benefits, because many of these benefits were not taxed, as were regular salaries and wages. So that much of the benefit structure we have today is a legacy of the Second World War.

If you could wave a magic wand and put in place the support and welfare policies that you believe are necessary, would you be comfortable with this broad idea of switching risk mitigation from the company to the government, and letting the contracts between workers and companies be more fluid? Or do you think that there’s a risk in going in that direction?

I would definitely support that direction. I think that’s the direction we have to move in, for a number of reasons. First, the benefit structures that we still have in place amount to a very large tax subsidy going to the highest paid workers. Most low-wage workers are not getting tax-subsidized benefits. That makes no sense — that’s an upward redistribution that is socially unjustifiable. Secondly, these benefit systems are very inefficient. They keep people locked into jobs that they don’t necessarily want, or they prevent people from taking opportunities that might otherwise be available. They impede mobility in the labor market. I think it makes a great deal of sense to move away from these employer benefit systems to benefits that are provided through government, either directly or indirectly.

https://hbr.org/2015/01/robert-reich-on-redefining-full-time-work-obamacare-and-employer-benefits

While the focus of this article is on labor and income from jobs and benefits, it fails to assess the result impact that tectonic shifts in the technologies of production is causing––specifically the destruction of jobs and shift from labor intensive to capital (non-human) intensive input, as well as the devaluation of the worth of labor’s input.

Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal cost, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price, or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.

Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 235 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

People invented tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention. Binary economist Louis Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.”

Furthermore, according to Kelso, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. Kelso postulated that 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. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive and ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the American economy.

 

 

City Looks At New ‘Infrastructure District’ To Fund L.A. River Plans

Arroyo Seco

On January 19, 2015, Catherine Saillant writes in the Los Angeles Times:

Los Angeles leaders are hoping to use a new tax-sharing law to help finance ambitious plans to transform the city’s namesake river into a ribbon of recreational areas and vibrant new developments.

As of Jan. 1, local officials have the authority to direct a greater share of future property taxes to revitalization efforts, public works projects and environmental cleanup. The law is intended to replace some of the billions of dollars cities lost when Gov. Jerry Brown and the Legislature shut down more than 400 redevelopment agencies during the recession-driven budget crisis.

L.A. officials wasted no time, taking initial steps last week toward creating what is believed to be the state’s first Enhanced Infrastructure Financing District. At a City Hall hearing, council members voiced eagerness to explore the steps needed to form a district and ordered a detailed report, due back in 45 days.

Councilman Mitch O’Farrell, who asked for the analysis, said the city’s first infrastructure district would be focused on projects to restore and improve a 31-mile portion of the Los Angeles River.

Revitalizing the river is one of Mayor Eric Garcetti’s top initiatives, and the city got a boost last year when the Army Corps of Engineers agreed to a $1-billion restoration plan. But the city has been trying to come up with its share of funding. Retaining more property taxes within the city is one possibility, O’Farrell said this week.

“I’ve been chomping at the bit for the better part of a decade to identify a permanent source of revenue for improvements along the river,” he said. “And tax-increment financing can be a very good vehicle for that.”

The L.A. River is an example of what municipal analysts say could be a wave of new and stalled economic development projects that could gain momentum as a result of the state’s tax-sharing law.

In addition to public works projects, the infrastructure districts can be used to remake former military bases, rehabilitate private industrial buildings and leverage transit-oriented development, said Jon E. Goetz, a San Luis Obispo attorney who specializes in municipal law. Unlike those of the now-defunct redevelopment agencies, qualifying projects and districts don’t have to be in blighted areas, he said.

“Redevelopment was a power tool, and this is more like a hand tool,” he said. “It’s not as powerful, but with creativity it can be used for economic development, for infrastructure and for affordable housing.”

Taxpayer groups opposed the infrastructure district legislation because it permits local jurisdictions to create the zones without a vote of affected property owners. They also objected to a 55% voter-approval requirement to issue bonds and raise money for the districts. Many other tax-related measures require a two-thirds majority of voters to become law.

