Trickle-Down Economics Is Not True Capitalism

On August 10, 2015, Eric Beinhocker writes on Economics:

“Four men sat at a table. Raised sixty floors above the city, they did not speak loudly as one speaks from a height in the freedom of air and space; they kept their voices low, as befitted a cellar.”

The four men in this early scene from Ayn Rand’s Atlas Shrugged are magnates of the steel, mining, and railroad industries who along with their lobbyist meet in “the most expensive bar-room in New York” to foil the book’s entrepreneurial hero, Hank Rearden, and protect their oligopolies. They conspire to use their influence in Washington to stitch up markets, crush competitors, and stifle innovation. They cynically clothe their plot in arguments that they are protecting “the public interest” and promoting a “progressive social policy.”

Ayn Rand would likely be deeply unhappy with the state of American capitalism today. Not just because of an overweening state, large budget deficits, and interventions in the economy such as Obamacare—the issues that so excite her disciples in the Republican Party today—but also because of the morphing of the U.S. economy into a playground of crony capitalism recognizable from the pages of Atlas Shrugged. Rand would have seen the growing reliance of businesses on Washington for corporate welfare, and of politicians on businesses for campaign contributions, as an unhealthy codependency that distorts the free market she so admired.

The profits of firms in more than 40 percent of the U.S. economy—in sectors such as agriculture, financial services, real estate, oil and gas, health care, education, and defense—are deeply intertwined with and at least partially dependent on policies in Washington. Various studies show enormous returns on investments in lobbying—for example, the pharmaceutical industry reaps a return of 77,500 percent on lobbying versus 8 percent from actually making drugs. While Rand would have had many differences with the Occupy Wall Street protesters, she would have found common cause with their objections to the power of the K Street lobbyist-industrial complex.

The Rise of the Rentiers

Economists use the phrase “economic rents” to describe extraordinary profits that arise from distorted, uncompetitive markets. In a truly free and competitive market, there are no “rents,” only market returns. Rentier capitalism is a system in which the focus is not on creating, making, investing, and building, but on distorting, protecting, skimming, and getting a slice. Rand’s villains were just as often rentier capitalists as welfare “moochers.” The rise and continued support of rentier capitalism is perhaps the final remaining point of bipartisan cooperation in Washington. Democrats and Republicans alike dole out spending, preferential treatment, and regulatory gifts to favored industries and constituents, all oiled by ever-looser campaign finance rules. This creates space for horse-trading—a defense contract for my district in exchange for support of your regulatory break for financial services. Such horse-trading cuts by interest group rather than along party lines.

Fortunately, however, objections to the growing distortions in American capitalism are also increasingly bipartisan. Since the Lehman Brothers crash in 2008, the left has vociferously criticized the cozy relationship between the financial-services industry and Washington—from Matt Taibbi’s memorable Goldman Sachs-vampire squid analogy in Rolling Stone, to the self-immolation of Bush Administration officials in the documentary Inside Job, to the megaphones of Occupy Wall Street.

But perhaps the most extensive argument against rentier capitalism has come from the right. In his 2012 book, A Capitalism for the People, University of Chicago economist Luigi Zingales makes the attention-grabbing argument that the United States is increasingly becoming like his native Italy, where success isn’t based on what you know but who you know. We may not be having bunga-bunga parties in the White House yet, but Zingales leaves one feeling they can’t be far off. Zingales describes himself as a “pro-market populist” and argues for lobbying limits, financial reform, regulatory simplification, tax reform, reinventing antitrust law, greater transparency, and more equality of opportunity. There is much in his agenda for both the center-right and center-left to agree on.

In a similar vein, Charles Koch (as in “the Koch Brothers”) published an op-ed in The Wall Street Journal titled “Corporate Cronyism Harms America.” While his language is not as colorful as Taibbi’s, his overall point is essentially the same—when business and government interests collude in a corrupt system that distorts incentives, bad things happen. The Journal chose to illustrate Koch’s piece with a cartoon of a grinning Uncle Sam and a corporate fat cat carving up a large turkey together. Standing to the side is a lean and hungry-looking man holding out an empty plate. He might well have been labeled “The Middle Class,” for it is the middle class that has lost the most in the great American turkey carve-up.

Failing to Invest in the Middle Class

The facts about the decline of the American middle class are increasingly familiar, though startling nonetheless. After growing almost continuously since World War II, U.S. median income stagnated at the end of the 1980s and then, beginning in 2000, declined 11 percent. Middle-class incomes today are no higher in real terms than they were in 1987.

Much of the debt that caused the crisis was accumulated by the middle class as people tried to compensate for stagnant incomes by mortgaging up their homes and running up their credit cards. Then the debt bubble burst and the median family lost nearly $50,000, or 40 percent of its net wealth, from 2007 to 2010. For the typical middle-class family, the crisis wiped out 18 years of savings and investment. With too much debt before the crisis and their modest savings hammered by the downturn, many middle-class baby boomers are facing a major decline in living standards as they age. On the other side of the generational divide, this will be the first cohort in modern American history whose children will quite possibly be poorer than their parents.

