If Apple Were A Worker Cooperative, Each Employee Would Earn At Least $403K

On December 18, 2014, Cameron Keng writes in Forbes:

Apple has 98,000 employees and earned $39.5 billion after tax over the past year. If Apple was a worker cooperative, then each employee would’ve received a $403,000 dividend on top of their salaries. Even the lowest paid worker would’ve earned at least $403,000 in Apple as worker cooperative.

The first thing naysayers and disbelievers will say is “but, Apple isn’t a worker cooperative.” Mondragon is a worker cooperative that has about 74,000 employees and earned $12.6 billion in revenue. Mondragon is smaller than Apple, but it’s at a scale that demonstrates that we can do better as employees.

What Is A Worker Cooperative?

A worker cooperative is a company that is owned by the employees. Thus, employees receive salaries for their labor and a dividend at the end of the year from the company’s profits. As employees, we all see how much our employers charge their customers. I used to bill $475 per hour to my employer’s client, but I was only getting paid $35 an hour. Seeing this makes everyone question why they’re making so little.

Worker cooperatives answers the question we’ve all asked ourselves – what’s the point of working hard for someone else? Finally, we’re able to justify working ourselves to the bone for our fair share of the spoils. Instead of the scraps that manifest as 3% inflationary raises.

How Does It Work?

A worker cooperative is a business like any other company you’d see on Main Street or listed on a stock exchange. The only difference is that the employees own the business. Generally, worker cooperatives allow each employee to purchase a share in the company. Each employee owns a single share and receives a single vote in the company. Thus, no one can unilaterally make a decision that will affect the company. Everyone gets an equal right to control the company.

Why Do We Want More Worker Cooperatives?

Sustainable Jobs

Worker cooperatives are great for the economy. Everyone was directly affected by the mass layoffs during the last recession. Worker cooperatives are better equipped to protect jobs and protect their workers from dangerous work conditions. For example, an average company is focused on creating profits for only their owners, thus they would lay-off employees to increase their profit margins. But, a worker cooperative would protect their jobs because each employee is an owner. Each worker-owner would make less, but they would all weather through the recession and retain their experienced staff for the eventual economic recovery.

Middle Class

The middle class is a shrinking population in the United States. The news and media outlets are constantly reminding us of the growing wealth gap. Growing the middle class is the best way to strengthen our economy and improve the quality of life for everyone. The worker cooperative is the perfect vehicle for the creation of a strong middle class. Worker cooperatives focus on being profitable, while assuring that worker-owners are paid fairly for their labor and in safe conditions. Instead of centralizing wealth and profits, the worker cooperative would give everyone a share of the spoils. Spreading wealth across a healthy middle class means a stronger economy and a better opportunity for everyone to improve their lives.

The biggest problem with the American economy is the centralization of wealth in a very small group of people. There’s nothing wrong with being wealthy, especially if it’s from the hard work you’ve put in through decades of labor. The problem is that when wealth is centralized in a small group of people, money does not circulate in our economy. For example, during the recession we’ve all heard that banks stopped lending and that prevented qualified potential homebuyers from buying homes. If the wealthy decides to spend less or invest less, then our economy grinds to a halt.

Worker cooperatives spreads the wealth among a larger group of people, so that each person will be able to spend more to strengthen our economy. Ironically, the most “American” thing we can do is to spend more money. (Obviously, everyone should always spend their money wisely and not wantonly.)

Worker Cooperatives Pay More Taxes

Worker cooperatives will likely pay more taxes than your average company. Worker cooperatives seek to pay their employees livable wages and share their profits among their workers. The average company is encouraged to pay employees as little as possible and to transfer their large profit margins to their shareholders. These shareholders are able to shelter their gains or income through lower tax rates from “capital gains” and avoid paying social security because dividends are not “earned income.”

Worker cooperatives pay more taxes because each employee that earns more money would pay their fair share of employment taxes and at a higher “personal income” tax rate. Thus, worker cooperatives are profitable and are better citizens that work to support every American.


Every business model has its strengths and weaknesses. Worker cooperatives face two major criticisms. First, critics argue that worker cooperatives are unable to effectively find investors or capital. Most banks and lending institutions are unfamiliar with the worker cooperative business model. Lending institutions rarely make business loans to new business models because it is a higher risk to the bank.

Investors are unwilling to invest in companies where owners must be worker-owners. Also, investors seek to invest their money in businesses that focus on returning the maximum profit allowable to its stakeholders. A worker cooperative seeks to primarily compensate their workers-owners, thus investors are not the primary stakeholders.

The first solution to this problem is that worker cooperatives may not require large investments or capital. Payroll is the largest and the most difficult expense for service companies to manage, but worker-cooperatives have the ability to determine their own wages. Thus, service worker cooperatives are able to start without heavy capital requirements.

But, there are alternative funding options for worker cooperatives that require heavy investments such as manufacturing. One is funding from the local community. Prof. Carmen Huertas-Noble, founding director of the Community Economic Development Clinic at CUNY LAW and the leading national worker-cooperative attorney, with CUNY students, alumni and community partners were able to secure $1.2 million in New York City Council funding to support local worker cooperatives. New York City’s pledge is the largest investment by any US city government to date. This pledge was brought about through the efforts of Assemblyman Carl E Heastie, Chair of the Labor Committee and Councilwoman Maria Carmen Arroyo, Chair of the Community Development Committee.

Prof. Huertas-Noble and 1worker1vote have taken their success in New York and helped to spurred other communities such as Madison, Wisconsin to make the same pledge. Last month, the City of Madison, Wisconsin approved a plan to provide $1 million per year in support of local worker cooperatives for five years.

Prof. Carmen Huertas-Noble’s CEDC has partnered with 1worker1vote and Mondragon University to develop a Social Economic Cooperative Enterprise Program to teach other communities how to achieve results similar to New York and Wisconsin.

Secondly, critics complain that the business model is not scalable. Critics believe that worker cooperatives are unable to grow to the scale of a company such as Apple. This is clearly disproven with the existence of companies such as Mondragon. All companies face the same problem as they grow – recruiting good people. Finding the right people to join the team is most important factor in whether a company is able to succeed at scale. Worker cooperatives are able to attract the best talent because they’re able to provide the opportunity for ownership of their work. A capable person is incentivized to join a worker cooperative because they will own a piece of the company, instead of simply earning a flat wage.


Worker cooperatives are a great option for Americans to achieve the “American Dream.” The United States was built upon entrepreneurialism and control over our own destiny. This vehicle is way for every American to realize that opportunity.



The Wealth Gap Between Rich And Poor Is The Widest Ever Recorded

On December 18, 2014, Joaquim Moreira Salles writes on Think Progress:

income inequality


The wealth disparity between upper and middle income Americans has hit a record high, according to a new Pew Research Center Report. On average, today’s upper-income families are almost seven times wealthier than middle-income ones, compared to 3.4 times wealthier in 1984. When compared to lower income family wealth, upper income family wealth is 70 times larger.

It has come to the point where only the top 10 percent of Americans are seeing their wealth grow while the bottom 90 get less and less of the pie each year. The driving force of this wealth chasm are the top 0.1 percent, who have seen their share of the nation’s wealth grow the most over the past decades, from 7 percent in 1979 to 22 percent today. In fact, the top 0.1 percent are now worth more than the entire bottom 90 percent of the U.S. population, according to the report, which adjusts for the shrinking size of the American family so as to enable comparisons across time periods.

The study also assesses what effect the 2008 financial crisis had on wealth distribution. Although the crisis wreaked havoc across all income levels, its effects have been much more enduring for those on the lower end of the economic spectrum. Those at the top have managed to recoup their wealth, while middle and lower income families have not made any gains, according to the Pew report. The stock market, on the other hand, has bounced back,surpassing pre-crisis levels, and Wall Street is doing better than ever.

The magnitude of wealth inequality in the U.S. reflects a broader trend towards increasingly uneven distribution across the developed world. A recent report by Oxfam shows that the top 1 percent in much of the developed world have also seen their share of national wealth grow significantly over the past 30 years.

Although polls show that people are concerned about rising inequality, they also show that people tend to massively underestimate the gravity of the problem. Respondents to a survey conducted in Canada this month believed the wealthiest fifth of Canadians owned 55.5 percent of the wealth. In reality, the richest Canadians own 67.4 percent of national wealth.

Respondents said that in an ideal world, the top fifth would own only 30 percent of the wealth, less than half of what they actually own. In the same vein, a survey conducted here in the U.S. showed that Americans drastically underestimate the CEO-to-worker pay gap. Respondents guessed the average CEO made 30 times as much as the average unskilled worker. In actual fact the CEO-to-worker pay ratio is 354-to-one. Ideally, respondents said, CEOs would make 6.7 times as much as workers.

It seems even if people underestimate the extent of wealth inequality, they still believe that wealth should be more evenly distributed. Two thirds of Americans are dissatisfied with the current configuration of wealth distribution, and roughly the same number of people believe the federal government should play a role in guiding the transition towards a more equitable society.


The fundamental reason the rich are getting richer is because this wealthy ownership class OWNS America. The system is rigged in ways that empower the wealthy ownership class to constantly concentrated among themselves more and more wealth-creating, income-producing capital assets as the economy grows. On the other hand, the vast majority of Americans, who are for all practical purposes propertyless and without meaningful savings, are shut out of the system and denied any opportunity to acquire ownership of capital assets, and forever stuck on the JOBS ONLY path to earning an income, and thus relegated to wage slavery or worse, welfare slavery and dependent on the State for support programs paid for with redistributive taxation and inflationary national debt.