Diverting more property tax dollars to capital projects would shrink money available for ongoing services, such as public safety and paving roads, which in turn would “drive the demand for higher local taxes,” the California Taxpayers Assn. said in a letter outlining its concerns.

There are key differences between the new law and legislation that created redevelopment agencies more than 60 years ago. Those entities, mostly run by cities, were empowered to capture virtually all property tax growth in designated, blighted areas. That cost counties, schools and special districts billions.

Critics and warring local officials accused the agencies of stretching the definition of “blighted” to siphon away needed property tax dollars.

Under the new law, property taxes going to schools can’t be diverted to the infrastructure districts. And dollars allotted for counties or special districts would be redirected to the new districts only if all the affected agencies agree.

Los Angeles County Supervisor Hilda Solis, who represents areas northeast of downtown where the initial river projects are envisioned, said she strongly backs the revitalization effort. But city leaders will have to convince the county to part with a portion of its future property tax collections, she said.

“There will have to be a good case for that,” she said.

Before their 2012 dissolution, California redevelopment agencies received more than $5 billion in property tax revenue annually. In Los Angeles County, cities shared about one-third of that through their redevelopment agencies.

The new funding zones are expected to raise a fraction of that. On average in Los Angeles County, the infrastructure districts could collect close to 60% of what redevelopment agencies were able to capture in designated areas, said Tom Sakai, a local government consultant. But the share would be significantly less if counties and special districts declined to participate, analysts say.

Goetz and others say local governments may look favorably on the potential of infrastructure districts, despite the limitations.

“It does force more cooperation between layers of government, particularly between the city and county,” he said. “And it forces local governments and developers to put their heads together and come up with plans to benefit everyone.”

O’Farrell’s staff said his office hasn’t yet done a revenue projection or identified what L.A. River projects would be included. But an estimated $1 billion worth of improvements have been listed in the city’s master revitalization plan, including widening bridges, restoring wetlands, cleaning up industrial waste and acquiring privately held parcels.

Lawmaker support in the council’s Arts, Parks, Health, Aging and River Committee, where creation of a infrastructure district was discussed, was generally strong.

But there could be fights ahead over how to use any windfall of tax money. As rents climb, Councilman Gil Cedillo signaled he would like some of the money earmarked for affordable housing.

“It’s great to talk about how great the river can be,” he said. “I’ve got four of the six major projects in my district. But I’m concerned that we would be doing river work in lieu of housing.”

http://www.latimes.com/local/cityhall/la-me-la-river-financing-20150118-story.html

The so-called “tax-sharing law” to create a so-called “Enhanced Infrastructure Financing District” to  “direct a greater share of future property taxes to revitalization efforts, public works projects and environmental cleanup” will result in a wealth ownership class of “investors” to end up owning the redevelopment improvements on which they will either sell off at a profit or lease the use thereof at a profit.

Already tax-payer monies have been pledged through the Army Corps of Engineers as part of a $1-billion restoration plan. The city, on the other hand, is exploring means  to come up with its share of funding. Retaining more taxes on property owned by individuals and associations of individuals within the city is one possibility being explored as well as raising money through bond issues.

The plan includes using eminent domain powers of the State. The taxpayers will pay for an estimated $1 billion worth of improvements listed in the city’s master revitalization plan, including widening bridges, restoring wetlands, cleaning up industrial waste and acquiring privately held parcels.

As usual, the question of “Who will own the properties, once improved, is NEVER addressed, but smart people know that it will be wealthy investors who will end up with the prized income-producing capital assets.

As an alternative the City of Los Angeles should use a Citizens Land Bank (CLB), a for-profit, professionally-managed, citizen-owned-and-governed community land planning and development enterprise, designed to enable every citizen of a community of any size to acquire a direct ownership stake in local land, natural resources and basic infrastructure.