So what do the rise of rentier capitalism and the hollowing out of America’s middle class have to do with each other? It is too simple to say that one directly caused the other. But they are more tightly linked than might be expected. The usual explanations for the woes of the American middle class point to big tectonic forces—namely globalization and technological change. At a superficial level this argument is correct—competition from low-wage countries has depressed wage growth in certain sectors, and technology has eliminated some manufacturing and middle-management jobs. But what this analysis leaves out is what we didn’t do—we didn’t make the long-term investments that would have helped us better adapt to these tectonic shifts.

One of the great historical strengths of both American capitalism and the American political system has been their adaptability. When the Industrial Revolution threatened America’s largely agricultural economy, America adapted and went one better, leapfrogging European industrial production by the early twentieth century. When industrialization then unbalanced America’s political system and strained its social fabric, Teddy Roosevelt unleashed a wave of political and social innovation, busting up trusts and introducing protections for consumers and workers. In the depths of the Depression, another Roosevelt responded with rural electrification, the creation of Social Security, and financial regulation that kept the system stable for 70 years. When the Soviet Union challenged America in the Cold War, we made massive investments in technology, education, and the National Highway System. The benefits of these innovations and investments flowed broadly in American society, not least to the middle class.

Where are the innovations and investments that will enable today’s middle class to meet the challenges of our own era? While government spending has risen relentlessly over the past decades, what we have not been spending on is our future. The Economist Intelligence Unit, the research arm of The Economist, recently ranked U.S. education performance seventeenth out of 50 developed economies. If one takes out spending on the War on Terror, government investment in R&D as a percentage of GDP has declined over the past two decades, while Chinese investment has more than tripled and will pass ours in the next decade. And according to the OECD, the United States now ranks sixteenth in broadband penetration, speed, and price. Flying from run-down John F. Kennedy Airport in New York to Beijing’s gleaming new airport terminal, one wonders which is the developing economy.

One should not see this short-termism as only a problem of government. The private sector has also lost much of its ability to think and invest for the long term. Starting in the 1980s, elite business schools began teaching future managers and investors that the only metric that matters is shareholder value. This was a dramatic change, as throughout most of its history American capitalism had operated on a stakeholder model in which managers sought to balance the interests of multiple stakeholders, including investors, customers, employees, and local communities. The shareholder-value revolution created a short-term quarterly earnings culture, a bias toward sweating assets versus building them, a view that employees are a cost to be managed rather than human capital to be invested in, and a love of debt. It also made CEOs and their top managers immensely rich by showering them with stock options. While CEO compensation shot upwards, corporate debt levels climbed, R&D spending dropped, and employee churn and temporary work rose.

Some might reply, what about Apple, Google, and Facebook? Don’t we still have plenty of innovative companies? Yes, we still have Silicon Valley and other pockets of entrepreneurship that are the envy of the world. But it is important to note that Silicon Valley was built by and continues to live off of the long-term investments of an earlier era—whether it was the government contracts that enabled Fairchild Semiconductor to launch the microchip revolution and spawn companies such as Intel, or DARPA’s invention of the Internet that made Google and Facebook possible, or Bell Labs’ early investments in cellular communications that lurk beneath every Apple iPhone. And yet Silicon Valley does not an economy make. Facebook, the most successful startup of recent times with a market value $60 billion, employs fewer than 5,000 people. Most of Apple’s job creation has been in China.

So it is true that America’s middle class has been under pressure from global competition and technological changes. But it is also true that America has not been investing enough in education, infrastructure, and technology to equip our middle class to compete in a more challenging world. Short-term rent-seeking and political gain have been driving out long-term investment.

Middle-Out Economics—True American Capitalism

Ayn Rand would have deplored this mutation of American capitalism. It is the opposite of the entrepreneurial, risk-taking, meritocratic capitalism she celebrated. In a twist of historical irony, the narrative that justifies this mutation is one of free-market conservatism. Just as Rand’s villains in Atlas Shrugged justified their market carve-up with cynical arguments about “social progress” and “public service,” today’s rentiers justify their actions by citing Rand, Hayek, and Friedman, claiming it is “the free market at work.” So when a bank threatens to trade against its own client unless the client steers it new business with fat fees—something Tony Soprano might have called “protection”—bankers call it “the efficient market at work.” Or when the clubby board pays its CEO handsomely despite mediocre performance, it claims it just reflects the “global market for talent.” Or when a lumbering corporate giant gets a tax break, it calls it “promoting entrepreneurship.”