The solution to economic inequality is to empower EVERY child, woman and man to acquire ownership in FUTURE productive capital assets on a self-liquidating basis.

My colleague Michael Greaney at the Center for Economic and Social Justice states the case:

“There’s a way that everyone can have an equal opportunity to participate in economic growth without taking anything from anyone, not even the bloated rich or the slack-off poor.

“A Capital Homestead Act would give every child, woman, and man equal opportunity and access to the means to participate in economic growth as a capital owner, not merely a wage-worker or welfare recipient. It would expand Lincoln’s concept based on the limited land frontier to the virtually unlimited commercial and industrial frontier.

“The key is in financing. If we assume that the only way to finance new capital formation is to cut consumption and accumulate the surplus as money savings, we restrict ownership of all new capital formed to those who are already rich and can afford not to consume all of their income.

“If, however, we take the present value of future increases in consumption and turn it into money to finance new capital, then repay and cancel the new money out of the profits generated by the new capital when it becomes profitable, the problem solves itself. Instead of financing economic growth out of what has not been consumed in the past, we can finance growth out of what can be produced in the future — and it won’t be either inflationary or deflationary.

“All we have to do is make sure that all new capital is financed in ways that create new capital owners, and the frantic search for new ways to finance artificial “job creation” can end. People will be too busy producing things for which there is a genuine demand to worry about doing make-work just to get an income.”

Support the Capital Homestead Act at http://www.cesj.org/…/capital-homestead-act-a-plan-for…/ and http://www.cesj.org/…/capital-homestead-act-summary/.


The Conservative Case For A Guaranteed Basic Income

Swiss backers of a minimum income spread out coins in Bern. (Denis Balibouse/Reuters)

On August 6, 2014, Noah Gordon writes in The Atlantic:

Last week, my colleague David Frum argued that conservative welfare reformers need to focus on simplification. As a young crop of conservative policymakers announce a range of proposals, there’s some movement in that direction. Florida Senator Marco Rubio’s plan would move most of America’s existing welfare funding into a single “flex-fund” to be disbursed to the states. Wisconsin Representative Paul Ryan, partly inspired by the “universal credit” reforms of Britain’s Conservative government, proposes allowing states to combine different forms of federal anti-poverty funding—food stamps, housing assistance, and more—into a single funding stream. In a recent speech about fighting poverty, Utah Senator Mike Lee told the Heritage Foundation, “There’s no reason the federal government should maintain 79 different means-tested programs.”

Meanwhile, the intellectual wing of reform conservatism likes these plans because they reduce government and offer citizens more control, at least in theory. Yuval Levin, one of the authors of the reform-conservatism manifestoRoom to Grow, has praised Ryan’s plan, saying it would “give people more resources and authority and greater freedom to find new and more effective ways up from poverty.” Liberal wonks, on the other hand, have claimed it’s actually a paternalistic program at odds with the traditional Republican desire for less-intrusive government, since it relies on providers who make decisions for beneficiaries.

In any case, these ideas are circumscribed by traditional boundaries. Neither is a truly radical small-government idea alternative. But one idea that Frum highlighted is more radical: a guaranteed basic income, otherwise known as just giving people money.

The idea isn’t new. As Frum notes, Friederich Hayek endorsed it. In 1962, the libertarian economist Milton Friedman advocated a minimum guaranteed income via a “negative income tax.” In 1967, Martin Luther King Jr. said, “The solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.” Richard Nixon unsuccessfully tried to pass a version of Friedman’s plan a few years later, and his Democratic opponent in the 1972 presidential election, George McGovern, also suggested a guaranteed annual income.

More recently, in a 2006 book, conservative intellectual Charles Murray proposed eliminating all welfare transfer programs, including Social Security and Medicare, and substituting an annual $10,000 cash grant to everyone 21 years and older.The Alaska Permanent Fund, funded by investments from state oil revenues, sends annual dividend checks to the state’s residents. Switzerland is voting on an unconditional basic income later this year. (Though the fundamental basic-income guarantee involves an unconditional grant to every citizen, no matter their wealth or age, other versions wouldn’t cut checks to those in top tax brackets or those receiving Social Security.)

Apart from lifting millions out of poverty, the plans promote efficiency and a shrinking of the federal bureaucracy. No more “79 means-tested programs.”Creating a single point of access would also make many recipients’ lives easier. If they knew they had something to fall back on, workers could negotiate better wages and conditions, or go back to school, or quit a low-paying job to care for a child or aging relative. And with an unconditional basic income, workers wouldn’t have to worry about how making more money might lead to the loss of crucial benefits. In the Financial Times, Martin Wolf has contemplated a guaranteed income’s ability to help society adjust to the disappearance of low-skill, low-wage jobs.

Is it feasible? It depends on the size and scope of the program, but Danny Vinik crunched some numbers at Business Insider: “In 2012, there were 179 million Americans between the ages of 21 and 65 (when Social Security would kick in). The poverty line was $11,945. Thus, giving each working-age American a basic income equal to the poverty line would cost $2.14 trillion.”

Cutting all federal and state benefits for low-income Americans would save around a trillion dollars per year, so there would still be a significant gap to be closed by revenue increases like higher taxes or closing existing loopholes. That doesn’t seem likely, to say the least, in the current political environment. Alternatively, a guaranteed income could be means-tested, or just offered at a lower level. In The Atlantic last year, Matt Bruenig and Elizabeth Stoker argued policymakers could halve poverty by cutting a $3,000 check to Americans of all ages.

Naturally, the idea is not without flaws. Some conservative critics contend a guaranteed income might create a society of layabouts by establishing adisincentive to work (although the jury is out). Others wonder which immigrants would be eligible and when. But the most common conservative counterargument is that a guaranteed income would destroy the progress against dependency and poverty effected by the welfare-to-work reforms of the last two decades. (Whether that progress was real, or dependent on the broader economy, is a debate of its own.) Many liberal wonks are excited by the idea, but Democratic politicians are usually scared off by the political cost of advocating a new, large-scale redistribution or by the problems with scrapping existing welfare programs. After all, as Derek Thompson explains, Social Security works pretty well. When Democratic Representative Bob Filner, since disgraced, proposed a guaranteed income on a very small scale in 2006, he picked up only one cosponsor.

Yet the effort to create a reform conservatism and reconstitute the GOP as the “party of ideas” seems to demand contemplating legitimately radical new ideas on welfare reform. In the introduction to Room To Grow, Levin writes, “these ideas embody a conservative vision that sees public policy not as the manager of society but as an enabler of bottom-up incremental improvements.” Scott Winship, in a welfare-reform essay later in the same document, writes approvingly of Levin’s desire to provide an “alternative to the fundamentally prescriptive, technocratic approach inherent in the logic of the liberal welfare state.” A guaranteed income, in any form, would tear that logic apart. Maybe conservative welfare reform still has some room to grow.


Instead of policy advocacy that redistributes taxes and national debt to finance a guaranteed basic income our nation needs to embrace economic policies that extend full equal opportunity for ordinary citizens––the middle class and poor––to acquire personal ownership shares on a self-liquidating basis in the wealth-creating, income-producing capital asset growth of the economy, which is now owned by the top 10 percent of the citizenship. Until we do this, ordinary people will suffer further job losses and devaluation of the worth of labor as tectonic shifts in the technologies of production continue to eliminate the necessity for human labor input into the production of products and services. The consequences will be that ordinary people will further become dependent on those who own and who control the State and never escape wage slavery and welfare slavery.

Banks, Multinationals And Governments Are Stealing Our Future. Here’s How We Win It Back

There’s never been a better time to organize a general strike in the U.S. than right now. We must stop the Trans-Pacific Partnership and put an end to government authorized bailouts.

On Monday, Dec. 15, all of Belgium was completely shut down from a nationwide general strike in protest of economic reforms that largely punish working people. The strike cancelled 600 flights for 50,000 passengers at the Brussels airport. High-speed trains to France, Netherlands, and the UK were all cancelled, buses didn’t run their routes, workers didn’t come to the office, and nobody went to school. While numbers aren’t yet available, Belgian workers certainly demonstrated that they are the ultimate deciders of whether or not the economy works for everyone or grinds to a halt. The U.S. should take a page from the Belgian playbook if we want to beat back the corporate assault on our livelihoods, homes and futures.

Belgium Fights Back

The general strike was the climax of a series of actions that started on Nov. 6, when over 100,000 workers mobilized to launch a movement resisting the new government’s austerity measures. After being elected in October, Prime Minister Charles Michel laid out plans to raise the retirement age, freeze a cost-of-living increase for public workers, and drastically cut budgets for public services like healthcare and education. Michel says the programs, recommended by the IMF and the European Union, will save an additional $13.7 billion over five years, but workers say the new government’s austerity measures will end up costing the economy an additional $2.5 billion. For a good example of how central banks’ forced austerity doesn’t work, look to Greece.

Banker-imposed austerity in Greece worked precisely how it was supposed to – punishing the poor to reward the rich. On average, Greeks are 40 percent poorer than they were in 2008, while rich Greeks are 20 percent richer, according to a 2014 report from the Levy Economics Institute at Bard College. That same report points out that Greeks’ purchasing power is down 37 percent after wages were slashed by 25 percent. While big banks were bailed out, the Greek unemployment rate has climbed to 27 percent while pensions and social services have been slashed. Anywhere in the world the austerity agenda is implemented, it only brings more misery to working people.