A Citizens Land Bank is a social vehicle for every man, woman and child to gain, as a fundamental right of citizenship, a single lifetime, non-transferable ownership interest in all the Bank’s assets, share equally in property incomes from rentals and user fees from leases or use of the Bank’s assets, accumulate appreciated equity values from enhanced land values, and gain an owner’s voice in the governance of future land development.

The Bank is an innovative legal and financing tool empowered to borrow on behalf of all citizen-shareholders and service the debt with pre-tax dollars to meet the land acquisition, capitalization and operational needs of the Bank. The CLB shelters from taxation the equity accumulations of citizen-shareholders and protects the outside assets of the citizens in the event of loan default or if the enterprise fails.

A Citizen Land Bank is a social tool designed to encourage a just, free and non-monopolistic market economy. It applies the democratic principles of equal opportunity and equal access to the means to participate as an owner as well as a worker. It demonstrates that anything that can be owned by government can and should be owned, individually and jointly, by the citizens.

The provisions and unique aspects of the Citizens Land Bank are:

  1. Make debt service on a leveraged CLB (a special kind of REIT) established within an eligible Super Empowerment Zone a tax-deductible business expense (as with an ESOP), so that area voters without savings can purchase a major block (up to 100%) of a CLB’s voting, full-dividend-payout common stock on borrowed funds repayable out of pre-tax CLB corporate profits and dividends. To the area voter, the principal payment on their stock acquisition loans would be treated as deferred income until CLB benefits are distributed as consumption incomes.
  2. Give the CLB tax-free status (as with an ESOP trust or an REIT) so that shares of CLB stock acquired by area voters and CLB earnings can be accumulated within individual CLB accounts free of taxes until the benefits are distributed to participants, generally on leaving the area. When distributed, the CLB benefits would be taxed the same as distributions from an ESOP or IRA.
  3. To create an in-house market for CLB shares, require the CLB to plan for the repurchase of distributed shares through a tax-free liquidity fund within the CLB, thus adding to the shares of remaining participants.
  4. Encourage the CLB to pay out dividends to area voters as supplementary incomes from their growing equity stakes in local real estate development by allowing CLB dividends (as with dividends on ESOP shares) to be taxable at the personal level but deductible at the corporate level. Together with the incentives of #1 and #2 above, this feature, by eliminating the discriminatory double tax on corporate profits, helps to restore private property in corporate equity.
  5. Defer personal income taxes on CLB-sheltered stock accumulations of area voters until the stock is distributed, sold and converted into spendable income. Allow the CLB participant a tax-free “roll-over” into a tax-exempt “Individual Retirement Account”, i.e., to further delay paying personal income taxes if the cash proceeds are re-invested into securities of other private sector equity investments. The objective here is to encourage savings and investment and to provide new sources for financing new ventures.
  6. Similar to #5 above, provide a tax deferral to the seller of stock to a CLB (e.g., joint venture partners and other CLB investors) from any proceeds on the sale, provided that the seller re-invests the cash proceeds in securities of other productive enterprises within the Super Empowerment Zone. This simultaneously reinforces both the goal of expanded share ownership opportunities and of providing new sources for financing development within the zone.
  7.  Require an annual independent professional appraisal of the fair market value of CLB shares and provide regulatory oversight of CLBs to minimize abuses, promote understanding, disseminate reliable information on the CLB among area voters, and generally protect the property rights of CLB participants.
  8. Monetize private sector productive credit by making “eligible” CLB and ESOP loans (as determined and allocated by local banks) within Super Empowerment Zones eligible for discounting under Section 13 of the Federal Reserve Act. New money issuances would be subject to 100% reserve requirement and made at a discount rate limited to a low Fed “servicing fee.” This reform would radically reduce capital credit costs, accelerate private sector growth rates and increase the competitiveness of enterprises within Super Empowerment Zones, reduce dependency on tax subsidies, and broaden citizen participation in capital ownership and profits.