Perhaps the most insidious narrative has been that of “trickle-down economics.” It has created the myth that helping powerful plutocrats is somehow the same as encouraging the free market. Orwell would have admired the doublespeak. But the true history of American capitalism has not been “trickle down,” it has been “middle out.” More than a century of private- and public-sector investments made American workers the most productive in the world. As labor productivity rose, so too did wages, creating the largest and most prosperous middle class the world has ever seen.

Middle-out economics is a principle that Henry Ford understood when he decided to pay his workers enough so they could afford to buy his cars. Entrepreneurs start companies not because of tax breaks, but because there are consumers out there who want and can afford what the entrepreneurs make. And most entrepreneurs don’t start rich; most start in the middle class or below. Steve Jobs’s father, Paul, was high-school educated and his mother was a payroll clerk—they struggled to send Steve to college. Sam Walton’s father was a farmer, and Walton started his business with $5,000 saved from his Army pay and a loan from his in-laws. Neither of these entrepreneurs would have benefited from tax breaks for the rich. Think of all the potential Steve Jobses and Sam Waltons who didn’t make it because their parents couldn’t afford to send them to college or because they couldn’t get a small-business loan. Government doesn’t make entrepreneurs, but it can help them help themselves.

Trickle-down economics may work in textbook economic theory with ivory-tower assumptions about perfectly rational people and perfectly efficient markets. But in the real world of politics and interests, it simply provides a cover story for rentier economics. It dresses up anti-market behavior in free-market rhetoric.

Other have presented Middle-out economics as a progressive argument—but it can just as easily be presented as a conservative argument. It is a call for a return to a truer form of American capitalism. It is an argument for going back to the values that have described American capitalism since de Tocqueville—competition, meritocracy, equality of opportunity, innovation, risk taking, and reward for hard work, self-improvement, and fair play. Both Randians and modern conservatives such as Koch claim to disdain rentier capitalism and celebrate these values. But what Rand’s acolytes, Koch, and the Tea Party fail to see is the constructive role government must play if these conservative values are to be made real. This is not the heavy-handed interventionism or disdain for markets by socialists or the far left. This is the enabling and investing role of government supported by generations of both centrist Republicans and Democrats.

Rand argued that the masses need elites. But elites also need the masses. In Atlas Shrugged, a grasping state causes the elite to go on strike, with dire consequences for the world. In America’s current case, a grasping elite is in danger of strangling the middle class, with consequences potentially as dire as Rand’s dystopian vision. It will take deep reform and a reassertion of the political center, but America can move away from rentier capitalism and return to the middle-out capitalist model that has served it so well. If not, there are a billion middle-class Chinese, Indians, Brazilians, and others who will only be too glad to take over America’s lead.

Trickle-Down Economics is Not True Capitalism

This is an excellent article that perfectly describes the correct role of businesses to contribute to society by creating and making available products and services that improve people’s lives in tangible ways. But still Eric Beinhocker and Nick Hanauer couch this purpose in the ability of businesses to “provide employment that enables people to afford the products and services of other businesses.” Unfortunately, this is limited one-factor thinking––jobs and labor input––that fails to acknowledge the far more powerful engine of creating and making available products and services––productive non-human capital assets––the result of constant technological invention and innovation. Face it, employment is not sufficient enough to secure economic prosperity for the majority of Americans when the reality is that tectonic shifts in the technologies of production eliminate jobs and devalue the worth of labor. What is essential to redefine capitalism is to empower EVERY citizen to become an owner of the wealth-creating, income-producing capital assets that result in the creation of products and services that improved people’s lives.

The system, as presently structured, prevents Americans without savings and equity––the 99 percent––from participating as a productive capital owner contributor and from acting fully as a “customer with money” for the products and services produced by physical assets––advanced tools, machines, super-automated processes, robotics, computerized operative asset, etc.

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

Under a reformed system paradigm with the focus on creating a democratic growth economy, the ownership of productive capital would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen, including the traditionally disenfranchised poor and working and middle class. Thus, productive capital income would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote economic growth. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy that can produce general affluence for EVERY citizen.

Eric Beinhocker and Nick Hanauer, influential economists and business leaders, as well as political leaders, should read Harold Moulton’s The Formation Of Capital, in which he argues that it makes no sense to finance new productive capital out of past savings. Instead, economic growth should be financed out of future earnings (savings), and provide that every citizen become an owner. The Federal Reserve, which has been largely responsible for the powerlessness of most American citizens, should set an example for all the central banks in the world. Chairman Janet Yellen and other members of the Federal Reserve need to wake-up and implement Section 13 paragraph 2, which directs the Federal Reserve to create credit for local banks to make loans where there isn’t enough savings in the system to finance economic growth. We should not destroy the Federal Reserve or make it a political extension of the Treasury Department, but instead reform it so that the American citizens in each of the 12 Federal Reserve Regions become the owners. The result will be that money power will flow from the bottom up, not from the top down––not for consumer credit, not for credit that doesn’t pay for itself or non-productive uses of credit, but for credit for productive uses to expand the economy’s rate of growth.