How Belgium’s Class War Mirrors the U.S.

When it comes to economic inequality, Belgium and the United States have a lot in common. While the U.S. is the world’s second-richest country, Brussels, Belgium is the third-richest region in the European Union. Yet, while the richest 1 percent of the United States captured 95 percent of all gains from the recent economic “recovery” the U.S. still has the second-highest child poverty rate in the world. Similarly, one in three children in Brussels lives in poverty.

The employment picture in the U.S. and Belgium is equally bleak. Youth unemployment in Belgium is 24 percent as of October 2014. In the US, a staggering 12.8 percent of youth are unemployed. While there are jobs available for highly-educated workers in both countries in certain high-tech industries, education is only available to the economically privileged. For most living-wage jobs in the U.S., a prerequisite to consideration is a college degree. However, the average American college graduate is $30,000 in debt upon leaving school, and 18 percent of Americans say they’ll be in debt for the rest of their lives.

In Belgium, there are 112 inquiries for every one job vacancy, and jobs that do pay enough to make a living are unavailable to the country’s vast migrant population. This is largely due to persisting education inequality that leaves Belgium’s immigrants at a crippling disadvantage. A 2012 report from L’appel pour une ecole democratique (APED) analyzed data from the Program for International Student Assessment and found that schools in both Belgium and France ranked behind all other countries in providing equal opportunity for both migrant and native students to succeed. In Belgium, there was a far higher representation of migrant children in underprivileged schools, higher dropout rates, and widespread discrimination against students based on their country of origin.

Likewise in the U.S., a 2012 report by the Schott Foundation for Public Education found that in New York City, black and latino students are four times as likely to be enrolled in understaffed, underfunded schools than white students. The report also found that none of New York City’s highest-performing schools were located in majority black and latino neighborhoods, like Central Brooklyn, South Bronx, and Harlem. Likewise, in Chicago, Mayor Rahm Emanuel closed 54 public schools in mostly poor neighborhoods with a high concentration of black students, while allocating over $300 million to a slush fund that largely benefits his campaign donors. Philadelphia closed 23 schools in low-income neighborhoods while spending $400 million on a new prison. See the pattern yet?

The Escalating Class War in the U.S.

While there’s no call for a general strike in the U.S., there should be, given the austerity budget that just passed Congress. The $1.1 trillion “cromnibus” spending bill that will fund the federal government through next September includes a Christmas wish list for the banks and a stocking full of coal for those who need the most help. $300 million was diverted from Pell Grants to student loan debt collectors, making access to higher education even more of a pipe dream for low-income would-be college students. $300 million was cut from support housing programs that help ease chronic homelessness. Another $93 million was cut from the program that provides food assistance to low-income women, infants, and children. In the meantime, Congress spent $479 million on the F-35 jet, which not even the Pentagon wants, and used taxpayers as the cushion for the big banks whenever the $700 trillion derivatives bubble pops. But the crominbus is just the beginning.

The Trans-Pacific Partnership (TPP), which has been negotiated in secret between government officials and over 600 corporate lobbyists for over a year, is likely to become a reality after the 114th Congress is sworn in this January, and possibly even before then. President Obama may try to fast-track the deal through Congress, meaning it will be put to an up-or-down vote without even a chance for discussion or debate of its contents. The reason the details of the TPP have been so closely guarded and why the process is being rushed is due to the horrific nature of the agreement, at least the parts that have been made available to the public.

If the TPP were put into place, it would effectively make world governments subservient to multinational corporations. It would make it easier for companies like Walmart to ship jobs to Vietnam, where workers are paid half as much as in China, and enable the same hazardous working conditions that led to the collapse of a Bangladesh clothing factory in 2013, or the Triangle Shirtwaist Fire in New York during the Industrial Revolution.

The TPP would also set up corporate tribunals, in which corporations could sue any government over any environmental or labor regulation for infringing on the company’s expected future profits. If the TPP were ratified, any attempt to break up the big banks or regulate toxic derivatives trading would be prohibited, and enable corporations to shift even more profits overseas to avoid paying domestic taxes. The only thing that could affect corporate power after the TPP’s ratification would be a general strike – particularly in the U.S., where a lot of these corporations rely on American customers to buy their products.

General Strikes Give Corporations a Dose of Their Own Medicine

IWW organizer Big Bill Haywood accurately described the relationships between working people and the ownership classes in that workers have “always been taught” to care for the capitalist’s private property, while owners will readily go on a capital strike and shut down a factory or ship jobs elsewhere if anything happens to their profits. A general strike thereby flips the tables on the capitalists, depriving the ownership class of their profits if owners do anything to upset workers’ wages, working conditions, or benefits. In doing so, workers remind owners and political leaders that the performance of the economy is entirely dependent on workers being happy and having their needs met.

General strikes have been used throughout the last century as a means for working people to assert power over the ownership class, in countries from Honduras to Yemen. In 2000, a general strike stopped the Bechtel Corporation from privatizing Cochabamba, Bolivia’s water supply. During the initial popular revolt in Egypt in 2011, before the movement was co-opted by the military, protest organizers successfully organized strikes that cost the Egyptian economy $310 million a day. The April 6 movement that preceded the 2011 uprising successfully organized a nationwide general strike several years before that had similar impacts on the economy.

There’s never been a better time to organize a general strike in the U.S. than right now, with both the corporate owners and political leaders pillaging public resources for their own private gain. If the Trans-Pacific Partnership is ratified, or if the government authorizes another bailout of the big banks with our money, the citizens can choose to either shut down the corporate establishment by depriving it of their labor and purchasing power, or succumb to the global corporate coup. The choice is ours to make.


Own the Future or Be Owned! Until we, the people, start to demand equal opportunity to acquire personal ownership of wealth-creating, income-producing capital assets on the basis that the investments pay for themselves, we will remain wage and welfare slaves to the wealthy ownership class.

401(k)s Are A Sham

On August 6, 2013, Helaine Olen, writes AlterNet and Sloan:

Duped by a DIY retirement dream, the elderly now face staggeringly low living standards

“For retirement, the answer is 4-0-1-k,” proclaimed Tyler Mathisen, then editor of Money magazine in 1996. “I feel sure that someday, like a financial Little-Engine-That-Could, it will pull me over the million-dollar mountain all by itself.”

For this sentiment, and others like it, Mathisen was soon rewarded with an on-air position at financial news network CNBC, where he remains to this day. As for the rest of us? We were had.

The United States is on the verge of a retirement crisis. For the first time in living memory, it seems likely that living standards for those over the age of 65 will begin to decline as compared to those who came before them—and that’s without taking into account the possibility that Social Security benefits will be cut at some point in the future.

The culprit? That same thing Mathisen celebrated: the 401(k), along with the other instruments of do-it-yourself retirement. Not only did they not make us millionaires as self-appointed pundits like Mathisen promised, they left very many of us with very little at all.

You might be tempted to ask “what went wrong,” but a better question might be “why did we ever expect this to work at all?” It’s not, after all, like we weren’t warned. As early as 1986, only a few years after the widespread debut of the 401(k) and the idea that American workers should self-fund their own retirement accounts based on savings and stock market gains, Karen Ferguson who was then, as she is now, the head of the Pension Rights Center, warned in an op-ed published in the New York Times, “Rank-and-file workers have nothing to spare from their paychecks to put into a voluntary plan.”

But her voice, and that of other critics like economist Teresa Ghilarducci, who is now at the New School and described our upcoming retirement crisis as “an abyss” in 1994 congressional hearings, were drowned out by the money and power of the financial services industry, combined with their enablers in the personal finance media who proclaim even today that if we don’t have enough money set aside for retirement, it is all our own fault.

It’s not.

No one less than John Bogle, the founder of the Vanguard Group, might come forward to declare the American way of retirement savings “a train wreck” — but no matter. A train wreck for you and me is a gravy train for the financial services sector. And in the United States, they are the only group that matters.

Folly, Fees and Frauds

On their own, the amount of money Americans have put aside for their post-work lives sounds extraordinary. According to the Investment Company Institute, the lobbying arm of the mutual fund industry, we had $20.8 trillion in retirement savings, divided between individual retirement accounts, defined contribution plans, defined benefit plans, government plans and annuity reserves.

When broken down to the individual level, those numbers add up to nowhere near enough money. According to a recent report issued by the National Institute on Retirement Security, the median amount a family nearing retirement has saved for their post-work lives is $12,000. As for the magical 401(k)? If a household where the earners are between the ages of 55 and 64 does have a retirement account, they barely hit the six-figure mark at $100,000—a far cry from $1 million we’re told we need.

Yet whether the stock market goes up, down or sideways, the financial services sector makes out when it comes to your retirement accounts. How much do they earn? Astonishingly, we don’t know the answer. In 2008, Bloomberg magazine polled a group of pension consultants and came to the conclusion that 401(k) fees alone totaled $89.1 billion annually. Ghilarducci, who recently took a more all-encompassing look at American retirement assets, and included IRAs and pensions in her total, pegged the number at $500 billion.

The industry gets away with this because it has what amounts to a captive audience. While there is some evidence that the recent Department of Labor requirement to reveal 401(k) plan fees to participants—something that was not even enacted till last year—has brought expenses down, knowledge does not leave consumers in the driver’s seat. If you discover your company plan is sub-par — the fund choices are poor, or the expenses are too high — all you can do is complain to your human resources department and hope they decide to change plans.