For more information on the Citizen Land Bank see http://cesj.org/resources/articles-index/citizens-land-bank-what-it-is-and-is-not/http://cesj.org/learn/capital-homesteading/ch-vehicles/citizens-land-banks-clbs/tax-incentives-and-infrastructural-reforms-needed-to-encourage-citizens-land-banks-clbs/, and http://cesj.org/learn/capital-homesteading/ch-vehicles/citizens-land-banks-clbs/.

Meet The 80 People Who Are As Rich As Half The World

On January 18, 2015, Mona Chalabi writes in FiveThirtyEight:

Eighty people hold the same amount of wealth as the world’s 3.6 billion poorest people, according to an analysis just released from Oxfam. The report from the global anti-poverty organization finds that since 2009, the wealth of those 80 richest has doubled in nominal terms — while the wealth of the poorest 50 percent of the world’s population has fallen.

To see how much wealth the richest 1 percent and the poorest 50 percent hold, Oxfam used research from Credit Suisse, a Swiss financial services company, and Forbes’s annual billionaires list. Oxfam then looked at how many of the world’s richest people would need to pool their resources to have as much wealth as the poorest 50 percent — and as of March 2014, it was just 80 people.

Four years earlier, 388 billionaires together held as much wealth as the poorest 50 percent of the world.

Thirty-five of the 80 richest people in the world are U.S. citizens, with combined wealth of $941 billion in 2014. Together in second place are Germany and Russia, with seven mega-rich individuals apiece. The entire list is dominated by one gender, though — 70 of the 80 richest people are men. And 68 of the people on the list are 50 or older.

If those 80 individuals were to bump into each on Svenborgia, what might they talk about? Retail could be a good conversation starter — 14 of the 80 got their wealth that way. Or they could discuss “extractives” (industries like oil, gas and mining, to which 11 of them owe their fortunes), finance (also 11 of them) or tech (10 of them).

There might be some quiet voices in the room, though, because 11 of the wealthiest people on the planet were simply born into their money (19 others inherited their wealth and then made it grow). The remaining 50 names on the list, according to Forbes, are self-made billionaires.

Oxfam notes that global wealth inequality is increasing while the rich get richer. If trends continue, the organization projects that the richest 1 percent of people will have more wealth than the remaining 99 percent by 2016.

Here’s the list of the 80 people with as much wealth as the world’s poorest 3.6 billion people:


http://fivethirtyeight.com/datalab/meet-the-80-people-who-are-as-rich-as-half-the-world/

First off, wealth is OWNERSHIP of either productive capital assets used to produce products and services (land, tools, machines, structures, etc.) or personal assets (homes, cars, furnishings, etc.) The reason people become rich is because they OWN wealth-creating, income-producing capital assets. In most cases, wealth is inherited and used to further acquire more wealth. The problem is that the system empowers those who already own to acquire more productive capital assets on the basis that their investments pay for themselves.

What is necessary  to reform the system are new ownership broadening policies that will empower EVERY citizen to acquire capital asset ownership shares in the viable business corporations growing the economy using insured, interest-free capital credit loans, repayable out of the future earnings of the investments. This would not require personal security such as past savings or any reduction in wage or other income, and would not take anything from those who already own assets.

To breakup the massive wealth held by individual at death, as a substitute for inheritance and gift taxes, a transfer tax needs to 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.

To achieve this objective we need to implement the proposed Capital Homestead Act. Among the provisions of the Act, the Federal Reserve would 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 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 on 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 newly added technology, renewable energy systems, plant, rentable space and infrastructure 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.

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 our only legitimate social monopoly –– the State –– and whatever elite controls the coercive powers of government.

Support the Capital Homestead Act at 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.

 

 

Here’s What Hillary Clinton’s Economic Platform Could Look Like

On January 18, 2015, Ken Thomas writes on The Huffington Post:

Inside the Democratic Party, economic policy is often seen as a contest between President Barack Obama’s track record and the anti-Wall Street approach advocated by Massachusetts Sen. Elizabeth Warren.

As Hillary Rodham Clinton heads for an expected 2016 run for president, her allies are pointing her toward something in-between.