 

 

It’s Time for New Economic Thinking Based On The Best Science Available, Not Ideology

On January 31, 2017, Eric Beinhocker writes on Economics:

If 2008 was the year of the financial crash, 2016 was the year of the political crash. In that year we witnessed the collapse of the last of the four major economic-political ideologies that dominated the 20th century: nationalism; Keynesian Pragmatism; socialism; and neoliberalism. In the 1970s and 80s the centre right in many countries abandoned Keynesianism and adopted neoliberalism. In the 1980s and 90s the centre left followed, largely abandoning democratic socialism and adopting a softer version of neoliberalism.

For a few decades we thought the end of history had arrived and political battles in most OECD countries were between centre-right and centre-left parties arguing in a narrow political spectrum, but largely agreeing on issues such as free trade, the benefits of immigration, the need for flexible efficient markets, and the positive role of global finance. This consensus was reinforced by international institutions such as the IMF, World Bank, and OECD, and the Davos political and business elite.

In 2008 that consensus was rocked, last year it crumbled. Some will cling on to the idea that the consensus can be revived. They will say we just need to defend it more vigorously, the facts will eventually prevail, the populist wave is exaggerated, it’s really just about immigration, Brexit will be a compromise, Clinton won more votes than Trump, and so on. But this is wishful thinking. Large swathes of the electorate have lost faith in the neoliberal consensus, the political parties that backed it, and the institutions that promoted it. This has created an ideological vacuum being filled by bad old ideas, most notably a revival of nationalism in the US and a number of European countries, as well as a revival of the hard socialist left in some countries.

History tells us that populist waves can lead to disaster or to reform. Disaster is certainly a realistic scenario now with potential for an unravelling of international cooperation, geopolitical conflict, and very bad economic policy. But we can also look back in history and see how, for example, in the US at the beginning of the 20th century Teddy Roosevelt harnessed populist discontent to create a period of major reform and progress.

So how might we tilt the odds from disaster to reform? First, listen. The populist movements do contain some racists, xenophobes, genuinely crazy people, and others whom we should absolutely condemn. But they also contain many normal people who are fed up with a system that doesn’t work for them. People who have seen their living standards stagnate or decline, who live precarious lives one paycheque at a time, who think their children will do worse than they have. And their issues aren’t just economic, they are also social and psychological. They have lost dignity and respect, and crave a sense of identity and belonging.

They feel – rightly or wrongly – that they played by the rules, but others in society haven’t, and those others have been rewarded. They also feel that their political leaders and institutions are profoundly out of touch, untrustworthy, and self-serving. And finally they feel at the mercy of big impersonal forces – globalisation, technology change, rootless banks and large faceless corporations. The most effective populist slogan has been “take back control”.

After we listen we then have to give new answers. New narratives and policies about how people’s lives can be made better and more secure, how they can fairly share in their nation’s prosperity, how they can have more control over their lives, how they can live with dignity and respect, how everyone will play by the same rules and the social contract will be restored, how openness and international cooperation benefits them not just an elite, and how governments, corporations and banks will serve their interests, and not the other way around.

This is why we need new economic thinking. This is why the NAEC initiative is so important. The OECD has been taking economic inequality and stagnation seriously for longer than most, and has some of the best data and analysis of these issues around. It has done leading work on alternative metrics other than GDP to give insight into how people are really doing, on well-being. It is working hard to articulate new models of growth that are inclusive and environmentally sustainable. It has leading initiatives on education, health, cities, productivity, trade, and numerous other topics that are critical to a new narrative.

But there are gaps too. Rational economic models are of little help on these issues, and a deeper understanding of psychology, sociology, political science, anthropology, and history is required. Likewise, communications is critical – thick reports are important for government ministries, but stories, narratives, visuals, and memes are needed to shift the media and public thinking.

So what might such a new narrative look like? My hope is that even in this post-truth age it will be based on the best facts and science available. I believe it will contain four stories:

  • A new story of growth
  • A new story of inclusion
  • A new social contract
  • A new idealism

This last point doesn’t get discussed enough. Periods of progress are usually characterised by idealism, common projects we can all aspire to. Populism is a zero-sum mentality – the populist leader will help me get more of a fixed pie. Idealism is a positive-sum mentality – we can do great things together. Idealism is the most powerful antidote to populism.

Finally, economics has painted itself as a detached amoral science, but humans are moral creatures. We must bring morality back into the centre of economics in order for people to relate to and trust it. All of the science shows that deeply ingrained, reciprocal moral behaviours are the glue that holds society together. Understanding the economy as not just an amoral machine that provides incentives and distributes resources, but rather as a human moral construct is essential, not just for creating a more just economy, but also for understanding how the economy actually creates prosperity.