Think of it this way: While we hope our employers comparison shop when they select a 401(k) retirement plan to offer their employees, that’s not a given. Employees simply have to take what is given to them. It’s not like you were shopping for a blazer at Saks Fifth Avenue, looked at the price tag, and decided to go across the street to Zara instead. Unless you get a new job, you are stuck.

As a result, the most benign sounding investments can astonish with what they charge consumers unfortunate enough to put their money in their funds. Take the highly popular 401(k) offering of target date funds. These investments are meant to take the work out of investing, and grow gradually more conservative with time. Time will tell if this works for the investor, but it’s already clear it works quite well indeed for the financial services industry.  According to industry estimates, they generated $2 billion in revenue in 2008, a number that is expected to increase to $13 billion by 2018.

How do they do it? In part it is the tremendous growth in assets into the investment class since the federal government in 2006 began allowing companies to default investors into them. But it is also their extraordinary fee structure. While the average fee for any mutual fund is .80 percent, the number for target date funds is a hefty 1.08 percent annually. Some funds are much, much worse. Legg Mason’s Target Retirement Series charges 1.47 percent expense ration for the privilege of taking your money. How do they get away with it? Well, the industry promotes them as “set-it-and-forget-it” funds, thereby attracting the sort of investors most likely not to ask many questions.

And while these numbers sound like peanuts, they are anything but. As the Department of Labor reveals:

Assume that you are an employee with 35 years to retirement and a current 401(k) balance of $25,000. If returns on your investment in your account over the next 35 years average 7 percent, and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if there are no further contributions to the account. If fees and expenses are 1.5 percent, however, your account balance will grow to only $163,000. The 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent.

And these people are the lucky ones. Half of Americans have no workplace retirement accounts at all.

As for the claim that those without workplace retirement savings plans can simply use Individual Retirement Accounts instead? Well, the fees the industry earns on IRAs puts the 401(k) money into the shade. Brokers not working in the best interests of their clients make the vast majority of IRA investment recommendations. Not only is this quite legal, the financial services industry is actively fighting attempts by the Department of Labor to change the situation, claiming it would not be able to afford to offer many low- and middle-income investors advice under an enhanced standard of care.

Think about this for a moment: the retirement industry is actually admitting it doesn’t have a viable business model if it needs to put its customers first.

So instead, the current situation allows for the indiscriminate marketing of all sorts of financial products as long as they meet the standard of “suitability,” which could best be described as “okay.”

Nowhere is this more clear than in the marketing of annuities to the public. Annuities are among the most confusing financial products in existence.

When the academic experts discuss the need for Americans to consider purchasing annuities with their retirement savings so they don’t run out of money, they are talking about mean immediate or deferred annuities, that is a product that gives you a guaranteed stipend for life in return for a one-time payment of money.

But the products that make the big money for insurance brokers are the infinitely more complicated variable and equity indexed annuities. These are stock-market based investments. They come with multiple fees for consumers—and, high commissions for those selling them.

Not surprisingly, the combination of consumer confusion and money incentives causes no small amount of bad behavior by the sellers of annuities. All too many people are sold annuities they have no business purchasing. There is currently a case in California where a broker is looking at jail time after being convicted of selling an indexed annuity to a woman suffering from dementia. (The case is on appeal.)

I’ve sat through presentations where elderly audiences are told that Social Security’s future is “shaky” and “uncertain” and a stock-market based annuity can protect them from the likelihood of outliving their savings. Sellers tout the fact that they offer customer consultations at no charge, but are less than clear about the fees they earn from financial service and insurance companies for successfully pushing the products.

Reality Check

The response by the financial service industry to our retirement crisis has not been self-examination. There has been no attempt to ascertain if it held out a false mirage to millions of Americans. Instead, financial hustlers and their media mouthpieces say the fault lies with Americans who either did not invest their savings properly or don’t don’t have enough money saved up because we spend too much of it.

This, frankly, ignores reality. Salaries for the majority of us are, when translated into constant dollars, falling. The median household is earning eight percent less income adjusted for inflation today than it did in 2000. In the first quarter of 2013, wages fell by the greatest amount ever recorded.

At the same time, costs of things we can’t do without continue to rise. College costs have tripled since the early 1980s. The amount of money students are borrowing to pay tuition bills is skyrocketing, and all but doubled from 2005 to 2012 to $1.1 trillion. Healthcare costs have also soared. The New York Times recently reported the cost of giving birth has tripled since 1996. At the same time, patients are increasingly responsible for ever greater amounts of their medical expenses: credit reporting agency Transunion recently claimed an astonishing 22 percent rise in out-of-pocket hospital expenses over the past year.

People find it all but impossible to save in this environment. Our national savings rate hovered around 10 percent in the late 1970s and early 1980s. Today, it is a little more than 2 percent. Just take a look at what happened when companies began to adopt automatic enrollment plans for 401(k)s, that is, forcing people to opt-out of retirement plans instead of filling out papers to join up. Yes, the number of people contributing to deferred contribution accounts increased – but so too did what industry insiders call “the leakage” rate – that is, people borrowing against or withdrawing the monies in their accounts (and if that money isn’t repaid, the consumers withdrawing it need to pay penalties for accessing it). That number is now close to 25 percent.

The truth is this: the concept of a do-it-yourself retirement was a fraud. It was a fraud because to expect people to save up enough money to see themselves through a 20- or 30-year retirement was a dubious proposition in the best of circumstances. It was a fraud because it allowed hustlers in the financial sector to prey on ordinary people with little knowledge of sophisticated financial instruments and schemes. And it was a fraud because the mainstream media, which increasingly relies on the advertising dollars of the personal finance industry, sold expensive lies to an unsuspecting public. When combined with stagnating salaries, rising expenses and a stock market that did not perform like Rumpelstilskin and spin straw into gold, do-it-yourself retirement was all but guaranteed to lead future generations of Americans to a financially insecure old age. And so it has.


This article does not offer any concrete solutions to the train wreck that is ahead of us as a society.

I’ve said it before and I’ll say it again: It’s great to be unemployed and retired if you can afford it!

There have been numerous proposals, including President Obama’s  MyRA program and senator Tom Harkin’s proposal for the Universal, Secure and Adaptable (USA) Retirement Funds Act of 2014, to address eroding retirement security.

Both proposals are yet more attempts to address the fact that Americans are not saving enough for retirement. But the proposals fall far shot by “trillions” of dollars.

The plain truth is that more than four in five older Americans expect to keep working during their latter years, a sign that traditional retirement is out of reach for vast swaths of society. According to a new survey poll conducted by the Associated Press-NORC Center for Public Affairs Research, among Americans ages 50 and older who currently have jobs, 82 percent expect to work in some form during retirement.

In other words, “retirement” is increasingly becoming a misnomer.

For those who have been dependent on employment and/or welfare, the problem is that financially sustainable retirement is and will no longer be a reality. Even with Social Security, which is funded through payroll taxes called the Federal Insurance Contributions Act tax (FICA) and/or Self Employed Contributions Act Tax, (SECA), one must have had a job to be eligible for the entitlement––and the amount of Social Security is based on the income level generated from one’s employment record of payroll tax contributions.

Employer-provided pensions continue to decrease and personal savings is not the norm among the vast majority of American households who must spend virtually every earned dollar on living expenses. While increasingly individuals are finding it necessary to continue working in retirement to supplement their income, most older Americans discontinue full-time career work and struggle to meet obligations with minimum-pay part- and full-time jobs. A proportion of retirees also receive income from welfare programs, such as Supplemental Security Income and other life-support services funded through tax extraction and government debt.

This perspective should serve as the “reality” from which to explore prospects for effectively dealing with eroding retirement security.

Senator Harkin’s proposal has all the downsides of the “MyRA” and nothing to recommend it. It claims it offers lifetime income security funded out of current savings, meaning further reductions in consumption out of already inadequate incomes. It also aggregates everything into a “private sector” institution that is custom designed to be “too big too fail.”

As with President Obama’s MyRA proposal, Senator Harkin’s proposed Universal, Secure and Adaptable (USA) Retirement Funds Act of 2014 will not succeed in providing any real, substantial retirement security for the majority of Americans whose jobs do not earn more than substance week-to-week and month-to-month wages. Both plans are designed to encourage Americans to save for retirement and require personal savings and denial of consumption. This is unrealistic given that the Americans with the least opportunity must reduce what is inadequate consumption income in order to accumulate savings for retirement, which for most Americans will be inadequate.

Does anyone really believe that the interest rate to be paid under these programs will be sufficient and able to avert the decline in the value of the money as the government continues to flood the economy with increasingly non-asset-based debt?

Both proposals rely on the requirement to reduce consumption in the economy at a time when what is needed is expansion of the economy supported by increased consumption.

As my colleague Michael Greaney at the Center for Economic and Social Justice (www.cesj.org) states, “under the prevailing Keynesian paradigm, of course, ‘saving’ is always defined as the excess of income over consumption. If you want to save, then, the iron assumption of Keynesian economics is that you must consume less.”

The American consumer is being put into an impossible situation of being asked to consume more to drive the economy and reduce saving, and at the same time are being told they must reduce consumption dramatically in order to accumulate sufficient savings for retirement.

Of course, the whole problem would go away if we financed both retirement and wealth-creating, income-producing physical productive capital needs out of “future savings,” thereby increasing the capacity to consume and support the economy while simultaneously building financial security for every American citizen.