A group of Clinton advisers offered a detailed economic agenda last week that aims to help raise wages for millions of workers and close the gap between rich and poor. The policy road map was produced at the Center for American Progress, a Washington-based think tank stocked with veterans of the Bill Clinton and Obama administrations. It appeared to target those who are disenchanted with Obama and skeptical that Clinton effectively would police Wall Street and champion middle-class workers.

“While there are large forces, globalization, technology and more, that are creating large challenges for many workers, there is no excuse or intellectual basis for fatalism,” said Larry Summers, one of its authors and a former treasury secretary under President Bill Clinton who later worked for Obama.

The subject is clearly on Hillary Clinton’s mind. In her first tweet in more than a month, she posted this Friday: “Attacking financial reform is risky and wrong. Better for Congress to focus on jobs and wages for middle-class families.”

Campaigning for Democrats last fall, she often spoke of the need to return to an economic system of broadly shared prosperity.

That goal has eluded Obama, even though he is able to point to a rebounding economy, falling unemployment rates and lower gas prices. Obama, in Tuesday’s State of the Union, plans to propose raising the capital gains rate on the wealthy and eliminating a tax break on inheritances. The plan is a nonstarter with Republicans, but Obama will make the case for using the additional revenue for new tax credits and other benefits for the middle class.

Warren, in a speech this month to the AFL-CIO, said that despite stronger economic growth and a soaring stock market, “America’s middle class is in deep trouble.” Liberals say the problem of stagnant wages require urgent action.

“We need to be extremely aggressive to deal with income and wealth inequality,” said Vermont Sen. Bernie Sanders, an independent who may seek the Democratic presidential nomination.

Republicans such as Jeb Bush and Mitt Romney are beginning to articulate their own agenda for addressing income inequality, reflecting an expected argument that Obama’s policies have not helped millions of workers.

“Their liberal policies are good every four years for a campaign, but they don’t get the job done,” Romney said in a speech last week to the Republican National Committee.

Clinton’s template has been the 1990s, during her husband’s two terms, and Summers noted that many of the ideas in the report built upon the “Putting People First” agenda from Bill Clinton’s first presidential campaign.

It also cited some of the chief parts of Obama’s economic program, such as efforts to raise the federal minimum wage, spend more on roads, bridges and public works, offer paid leave for workers and help students pay for college.

But the report also offered other ideas with broad appeal in the party: tax credits for middle-class families, incentives for employees to partake in profit-sharing, attention to collective bargaining rights and tying the repayment of student loans to a graduate’s income earned over two decades or more.

Those responsible for the report have strong Clinton connections.

Along with Summers, the commission included the center’s president and CEO, Neera Tanden, a former Hillary Clinton policy adviser; former Michigan Gov. Jennifer Granholm, a leader of a political action committee set to back a Clinton candidacy; and Steven Rattner, who was chief adviser to Obama’s auto bailout task force and is a longtime Clinton donor.

Clinton, who returns to the speaking circuit in Canada this coming week, has said she would offer a “very specific agenda” if she runs for president.

Some progressives said that while the new report offered good ideas, it had deficiencies. Most notably, it does not advocate for the breakup of Wall Street banks, which Warren has sought, and does not push for a higher minimum wage beyond the $10.10 pushed by Obama.

Anna Galland, executive director of MoveOn.org, noted the role of lobbyists only had a passing reference in the findings.

“In some areas, the report represents a largely Washington establishment perspective, and isn’t as bold as folks outside the Beltway are probably ready for,” Galland said.

Jared Bernstein, a former economic adviser to Vice President Joe Biden, said much of the report offered ideas that could unite broad parts of the Democratic coalition. He said it built upon a growing understanding in the party, in the aftermath of the November elections, that simple economic growth is not enough to lift the fortunes of middle-class workers.