In short, it is time to forge a new vision that puts people back at the centre of our economy. To paraphrase Abraham Lincoln, it is time to create an economy that is “of the people, by the people, for the people.” We are truly at a fluid point in history. It could be a great step backwards or a great step forwards. We must all push forwards together.

Based on remarks originally delivered to the OECD New Approaches to Economic Challenges workshop, December 14, 2016, Paris.

It’s Time for New Economic Thinking Based on the Best Science Available, Not Ideology

America has tried the Republican “cut spending, cut taxes, and cut ‘entitlements,’ eliminate government dependency and shift to private individual responsibility” and the Democratics “protect ‘entitlements,’ provide tax-payer supported stimulus, lower middle and working class taxes, tax the rich and redistribute” through government brands of economic policy, as well as a mixture of both. Republican ideology aims to revive hard-nosed laissez-faire appeals to hard-core conservatives but ignores the relevancy of healing the economy and halting the steady disintegration of the middle class and working poor.

Some conservative thinkers have acknowledged the damaging results of a laissez-faire ideology, which furthers the concentration of productive capital ownership. They are floundering in search of alternative thinking as they acknowledge the negative economic and social realities resulting from greed capitalism. This acknowledgment encompasses the realization that the troubling economic and social trends (global capitalism, free-trade doctrine, tectonic shifts in the technologies of production and the steady off-loading of American manufacturing and jobs) caused by continued concentrated ownership of productive capital will threaten the stability of contemporary liberal democracies and dethrone democratic ideology as it is now understood.

Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status.

 

 

Grab Your Pitchforks, America, Your 401(K) May Need Defending From Congress

PHOTO: CHRISTOPHE VORLET

 

On April 21, 2017, jason Zweig writes in The Wall Street Journal:

The lucky participants in one of the best retirement plans around are coming after yours with a meat cleaver.

In the early stages of negotiating tax reform, Congress is already considering whether to reduce the benefits of contributing to a 401(k) and similar retirement plans — even as U.S. representatives and senators bask in the safety of the pension system that taxpayers fund for federal employees.

Alongside several million U.S. government workers, members of Congress participate in the Federal Employees Retirement System, which wraps their current savings and future pensions in a cushion of comfort that most American workers can only dream of.

Only about 13% of employees nationwide are covered by both a 401(k) and a traditional pension that assures stable, lifelong income, according to the Center for Retirement Research at Boston College; all 535 members of Congress are.

In 2015, the average taxpayer-funded annual pension received by recently retired members of Congress was $41,316. A representative or senator retiring in 2014 after 30 years in Congress would earn an annuity of roughly $104,600 to $130,500, according to the Congressional Research Service.

Retirement savers in the private workforce pay outlandish management fees that can exceed 1% annually on lousy investment choices; members of Congress pay a maximum of 0.039% for funds that all but guarantee matching the market.

Those expenses on a $10,000 investment can easily eat up at least $100 a year for regular retirement savers; fees on the same amount in a U.S. representative or senator’s account can’t exceed $3.90.

Fewer than one in 10 corporate retirement plans match 5% of employees’ contributions dollar-for-dollar, according to the Plan Sponsor Council of America. Every member of Congress gets that match — funded by the taxpayers.

Even if a member of Congress won’t set aside any of his or her own money, the public automatically contributes an amount equaling 1% of that legislator’s salary to the federal retirement fund. Nearly all members of Congress earn $174,000 annually.

A reliable retirement is “a four-legged stool,” says David Kabiller, co-founder of AQR Capital Management in Greenwich, Conn., and co-author of a recent article on how to design retirement programs. Those four legs are a traditional pension, a 401(k)-type plan, Social Security and supplemental savings in taxable accounts. “Eliminate or restrict any of those,” he says, “and you make achieving a secure retirement more challenging.”

Yet that is what Congress, perched securely on its taxpayer-funded four-legged stool, is considering for the rest of us.

At a meeting with members of the Senate Banking Committee earlier this month, Gary Cohn, the director of the White House National Economic Council, discussed ideas that would remove pre-tax benefits from retirement accounts including 401(k)s and shift them to after-tax benefits, according to people familiar with the discussions. It wasn’t clear how seriously the administration is evaluating any specific proposal, these people said.

Some are confident change is afoot. In the next round of tax reform, “it’s not really a question of whether retirement plans will get a haircut, but of how much,” says Bradford Campbell, a partner in the law firm of Drinker Biddle & Reath in Washington, D.C., who served as assistant Secretary of Labor under Pres. George W. Bush.

That’s because the money you contribute to 401(k)s and several other types of retirement plans isn’t subject to current income tax. Nor are your future earnings on those accounts — until you take them out to live on in retirement, when your withdrawals will be taxed as ordinary income.