A far better and productive approach would be to create a new way for working and non-working Americans to start their own retirement savings: MyCHA. CHA stands for Capital Homestead Account. It would be a super-IRA or asset tax shelter for citizens. The Treasury should start creating an asset-backed currency that will enable every child, woman and man to establish a CHA at their local bank to acquire a growing dividend-bearing stock portfolio comprised of newly-issued stock representative of viable American growth corporations to supplement their incomes from work and all other sources of income.

We can create new asset-backed money for investment through the existing but dormant Section 13(2) rediscount mechanism of each of the 12 regional Federal Reserve banks that would be backed by “future savings” (that is, future profits from higher levels of marketable goods, products, and services).

The CHA would function as a savings and income account that effectively would build a nest egg over time, using interest-free, insured capital credit loans. A CHA would be offered to EVERY American, whether employed or not. Of course, those employed may also have additional opportunities to acquire personal ownership in their companies using an Employee Stock Ownership Plan (ESOP) trust financial mechanism.

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 products 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 interest-free 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. There would be no prerequisite requirement to qualify for an annual set capital credit loan other than American citizenship.

This idea to stimulate economic growth and provide retirement security for EVERY American is based on the premise that what is needed is for the system to facilitate spreading the ownership of productive capital more broadly as the economy grows with full payout of dividend earnings, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate productive capital wealth assets. In doing so, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader.

This would benefit the traditionally disenfranchised poor and working and middle class, who are propertyless in terms of owning productive capital assets. It would also result is tremendous economic growth, which would benefit everyone including the already wealthy ownership class, and create opportunities for real jobs, not make-work as an expanded economy is built that can support general affluence for EVERY American citizen. Thus, as productive capital income is distributed more broadly and the demand for products and services is distributed more broadly from the earnings of capital, the result would be the sustentation of consumer demand, which will promote economic growth. That also means that over time, EVERY child, woman and man could accumulate a diversified portfolio of wealth-creating, income-producing productive capital assets to provide economic security in retirement and not be dependent on having to work during retirement or rely on government-assisted welfare.

One might ask how we failed to grasp the significance of productive capital’s input and the necessity for broad private sector individual ownership? Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment––thus the political focus on job creation and redistribution of wealth rather than on full production and broader productive capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income. Yet, the wealthy ownership class knows that this notion is idiotic.

In real productive terms, productivity gains are the result of tectonic shifts in the technologies of production, which consequently eliminates the need for human labor, destroys jobs, and devalues the worth of labor.

One should ask what form would the structural reforms take. Employment in this new enlightened age would start at the time one enters the economic world as a labor worker, to become increasingly a productive capital owner, and at some point to retire as a labor worker and continue to participate in production and to earn income as a productive capital asset owner until the day you die. As a substitute for inheritance and gift taxes, a transfer tax would be imposed on the recipients whose asset holdings exceeded $1 million. This would encourage those owning concentrations of productive capital assets (effectively the 1 to 10 percent) 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.

Other stipulations for the structural reform would entail tax policy reform to incentivize corporations to pay out all profits to their owners as taxable personal incomes to avoid paying stiff corporate income taxes and to finance their growth by issuing new full-dividend payout shares for broad-based individualized employee and citizen ownership with full-voting rights.

We need to encourage the insurance industry to expand their product lines to market Capital Credit Insurance to cover the risk of default for banks making loans to Capital Homesteaders under the proposed Capital Homestead Act. Under the provisions of the Act, risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance issued by a new government agency (ala the Federal Housing Administration concept), but would not require citizens to reduce their funds for consumption to purchase shares.

The end result is that ALL American citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing our country’s trend where all citizens are becoming more dependent for their economic well-being on the “state,” our only legitimate social monopoly.

Implementing the Capital Homestead Act would significantly empower ALL Americans to accumulate over time a viable, diversified ownership portfolio in our nation’s growth companies and create a truly unique, global-leading just and environmentally responsible Ownership Society that fosters personalism, creativity and innovation. Embarking on a new path to prosperity, opportunity and economic justice will expand growth of our market economy in ways that democratize future ownership opportunities, while building a future economy that can support general affluence for EVERY American.

In conclusion, both President Obama’s MyRA and Senator Harkin’s USA programs would be completely unnecessary if we had Capital Homesteading. President Obama, Senator Harkin and other elected representatives should instead advocate for the passage of the Capital Homestead Act.

See two references to the proposed Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm.

For more on how to accomplish such structural reform, see  “Financing Economic Growth With ‘FUTURE SAVINGS': Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624 and “The Income Solution To Slow Private Sector Job Growth” at http://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.

U.S. Wealth Gap Hits Record High

On December 17, 2014, Maxwell Strachan writes on The Huffington Post:

Never in the 30 years since the the Federal Reserve first starting collecting wealth data has the divide between the rich and everyone else been so large, according to a new analysis by the Pew Research Center.

The wealth gap in the U.S. last year was the biggest since at least 1983, according to the report. The median wealth of upper-income families was 6.6 times that of middle-income families in 2013, up from 6.2 in 2010.

Those same upper-income families are now nearly 70 times wealthier than low-income families — also a record gap.

pew research center

Thirty years ago, the richest households’ wealth was only 3.4 times that of middle-income households. (Source: Pew Research)

There are two main reasons for the growing gulf between the rich and everyone else:stagnant middle-class wages and the rising wealth of America’s richest families. While median middle-income wealth was flat between 2010 and 2013 — stuck at $96,500 — the wealth of upper-income families jumped to $639,400 from $595,300. Lower-income wealth dropped slightly to $9,300 from $10,500.

“The latest data reinforce the larger story of America’s middle class household wealth stagnation over the past three decades,” Pew’s Richard Fry and Rakesh Kochhar wrote in a release. “Without any palpable increase in their wealth since 2010, middle- and lower-income families’ wealth levels in 2013 are comparable to where they were in the early 1990s.”

Pew divided the country’s families into three groups — high, middle and low income — by adjusting a family’s income according to its size and then comparing it to the nation’s median family income. If a family only made two-third of U.S. median income, it was considered low income. If it made between two-thirds and two times the median income, it was considered middle income. If it made more than that, it was considered high income.

The report focused on wealth, which may give a broader picture of a family’s financial situation than income. Wealth consists of the assets people own, like houses and stocks, minus the debts they owe.

Wealth and income inequality have risen together in recent decades, to some extent feeding each other. The rich have enjoyed most of the fruits of the recovery, thanks at least in part to a ripping stock-market rally that padded their wealth while also boosting their incomes.

French economist Thomas Piketty has warned that unfettered capitalism will lead to even more grotesque wealth inequality because returns on investments like stocks and real estate — stuff the wealthy own — generally outpace economic growth and wages.

That warning is looking more and more like a reality in the U.S., which has seen much more of its income growth going to its top 1 percent of earners in recent decades thanany other developed country:

emilys chart

The fundamental reason the rich are getting richer is because this wealthy ownership class OWNS America. The system is rigged in ways that empower the wealthy ownership class to constantly concentrated among themselves more and more wealth-creating, income-producing capital assets as the economy grows. On the other hand, the vast majority of Americans, who are for all practical purposes propertyless and without meaningful savings, are shut out of the system and denied any opportunity to acquire ownership of capital assets, and forever stuck on the JOBS ONLY path to earning an income, and thus relegated to wage slavery or worse, welfare slavery and dependent on the State for support programs paid for with redistributive taxation and inflationary national debt.

The solution to economic inequality is to empower EVERY child, woman and man to acquire ownership in FUTURE productive capital assets on a self-liquidating basis.

My colleague Michael Greaney at the Center for Economic and Social Justice states the case:

“There’s a way that everyone can have an equal opportunity to participate in economic growth without taking anything from anyone, not even the bloated rich or the slack-off poor.

“A Capital Homestead Act would give every child, woman, and man equal opportunity and access to the means to participate in economic growth as a capital owner, not merely a wage-worker or welfare recipient. It would expand Lincoln’s concept based on the limited land frontier to the virtually unlimited commercial and industrial frontier.

“The key is in financing. If we assume that the only way to finance new capital formation is to cut consumption and accumulate the surplus as money savings, we restrict ownership of all new capital formed to those who are already rich and can afford not to consume all of their income.

“If, however, we take the present value of future increases in consumption and turn it into money to finance new capital, then repay and cancel the new money out of the profits generated by the new capital when it becomes profitable, the problem solves itself. Instead of financing economic growth out of what has not been consumed in the past, we can finance growth out of what can be produced in the future — and it won’t be either inflationary or deflationary.

“All we have to do is make sure that all new capital is financed in ways that create new capital owners, and the frantic search for new ways to finance artificial “job creation” can end. People will be too busy producing things for which there is a genuine demand to worry about doing make-work just to get an income.”

Support the Capital Homestead Act at http://www.cesj.org/…/capital-homestead-act-a-plan-for…/ and http://www.cesj.org/…/capital-homestead-act-summary/.

A Black Hole For Our Best And Brightest

On December 16, 2014, Jimi Tankersley writes in The Washington Post:

Wall Street is expanding, and the economy is worse off for it.

Jackson joined Goldman in 1980, fresh from business school and steeped in the workings of government and finance. She found crackerjack colleagues and more business than she could handle. She worked in municipal finance, lending money to local governments, hospitals and nonprofits around the country. She flew first class to scout potential deals — “The issue was, can you really be productive if you’re in a tiny seat in the back?” — and when the time came to seal one, she’d welcome clients and their attorneys to Manhattan’s best restaurants.