“I don’t think the 2014 midterms were some sort of fluke. If you don’t give people a reason to get up and go vote for you, I’d expect them to sit down and stay home or vote for somebody else,” he said. “So you can’t assume based on demographics or race or income class that the electorate is going to support you. … You have to do precisely the kind of policy work that this group is offering us.”

http://www.huffingtonpost.com/2015/01/18/hillary-clinton-economic-platform_n_6495950.html?ncid=fcbklnkushpmg00000013

There are two planks in the Hillary Clinton platform that stand out and depart from the same old same old that is put forth by politicians.  Yes, sadly, there are a number of platform planks that would grow the power of government to coerce business corporations to raise wages as well as invest taxpayer extractions in infrastructure to create jobs, without the stipulation that the companies bidding for the government contracts are fully employee owned. And while Hillary Clinton has yet to address the issue of concentrated capital ownership and advocate universal individual ownership for EVERY citizen of wealth-creating, income-producing capital assets simultaneously with the growth of the economy, one of her platform planks “endorses more favorable tax treatment for worker-owned firms,” and proposes “‘estate tax relief’ for corporate founders who convert their companies to worker-owned enterprises when they retire or die.”

While the above addresses the concentrated capital ownership issue––the source of income and wealth inequality––Hillary Clinton only addresses aspects of this around the periphery and avoids the REAL issue. She, as with the majority of politicians seeking the presidency as well as in the Senate and Congress, are millionaires because they own capital assets, yet none EVER advocate to reform the system to empower EVERY citizen to acquire personal capital asset ownership on the basis that the earnings from the investments will pay off the initial insured, interest-free capital credit loans, which is the feasible and practical solution to broadening capital ownership. 

While Hillary Clinton recognizes that “incomes for the bottom 90 percent of the population have not kept up with productivity or per capita GDP growth,” she fails to understand why and realize that tectonic shifts in the technologies of production are constantly eliminating the necessity for human labor and at the same time devaluing the worth of labor as “machines”––the product of technological invention and innovation––shift the relative productive input from human labor to non-human “labor,” which is presently narrowly OWNED by a politically powerful wealthy ownership class minority.

Hillary Clinton does endorse “closing corporate tax and inheritance tax loopholes,” but to what extent is not stated. Ideally, ALL such loopholes should be closed, as well as all subsidies should be eliminated.

As for “estate tax relief,” inheritance and gift taxes should be replaced with a transfer tax that would 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 Commission On Inclusive Prosperity’s report appears to focus on Americans who are already employed and not impoverished, but struggling with stagnant incomes and retirement insecurity, but largely ignores the necessity to empower EVERY citizen, regardless of economic circumstances, to acquire individual ownership of wealth-creating, income-producing capital assets on the basis that past savings are not required, nor reduction in wages or other incomes and benefits to qualify for insured, interest-free capital credit loans, repayable out of future dividend earning fully paid out from the investment in successful corporations are who are growing the economy.

The author of this article acknowledges that the report is ” in some respects an exciting plan, but lacks a realistic path for enacting it”––claiming that Hillary Clinton’s economic message is “largely built out of politically unrealistic proposals.”

Well, there is a politically realistic set of policy proposals that respects the private property principles our nation was founded on and takes no property from those who presently own property. The policies are embodied in the agenda of the Just Third Way and in the platform of the Unite America Party, which are open to ANY politician or political party to adopt. The central economic policies in this platform are contained in the proposed Capital Homestead Act.

While Hillary Clinton offers us hope that her eyes can be opened and that she would take up and lead the cause, if she did in fact endorse and advocate for the passage of the Capital Homestead Act, this would be a monumental political achievement and would put our nation on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice.

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 our only legitimate social monopoly –– the State –– and whatever elite controls the coercive powers of government.

Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797http://foreconomicjustice.org/?p=5797http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.

Support the Capital Homestead Act at 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.

Support the Unite America Party Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html as well as Nation Of Change at http://www.nationofchange.org/platform-unite-america-party-1402409962 and OpEd News at http://www.opednews.com/articles/Platform-of-the-Unite-Amer-by-Gary-Reber-Party-Leadership_Party-Platforms-DNC_Party-Platforms-GOP-RNC_Party-Politics-Democratic-140630-60.html.