If your retirement dollars were treated, instead, like contributions to a Roth Individual Retirement Account or Roth 401(k), they would be taxed before you put them in. You could ultimately withdraw the money tax-free in retirement, but the incentive of getting an upfront tax break would be gone.

Taxing retirement-plan contributions Roth-style would generate roughly $1.5 trillion over the next decade the way the government reckons the numbers, estimates Mr. Campbell. So giant a pot of honey may be hard for Congress not to raid.

“We definitely need comprehensive tax reform,” says Mr. Campbell. Unfortunately, when lost revenue has to be replaced, “it’s a game of winners and losers, and the retirement system is poised to be one of the losers.”

It’s hard for most people to save for a goal that glimmers faintly decades in the future. Take away the tax incentive, and many savers might no longer see the point of even trying.

Fully 39% of Americans don’t feel very confident in their ability to fund a comfortable retirement, according to a recent survey. It’s safe to say none of those worried folks are members of Congress.

Instead of penalizing retirement saving, lawmakers should be making it easier, perhaps even mandatory — as it is for members of Congress.

For workers struggling to set money aside, says Mr. Kabiller, “mandatory savings could help impose the discipline of giving up compensation today in order to fund your longevity down the road.”

At a bare minimum, if Congress is going to hack away some of the tax advantages of private retirement plans, it should make matching cuts to the cushy federal system.

“There should be equal sacrifice,” says Mr. Campbell. “It’d be very hard for them to justify not doing that.”

If you have a pitchfork in your garage, keep it handy. Your 401(k) might need defending.

https://blogs.wsj.com/moneybeat/2017/04/21/grab-your-pitchfork-america-your-401k-may-need-defending-from-congress/

Since most American citizens have no significant or secure retirement source of income other than Social Security, this article describes what is at risk for the relative few that do have 401)k and similar retirement plans or private sector pension sources of retirement income. Retirement security should be strengthened not weakened.

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

So far the attempts to address the fact that Americans are not saving enough for retirement do not address the REAL cause. And the proposals put forth 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 recent 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, and incur consumer debt to secure automobiles and housing, as well as other consumption. 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.

Proposals that have received national media attention offer lifetime income security funded out of current savings, meaning further reductions in consumption out of already inadequate incomes. They also aggregates everything into a “private sector” institution that is custom designed to be “too big too fail.”

Such proposals 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. The proposals 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 the proposed programs advocated 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?

The 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, the conventional savings required––denial-of-consumption––programs would be completely unnecessary if we had Capital Homesteading. Our elected representatives should instead advocate for the passage of the Capital Homestead Act.

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

For more on how to accomplish such structural reform, see  “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at http://www.foreconomicjustice.org/9206/financing-future…economic-decline , “The Income Solution To Slow Private Sector Job Growth” at http://www.foreconomicjustice.org/9872/the-income-solut…ector-job-growth, and “A Solution To Eroding Retirement Security” at http://www.huffingtonpost.com/gary-reber/a-solution-to-eroding-retirement_b_4103834.html and at http://www.foreconomicjustice.org/10470/a-solution-to-er…irement-security.

America is Regressing Into a Developing Nation For Most People

On April 20, 2017, Lynn Paramore writes on the Institute for New Economic Thinking:

A new book by economist Peter Temin finds that the U.S. is no longer one country, but dividing into two separate economic and political worlds.

You’ve probably heard the news that the celebrated post-WW II beating heart of America known as the middle class has gone from “burdened,” to “squeezed” to “dying.”  But you might have heard less about what exactly is emerging in its place.

In a new book, The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Peter Temin, Professor Emeritus of Economics at MIT, draws a portrait of the new reality in a way that is frighteningly, indelibly clear:  America is not one country anymore. It is becoming two, each with vastly different resources, expectations, and fates.

Two roads diverged

In one of these countries live members of what Temin calls the “FTE sector” (named for finance, technology, and electronics, the industries which largely support its growth). These are the 20 percent of Americans who enjoy college educations, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success. They grow up with parents who read books to them, tutors to help with homework, and plenty of stimulating things to do and places to go. They travel in planes and drive new cars. The citizens of this country see economic growth all around them and exciting possibilities for the future. They make plans, influence policies, and count themselves as lucky to be Americans.

The FTE citizens rarely visit the country where the other 80 percent of Americans live: the low-wage sector. Here, the world of possibility is shrinking, often dramatically. People are burdened with debt and anxious about their insecure jobs if they have a job at all. Many of them are getting sicker and dying younger than they used to. They get around by crumbling public transport and cars they have trouble paying for. Family life is uncertain here; people often don’t partner for the long-term even when they have children. If they go to college, they finance it by going heavily into debt. They are not thinking about the future; they are focused on surviving the present. The world in which they reside is very different from the one they were taught to believe in. While members of the first country act, these people are acted upon.