The clients would bring their spouses and go to shows. Everyone drank good wine. Her favorite place, in the heyday, was the 21 Club, which felt like an Old World library and went heavy on red meat. More than the perks, Jackson loved the work — the shared struggle of smart people trying to help the country, even as they banked big money. “It was all about solving problems,” she said.

Years later, she would come to see it differently, growing disenchanted with an industry she didn’t think was fixing much anymore.

Economic research suggests she was onto something. Wall Street is bigger and richer than ever, the research shows, and the economy and the middle class are worse off for it.

There’s a prominent theory among some economists and policymakers that says the big problem with the American economy is that a lot of Americans don’t have the talent to compete in today’s global marketplace. While it’s true that the country would be better off if more workers had more training — particularly low-skilled, low-income workers — that theory misses a crucial, damaging development of the past several decades.

It misses how much the economy has suffered at the hands of some of its most skilled, most talented workers, who followed escalating pay onto Wall Street — and away from more economically and socially valuable uses of their talents.

The financial industry has doubled in size as a share of the economy in the past 50 years, but it hasn’t gotten any better at its core job: getting money from investors who have it to companies that will use it to generate growth, profit and jobs. There are many ways to quantify how that financial growth-without-improvement hurts the economy.

In 2012, economists at the International Monetary Fund analyzed data across years and countries and concluded that in some countries, including America, the financial sector had grown so large that it was slowing economic growth. Using a different methodology, the most prominent researcher on the size and economic value of Wall Street, a New York University economist named Thomas Philippon, estimates that the United States is sinking nearly $300 billion too much annually into finance.

In perhaps the starkest illustration, economists from Harvard University and the University of Chicago wrote in a recent paper that every dollar a worker earns in a research field spills over to make the economy $5 better off. Every dollar a similar worker earns in finance comes with a drain, making the economy 60 cents worse off.

It’s not that finance is inherently bad — on the contrary, a well-functioning financial system is critical to a market economy. The problem is, America’s financial system has grown much larger than it should have, based on how well the industry performs.

To understand how and why that is, think of money as water and the financial system as a series of pipes. Ideally, the pipes deliver the water from people who have stockpiled it (investors) to people who want to put it to productive use (entrepreneurs, executives, home buyers, etc.).

Over the past half-century, America’s financial industry built a whole bunch of new pipes. The sector grew six times as fast as the economy overall during the past three decades. Other advanced countries didn’t see anywhere close to that growth in their financial sectors.

Some of America’s growth was driven by Washington. Lawmakers kept encouraging financial innovation, which built a market for smarter investment bankers. They did that by changing the tax code to encourage businesses to hire financial whizzes who could spin ordinary income into certain, preferred types of investment income, and by loosening restrictions on the kinds of financial activities that the titans of Wall Street could engage in.

Extra pipes attracted better plumbers — the more the finance industry grew, the more it tugged at highly educated workers. Philippon is a French economist at NYU’s Stern School of Business. He and a co-author, Ariell Reshef of the University of Virginia, have shown that from the end of World War II until the early 1980s, finance was just like any other desk job: The average Wall Street worker was paid about as much as the average worker in the private sector and was only slightly more educated.

But starting at about the time that Jackson joined Goldman, when Congress began tweaking investment-tax rates, Wall Street started drawing more educated workers. This made the average finance salary go up — from less than $50,000 a year in 1981 (which is about $100,000 in today’s dollars) to more than $350,000 a year in 2012.

Salaries rose even faster in the mid-1990s. The average finance worker began to earn more than a similar non-finance worker who had the same amount of schooling. Wall Street executives began to command salaries several times the rate that non-finance executives could.

In sheer dollar terms, it became irrational for almost any qualified American graduate to pass on a Wall Street job. By the mid-2000s, finance workers earned about 50 percent more than they would have in a similar job anywhere else in the economy. There are almost twice as many financial professionals in the top 1 percent of American income earners today as there were in 1979, according to researchers from Williams College, Indiana University and the Treasury Department. Almost 1 in 5 members of the top 0.1 percent work in finance.

You might think finance workers earned all that money because they were selling new and improved financial products that delivered more value — that helped get money more efficiently from investors who had it to entrepreneurs who could put it to profitable use. Research suggests that’s not the case.

A few years ago, Philippon set out to study 130 years of financial-sector performance. He expected to find that performance improved as the industry grew in recent decades.

Philippon tracked the fees that banks and other asset managers take when they move money between investors and borrowers. In theory, the managers should charge less as their technology improves, because they become more efficient and more competitive with one another. (Or, if they charge the same amount, they should generate better returns for investors.)

That’s how it works with, say, your laptop: As the technology improves, you can either buy a better computer for the same price as your last one or you can buy a clone of your last one for less.

In finance, Philippon found, the opposite is true. Financial firms pocket about 2 percent of the money that passes through their hands. That’s basically unchanged from the price of finance in 1920, and it’s actually an increase from the mid-1960s. “It seems that improvements in information technologies over the past 30 years have not necessarily led to a decrease” in the price of financial intermediation, he concluded in the paper.

What that means is that the growth of complex financial products has served primarily to boost income for the firms themselves, Philippon said. A new paper from researchers in the United Kingdom supports his findings. It analyzes decades of data on individual workers and finds no connection between financial professionals’ specific skill sets and why they make so much more money than similarly skilled workers in other industries.

Those finance pros could have been doctors or researchers or product engineers. They could have gone into the business of solving human problems, commercializing big ideas and creating jobs. Almost anything they could have done, by Philippon’s calculations, would have added more value — more growth and job creation — to the economy.

Today, fewer top graduates are heading to Wall Street than a decade ago, possibly because of the fallout from the financial crisis. But the industry still makes up just under 8 percent of the economy, two percentage points above what Philippon calls the optimal size of the sector, given its performance. It’s still adding workers.

Deborah Jackson spent 21 years in the financial industry after she left Columbia Business School. Gradually, over 10 or 15 years, she began to suspect that her industry had stopped caring about solving problems.

She left Goldman in the 1990s for a boutique firm; she later launched an investment-banking practice focused on health-care technology. Her next itch to move was different — more existential. Shortly before the 2008 crisis, she left finance for good.

“It just lost its interest for me,” she said. “It just became work instead of enjoying what I was doing.”

When Jackson left Wall Street, she called it retirement. She day-traded to keep her brain engaged. But she knew she wanted to get back into the business world, somewhere she could solve problems again, where she could make a difference.

Then, in the course of some volunteer work, she started meeting female entrepreneurs, and she was taken with their ideas and energy. She co-founded an accelerator program for women building new mobile technologies. She helped organize an all-female “hackathon,” where programmers get together to build something cool from scratch. She rented a home in the Hamptons and invited 18 women, all skilled coders, to start at 10 p.m. on a Friday. They worked around the clock until 4 p.m. Sunday, building an interactive game to show the horrors of sex trafficking.

Finally, she hopped into the job-creation space. She founded Plum Alley, a company focused on spurring innovation and job creation among female entrepreneurs. It can help them find money to get started (through a six-step plan to tap potential donors in their social networks) and help them find customers (through an online shopping site). She hired three highly educated women, then four more. The company recently moved to an office on Park Avenue South.

Jackson had found the meaningful work she’d been looking for, using knowledge in finance to try to create value in the economy. She had taken a risk and started a business. She’s already thinking about expanding the company to help start-ups grow and thrive. “It kind of reminded me of the early days,” she said. Like back at Goldman, all those years ago. Solving problems.




The College Trap That Keeps People Poor

On December 15, 2014, Jim Tankersley writes in The Washington Post:

The odds are stacked against low-income Americans seeking the education they need to move up.

Her teachers saw that spark. You can earn a college scholarship, they said. Land a good job, and don’t depend on the government or anyone else. She knew they were right. She was almost there.

Then she got pregnant. Then she was 17, working two jobs to feed herself and her daughter, Kiara. She started college and tried to carry a full load of classes, and it was too much. She dropped out. And there went her chance at the middle class, racing away across the plains.

“Where I was from, everyone was like, ‘She’s going to be like her mom.’ And I was like, ‘No, I’m not,’ ” Stone said. But when the baby came, “I couldn’t keep it up.”

The American economy has stopped working the way it used to for millions of Americans. The path from poverty to the middle class has changed — now, it runs through higher education.

In 1965, a typical man whose education stopped after four years of high school earned a salary 15 percent higher than the median male worker.

By 2012, a high-school-only grad was earning 20 percent less than the median. The swing has been even more dramatic for women who stopped their education after high school: They earned almost 40 percent more than the median female salary in 1965 and 24 percent less in 2012.

College graduates, meanwhile, have widened their income advantage over high school grads, as several recent studies demonstrate — including one from MIT economist David Autor, who found that the annual income gap between a college-educated family and a high-school-educated one grew by $28,000 over the past 35 years, after adjusting for inflation. Nine out of 10 children who grow up at the bottom of the income ladder but then graduate from college move up to a higher economic bracket as adults, according to the Pew Charitable Trusts. Less than half of kids without a degree make the same leap.

That creates a paradox: Being poor is a big impediment to getting the education that lifts you out of poverty.

Study after study shows students from wealthier families are increasingly more likely to graduate from college than students from low-income families. Statistics from the federal Education Department show that high-income students who score poorly on standardized tests are more likely to earn degrees than low-income students who notch high test scores.

Low-income students struggle to earn even two-year degrees or professional certifications, which can lead to good-paying jobs. Thousands of low-paid, low-skilled Texans enroll in community college full time every year. Fewer than 1 in 9 of them earns an associate’s degree within three years. Nationally, it’s about 1 in 8.