The two sectors, notes Temin, have entirely distinct financial systems, residential situations, and educational opportunities. Quite different things happen when they get sick, or when they interact with the law. They move independently of each other. Only one path exists by which the citizens of the low-wage country can enter the affluent one, and that path is fraught with obstacles. Most have no way out.

The richest large economy in the world, says Temin, is coming to have an economic and political structure more like a developing nation. We have entered a phase of regression,and one of the easiest ways to see it is in our infrastructure: our roads and bridges look more like those in Thailand or Venezuela than the Netherlands or Japan. But it goes far deeper than that, which is why Temin uses a famous economic model created to understand developing nations to describe how far inequality has progressed in the United States. The model is the work of West Indian economist W. Arthur Lewis, the only person of African descent to win a Nobel Prize in economics. For the first time, this model is applied with systematic precision to the U.S.

The result is profoundly disturbing.

In the Lewis model of a dual economy, much of the low-wage sector has little influence over public policy. Check. The high-income sector will keep wages down in the other sector to provide cheap labor for its businesses. Check. Social control is used to keep the low-wage sector from challenging the policies favored by the high-income sector. Mass incarceration – check. The primary goal of the richest members of the high-income sector is to lower taxes. Check. Social and economic mobility is low. Check.

In the developing countries Lewis studied, people try to move from the low-wage sector to the affluent sector by transplanting from rural areas to the city to get a job. Occasionally it works; often it doesn’t. Temin says that today in the U.S., the ticket out is education, which is difficult for two reasons: you have to spend money over a long period of time, and the FTE sector is making those expenditures more and more costly by defunding public schools and making policies that increase student debt burdens.

Getting a good education, Temin observes, isn’t just about a college degree. It has to begin in early childhood, and you need parents who can afford to spend time and resources all along the long journey. If you aspire to college and your family can’t make transfers of money to you on the way, well, good luck to you. Even with a diploma, you will likely find that high-paying jobs come from networks of peers and relatives. Social capital, as well as economic capital, is critical, but because of America’s long history of racism and the obstacles it has created for accumulating both kinds of capital, black graduates often can only find jobs in education, social work, and government instead of higher-paying professional jobs like technology or finance— something most white people are not really aware of. Women are also held back by a long history of sexism and the burdens — made increasingly heavy — of making greater contributions to the unpaid care economy and lack of access to crucial healthcare.

How did we get this way?

What happened to America’s middle class, which rose triumphantly in the post-World War II years, buoyed by the GI bill, the victories of labor unions, and programs that gave the great mass of workers and their families health and pension benefits that provided security?

The dual economy didn’t happen overnight, says Temin. The story started just a couple of years after the ’67 Summer of Love. Around 1970, the productivity of workers began to get divided from their wages. Corporate attorney and later Supreme Court Justice Lewis Powell galvanized the business community to lobby vigorously for its interests. Johnson’s War on Poverty was replaced by Nixon’s War on Drugs, which sectioned off many members of the low-wage sector, disproportionately black, into prisons. Politicians increasingly influenced by the FTE sector turned from public-spirited universalism to free-market individualism. As money-driven politics accelerated (a phenomenon explained by the Investment Theory of Politics, as Temin explains), leaders of the FTE sector became increasingly emboldened to ignore the needs of members of the low-wage sector, or even to actively work against them.

America’s underlying racism has a continuing distorting impact. A majority of the low-wage sector is white, with blacks and Latinos making up the other part, but politicians learned to talk as if the low-wage sector is mostly black because it allowed them to appeal to racial prejudice, which is useful in maintaining support for the structure of the dual economy — and hurting everyone in the low-wage sector.  Temin notes that “the desire to preserve the inferior status of blacks has motivated policies against all members of the low-wage sector.”

Temin points out that the presidential race of 2016 both revealed and amplified the anger of the low-wage sector at this increasing imbalance. Low-wage whites who had been largely invisible in public policy until recently came out of their quiet despair to be heard. Unfortunately, present trends are not only continuing, but also accelerating their problems, freezing the dual economy into place.

What can we do?

We’ve been digging ourselves into a hole for over forty years, but Temin says that we know how to stop digging. If we spent more on domestic rather than military activities, then the middle class would not vanish as quickly. The effects of technological change and globalization could be altered by political actions. We could restore and expand education, shifting resources from policies like mass incarceration to improving the human and social capital of all Americans. We could upgrade infrastructure, forgive mortgage and educational debt in the low-wage sector, reject the notion that private entities should replace democratic government in directing society, and focus on embracing an integrated American population. We could tax not only the income of the rich, but also their capital.