Why is it so hard today for the children of poverty to finish the schooling they need to climb into the middle class? Researchers blame changes in society and the economy, which have made it easier for students to drop out or be discouraged from enrolling in the first place.

When you live on the margins, economists are discovering, even the smallest disruption can knock you off course and out of school. Things like your car breaking down, or your neighbor saying she can’t watch your child anymore, or your boss threatening to fire you if you don’t work more hours in your low-wage job.

Emerging research suggests there’s a broader social pull at work, too, linked to the nation’s faltering middle class and the widening gap between the very rich and everyone else. Dwindling economic opportunity, University of Maryland economist Melissa Kearney has found, compounds across generations to keep children poor.

If you are poor, growing up in a place where the income gap between you and the middle class is wide and seemingly insurmountable — if you don’t see a lot of people like you moving up in life — you’re much more likely to make choices that will keep you out of the middle class yourself, Kearney discovered. Choices such as dropping out of high school or having a baby while young and unmarried. You don’t properly evaluate the risks of those choices, because what future do you have to risk, really?

Over the past 40 years, the nation has seen a surge in children born to low-income single mothers. About 25 percent of American families are now headed by a single mom, according to Isabel Sawhill of the Brookings Institution, double the rate from 1970. Nearly half the children of single mothers live in poverty. Kearney’s research suggests that as they grow up, those children will make choices that will reduce their odds of reaching the middle class.

In South Texas, Stone saw that firsthand. “I see my cousins, and they’re trapped in the same cycle, and they don’t care,” she said — don’t care about being poor, or being on food stamps, or working part time for minimum wage. “They don’t care they don’t have nice things.”

Stone wanted nice things, so six years after her daughter was born she went back to school, clawing her way into community college. She moved out of her small town and in with an elderly friend in a suburban subdivision on a man-made lake south of Fort Worth, then later into a duplex she rented with her boyfriend. She found a job as a preschool aide, at minimum wage, then worked her way up to become a teacher, at $10 an hour. She signed up for classes. She made a work schedule that allowed her to pick up Kiara from school.

But to keep from dropping out again this time, she needed help. That’s what so many low-income Americans need on their road to a better life: help with little things. Someone to watch the baby. Someone to help with the rent. Someone to ease the burden of being a mom and being a student and working to afford food and shelter and transportation.

And this time, for Stone, that someone was waiting.

Catholic Charities Fort Worth is a nonprofit, faith-based social service agency that occupies a sprawling campus on the outskirts of town. It runs on the scale of a small city. The group helped 120,000 low-income people in 2012. Its annual budget is $27.5 million, about half of which comes from government sources. It employs 350 people, and all of them, from the janitors on up, earn at least $13 an hour, which the group has determined is a living wage for the area. The charity doesn’t want its employees to be its customers.

“Customers” are what the group’s leaders call the people who fill their waiting room every day. The group’s new mission is to stop seeing as many of those folks as possible — by helping them go to school, gain skills and get hired in a living-wage job. In a pilot program that began in 2012, Catholic Charities Fort Worth selected 19 applicants and paired them with social workers. All of the participants enrolled in community-college programs that put them on a path to a high-demand job in the Fort Worth area that pays well, such as accounting or aviation mechanics.

The social workers coach the students through class sign-up, help them get government assistance when necessary, and are allowed to dispense up to $500 a year to the students to survive financial “shocks,” such as being forced to find a new apartment or hire a new babysitter. (One man needed cash to get his car out of impoundment so that he could live in it.)

The program was so successful that the charity expanded it, in partnership with a team of economists — including U-Md.’s Kearney — who want to learn the most cost-effective ways to help poor people stay in school. They set up shop at Tarrant County College nearby.

Some students in the expanded program, called Stay the Course, got no social-work help but could apply for up to $500 per semester (capped at $1,500 total) to survive a financial shock. That money alone didn’t seem to help very many students stay in school. Hardly anyone, the researchers are finding, has just one shock.

Other students were paired with Catholic Charities social workers. One of those students was Stone. Her social workers have paid a portion of her utility bills, given her a refurbished laptop when hers contracted a virus — and provided a constant stream of logistical and emotional support.

Stone and her helpers have mapped out a plan for her schooling: First finish at Tarrant, then transfer to a four-year school, where she’ll study to be an elementary or middle school teacher. “It’ll double my salary,” Stone said, “so I can afford to live on my own.”

Only 12 percent of the students who received full social-service help have dropped out, compared with 26 percent of comparable students who weren’t assigned to the program. Researchers say that preliminary finding is significant, and a sign that aggressive interventions could dramatically improve the community college graduation rate.

But there’s no way one local charity could scale that aid for all its customers. So far, between its pilot programs and its partnerships with researchers, Catholic Charities has helped about 130 students like Stone stay on track for a degree — or about 0.1 percent of its total clients.

Even if Americans could marshal the money to help every working poor person in the country get that next bit of education, those new graduates would run smack into a bigger problem with the economy today: There aren’t enough good-paying job openings waiting on the other side of the diploma that pay a wage that can support a family.

This is the problem hanging over the people who fill the Catholic Charities waiting room in Fort Worth on a fall morning. Even if they all earned degrees, who would hire them? Where are the jobs that would take these customers away, for good?





Renting In The US Is Now Twice As Expensive As Buying

On December 16, 2014, Emily Heftier writes on Business Insider:

As rent soars across the US, Zillow found that renting a home is half as affordable as buying one.

In the third quarter of 2014, US renters could expect to spend about 30% of their incomes on rent, while those buying homes could expect to spend just 15% of their monthly incomes on their mortgage payment.

The report reveals a big shift from the years before the real estate bubble, between 1985 and 2000, when rent was typically more affordable in major metros than buying.

Now, in most metros, those who can come up with a down payment are better off buying, in terms of affordability.

Even in the least affordable metros — like San Francisco, Los Angeles, Seattle and Boston — renting was a more affordable option before the real estate market crash. But since then, rent has increased while the cost of buying a home has fallen in many places, so that renting is now the less affordable option — sometimes by a large margin.

Younger buyers making smaller down payments spend slightly more than other buyers on mortgage payments — a median of 17% of their incomes — but buying is still more affordable for them on a monthly basis.

“Despite rising home values, home ownership remains very accessible for buyers that can scrape together a down payment — even a relatively modest one — find a home to buy and secure financing,” said Zillow Chief Economist Dr. Stan Humphries.

Humphries has said he expects 2015 to be a breakthrough year for younger buyers to enter the market, and many of those buyers will decide to buy because rent is so unaffordable. At the same time, some renters are spending so much on rent they will struggle to save for a down payment, even if they want to buy.




Full Speed Ahead On Secretive Trade Deal

On December 17, 2014, David Cay Johnston writes on Aljazeera America:

Early next year, after the 114th Congress begins meeting, a new Washington coalition will move quickly to approve the Trans-Pacific Partnership (TPP), a 12-nation trade agreement that will destroy American jobs, restrict individual liberty and burden American taxpayers. Oh, and it will do so without any real debate.

The coalition pushing approval consists of multinational corporations eager to escape the rigors of competition, Republican lawmakers who talk free markets but act as enemies of competition and President Barack Obama, as loyal a friend as Wall Street and multinational corporations have ever had in the White House.

The broad strokes of the proposed agreement show it is not about lowering the few remaining tariffs and trade barriers, with a few exceptions such as easing Japanese protections for domestic farmers so cheap California rice can be sold in Tokyo.

At least the Office of the U.S. Trade Representative does not call it a free trade agreement, because it is anything but. Rather, it is a trade-restriction agreement that protects monopolists, large corporations and various state-owned enterprises from the rigors of competition while diminishing worker rights and gutting environmental rules and food safety inspections.

The agreement would even let foreign companies seek damages if U.S. or state rules threaten their profits. Plaintiff companies would not have to sustain damages to collect damages from American taxpayers. They would only need to show a threat to their profits, leaks from the trade talks have revealed. Under previous trade deals, American taxpayers already have paid $3 billion in damages, with $14 billion in claims still in litigation.

Shinzo Abe, the Japanese prime minister, believes approval is nigh. He told The Washington Post that the TPP will “make sure the Japanese economy will really get out of the deflation which has continued for the past 15 years. Because we have not yet fully gotten out.”

Fine for Japan, but the pact would add to deflationary pressures in the U.S., where so much money has piled up with the wealthiest that far too little circulates among the vast majority. This imbalance causes weakening demand for goods and services, which discourages investment in productive business activities, promoting a vicious cycle of falling prices that could easily slip into full-blown deflation. If you think inflation is bad, be warned: General deflation would be an enduring economic nightmare.

A poor track record

The record of trade agreements past is that the U.S. loses and its competitors grow rich. I see no evidence this one will be any different.

Until 1995, the U.S. enjoyed trade surpluses with Mexico. But after the North American Free Trade Agreement kicked in, the U.S. trade deficit became so severe that our deficit each month now exceeds Mexico’s annual deficit before the agreement.

A bilateral trade deal with China was, the federal government told us, supposed to result in a U.S. traded-goods deficit of no more than $1 billion a year. Instead it is closer to $1 billion a day.

In 2011, the last full year before a South Korean trade deal took effect, we ran a monthly deficit in goods of $13.1 billion. This year it will approach double that, Census Bureau data show. That’s great for Seoul but not for American workers.

A draft of just one TPP chapter, labeled QQ, has become public. WikiLeaks posted the 30,000-word document, covering intellectual property rights such as drug patents and movies, which you can read here.

That congressional Republicans favor fast-tracking TPP has an ‘Alice in Wonderland’ quality, given GOP attacks on Obama’s supposed dictatorial use of executive orders.

Secrecy, complexity and finely detailed rules are the tools of exploiters who can and will use them to crush competition and protect their privileges, undermining the benefits of competitive markets, just as Adam Smith warns us in “The Wealth of Nations”:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

Fast track = little debate

Don’t expect a vigorous congressional debate exploring the agreement and its implications, especially for workers, before it becomes the law of the land.

Obama wants Congress to fast-track the agreement, which would mean perfunctory congressional hearings followed by an up-or-down vote within 90 days, no amendments allowed. That congressional Republicans favor fast-tracking has an “Alice in Wonderland” quality, given GOP attacks on his supposed dictatorial use of executive orders. (He has issued far fewer executive orders per year than any other president in the last century.)

Secrecy and fast track are not how democracy is supposed to work. They are also a glaring contradiction of candidate Obama’s transparency promises in 2008.

The whole idea of self-governance is that we will hear out every side and come to decisions after reasoned — and even unreasoned — debate. It’s messy and slow and does not always produce the optimal results, but sunshine is also the best antidote to dictatorial rule and abuse of power.

If you have hardly heard of the proposed TPP or its European twin, the proposed Trans-Atlantic Free Trade Agreement, and have little to no idea of just what it is about, that is no surprise. Only a handful of us have written about the agreement, mostly to a collective shrug from the public.

That disinterest is understandable because when all the major news organizations fail to follow a story, people reasonably assume it must not be important. But these trade deals are critically important.

Veil of secrecy

Some of my journalistic friends and competitors say it is next to impossible to get into print, even in the back pages, or on the air with trade stories because officials will not talk specifics. Of course, aggressive reporters break through veils of secrecy all the time, from diplomatic strategies to corrupt and bungled CIA operations like the torture of innocents wrongly suspect of terrorism to labor negotiations.

The real reasons trade talks get little attention are that officials refuse to say anything of substance on the record that understanding trade economics, treaty law and related issues requires a lot of time. Sadly, most journalists rely on what official sources say rather than their own reporting.

The TPP is not totally secret. If you represent any of about 500 big U.S. companies involved in negotiating its terms, you are in the know. The tiny, elite universe of trade lawyers enjoys not just insider power but big money from client fees.

Rep. Louise Slaughter, D-N.Y., wanted to read the agreement. To get access, she had to submit to a search for paper, pen, pencil or tape recorder, at the behest of the U.S. trade representative. She told me she could not make heads or tails of the documents — pages of tables with no guide to their meaning interspersed with jargon. Complexity is usually not a barrier for Slaughter, a microbiologist with a master’s in public health and an expert on arcane House procedural rules.

Eventually you will get to the read the agreement — after it becomes the law of the land. So why the secrecy now? Because if you could read it well in advance, after experts translate the jargon into plain English, its anti-competition, anti-worker, anti-environmental and anti-safety provisions would stir demand to tear it up and start over — and where’s the easy profits in that?


Not surprisingly, it appears that the agreement will promote the interests of giant, multinational corporations over the interests of labor, environmental, consumer, human rights, or other stakeholders in democracy, AND FURTHER CONCENTRATE OWNERSHIP OF THE NON-HUMAN PRODUCTIVE CAPITAL MEANS OF PRODUCTION!

The REAL STORY is a story about the collusion among a globally wealthy ownership class to further concentrate private sector ownership in ALL FUTURE wealth-creating, income-generating productive capital asset creation on a global scale. A sorta FREE TRADE ON STEROIDS!

This is a battle between two property system choices: economies such as China in which the productive capital assets are primarily state-owned or state-sponsored communism or socialism and economies such as the United States, Great Britain, Canada, Mexico, Australia, Japan, etc in which the productive capital assets are primarily privately owned, although also largely concentrated among less than 10 percent of the population so as to require massive earnings redistribution, and thus welfare support open and disguised.

But there is another alternative, a balanced Just Third Way (http://www.cesj.org/thirdway/thirdway-intro.htm), based on an understanding of binary economics, by which over time the economy’s productive capital assets will become almost entirely individually owned by 100 percent of the citizens. Such an economy would produce efficiencies of production fully using ever-advancing technologies of production that will fuel a greater growth of the world economies by eliminating the problematic condition of the exponential disassociation of production and consumption through ordinary citizens gaining access to FUTURE productive capital ownership to improve their economic well-being, without taking anything away from those who already own.

It is critical that private property ownership in productive capital be extended to ALL people because of the increasing power of productive capital to produce more and more of the wealth or products and services needed and wanted by society. Because productive capital––the non-human factor of production––is an independent productive power separate from human labor power, and represents an increasing role in creating wealth, the question to be addressed is: Who has the right to acquire ownership of productive capital?

While people have private property rights in their own labor, due to tectonic shifts in the technologies of production it is not enough for individual survival if people cannot get jobs, or if jobs, in reality are no longer doing a substantial part of the wealth creation. As exponential technology shifts destroy jobs and devalue the worth of labor, people need not only private property rights in their own labor, but also private property rights in the productive capital assets that are doing ever more of the work.

We as a nation, and other nations, can no longer limit people to personal rights while restricting ownership acquisition rights in wealth-creating, income-producing productive capital assets to those already well-capitalized. To be a just society, all individuals MUST have effective property rights not only in their labor and personal use possessions but also in FUTURE productive capital asset creation. Because of this imbalance, the result has been that the consumer populous is not able to get the money to buy the products and services produced increasingly by the non-human factor––physical productive capital––as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption.

Broadened, private sector individual ownership of FUTURE productive capital assets as a societal objective is the ONLY individual private property-rights approach that will provide solutions to income inequality, unemployment, underemployment and anemic GDP growth––all of which is rooted in the tectonic shift in the technologies of production and its concentrated ownership. This reality, as a practical matter, is destroying jobs and devaluing the worth of labor, widening the income gap between the rich and poor and struggling (each resentful and suspicious of the other), and resulting in our inability to achieve double-digit GDP growth in the United States and other countries.

To solve this challenge, several policies must be implemented in the United States:

1. Tax reform is needed to incentivize broadened individual ownership of corporations by their employees. As an incentive, provide a tax deduction to corporations for dividend payouts, which would tighten-up the right of each owner to his or her full share of profits, a basic and historic right of private property. It would eliminate double and triple taxes on corporate profits, shifting the burden of taxation to personal incomes after exempting initial incomes that would allow low and middle class citizens not to pay taxes on incomes needed to cover basic living expenses. It will also encourage corporations to finance their growth through the issuance of new full voting, full dividend payout shares for financing their productive capital growth needs through Employee Stock Ownership Plans (ESOPs) and Capital Homestead Accounts (CHAs). Politically we need to insist that politicians lift barriers to the democratization of future ownership opportunity based on sound principle, rather than redistributive taxation.

2. As increasingly more workers acquire ownership stakes in FUTURE corporate productive capital assets using ESOP financing mechanisms, workers will build second incomes to support their living expenses, which in turn means they will be better “customers with money” to support demand for the products and services that the economy is capable of producing. By reason of the higher marginal spending rate on the part of workers second incomes, more of the additional income earned by the new capitalists (who have many unsatisfied consumer needs and wants) will be spent on consumption than if the income had been earned by those capitalists who now have concentrated the ownership of productive capital exclusively, and who have few, if any, consumer needs and wants. Such broadened incremental consumption will fuel a demand for more consumer products and services, which in turn will provide incentive for greater productive capital investment.

3. For all Americans, the Federal Reverse needs to create an asset-backed currency that can enable every man, woman and child 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 using essentially interest-free credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable products 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, if necessary, government reinsurance, but would not require citizens to reduce their funds for consumption to purchase shares.

4. Reform the tax code such that the tax rate would be a single rate for all incomes from all sources above an established personal exemption level (for example, an exemption of $100,000 for a family of four to meet their ordinary living needs) so that the budget could be balanced automatically and even allow the government to pay off the growing unsustainable long-term debt. The poor would pay the first dollar over their exemption levels as would the stock fund operator and others now earning billions of dollars from capital gains, dividends, rents and other property incomes.

5. 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.

6. Eliminate all tax loopholes and subsidies.

These polices would result in rapid and substantial economic growth with the GDP rate in double digits. As a result of the stimulus effect, more REAL, decent paying job opportunities and further technological advancement would be created while simultaneously broadening private, individual ownership of FUTURE wealth-creating, income-generating productive capital assets, which would support second and primary incomes for ALL Americans.

In this new FUTURE economy, a citizen would start to benefit financially at the time he or she enters the economic world as a labor worker, to become increasingly a capital owner, whose productive capital assets contribute as a non-human worker earning a second income, and at some point to retire as a labor worker and continue to participate in production and to earn income as a capital owner until the day you die.

As we ALL contribute to the building of a FUTURE economy that can support general affluence for EVERY man, woman and child, at some point as the technologies of production further advance there will be far less need for human workers and productive capital asset ownership will become the primary income source for most people. As general affluence becomes more widespread people will be free and economically secure to pursue their creative desires and pleasures, further contributing to the cultural and societal development of the country.

Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797

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

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm. See the full Act at http://cesj.org/homestead/strategies/national/cha-full.pdf

See “Financing Economic Growth With ‘FUTURE SAVINGS': Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624 and “The Income Solution To Slow Private Sector Job Growth” at http://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.