The cost of not doing these things, Temin warns, is incalculably high, and even the rich will end up paying for it:

“Look at the movie,Hidden Figures: It recounts a very dramatic story about three African American women condemned to have a life of not being paid very well teaching in black colleges, and yet their fates changed when they were tapped by NASA to contribute to space exploration. Today we are losing the ability to find people like that. We have a structure that predetermines winners and losers. We are not getting the benefits of all the people who could contribute to the growth of the economy, to advances in medicine or science which could improve the quality of life for everyone — including some of the rich people.”

Along with Thomas Piketty, whose Capital in the Twenty-First Century examines historical and modern inequality, Temin’s book has provided a giant red flag, illustrating a trajectory that will continue to accelerate as long as the 20 percent in the FTE sector are permitted to operate a country within America’s borders solely for themselves at the expense of the majority. Without a robust middle class, America is not only reverting to developing-country status, it is increasingly ripe for serious social turmoil that has not been seen in generations.

A dual economy has separated America from the idea of what most of us thought the country was meant to be.

https://www.ineteconomics.org/perspectives/blog/america-is-regressing-into-a-developing-nation-for-most-people

What has and continues to escape conventional economists, including Peter Ternin the economist author referred to in this article, and the politics of progressives, centralists and conservatives, is that the wealthy are rich because they own productive capital — non-human wealth-creating assets used to produce products and services. The reality is that in most economic tasks and in the overall economy, productive capital (not human labor) is independently doing evermore of the work that results in the products and services produced for consumption. It is productive capital’s increasing productiveness and evolution, rather than human effort (productivity conventionally considered) that is the productive means most responsible for economic growth. Effectively, technological innovation and invention limits new, higher-productivity jobs to relatively fewer workers, leaving most other people willing and able to work with lower-paying job opportunities or no jobs at all. This increasing majority is finding it more and more difficult to afford the products and services that are increasingly produced by productive capital.

It is true what Ternin states that “Around 1970, the productivity of workers began to get divided from their wages.” What he means is that worth of labor began to decrease, thus wage levels, while the worth of the non-human factor replacing the necessity for mass labor was increasing. Up to the 1970 or so, the United States economy was still labor intensive with pockets of industries transforming to employing non-human means of production that either eliminated the necessity for workers are dramatically reduced worker contributions. And of course, in a private property system those who OWN the non-human factor (productive capital) are the people entitled to the wealth and income produced by their productive capital contribution. After all, fundamentally, economic value is created through human and non-human contributions.

When the right to participate in production through productive capital ownership is effectively denied, especially when tectonic shifts in the technologies of production destroy and degrade the worth of jobs, then the people affected become increasingly insecure in satisfying their and their family’s basic survival. Such conditions force them to seek low-pay, low-security jobs, or either charity or welfare, or desperately engage in illegitimate means. Such disintegration tears at society’s sense of fairness and justice, and spreads resentment, alienation and despair.

It is essential that people focus their thinking on the understanding of who and what creates wealth, in order to fully understand how to solve growing income inequality and the disintegration of the nation wherein the majority of citizens are regulated to low-pay job serfdom and public welfare.

In a modern, technological era it is the ownership of wealth-creating productive capital assets, not the labor of people that is the primary creator of affluence.

Hence, it is access to ownership of productive capital assets, not to jobs, wherein the national economic policy guidelines for the 21st century ought to lie. As ownership of wealth-creating productive capital becomes widely diffused, political power ought also to be widely diffused.

Productive capital is defined as the non-human means of producing products and services (productive land; structures; infrastructure; tools; human-intelligent and non-human-intelligent machines; super-automation; robotics; digital computerized processing and operations; certain intangibles that have the characteristics of property, such as patents and trade or firm names; and the like owned by individuals).

Tectonic shifts in the technologies of production are constant and result in new formations of productive capital, whose role is to do ever more of the work, which produces income to the owners of the capital assets. People invented tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive — the core function of technological invention.

Businesses employ both productive capital and people, but full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to produce efficiently and profitably. Because of the ever-accelerating shift to productive capital to lower business operational costs, jobs are constantly being eroded. The other aspect impacting job security — the overwhelming source of income for the majority of Americans — is global competition and the sourcing of low-cost “slave” labor. As a result, American businesses seeking to compete in global markets and within the United States market, which is driven by low pricing demand, have out-sourced manufacturing to other countries whose labor costs are significantly lower and whose tax extraction rates and environmental regulations are respectively far less costly and stringent. Such out-sourcing is motivated by the market demand to produce their products and services more efficiently and more profitably.

This combination of free-market forces means that private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever-increasing role, compounded by far less costly out-sourcing of production.

As a result, there are fewer and fewer “customers with money” to purchase the products and services that can be more efficiently produced with productive capital. Economic growth will always be stalled when there are high levels of economic inequality because there will be an imbalance between production and consumption.

Why is this happening?

The reason is simple. A relative few people OWN the preponderance of the nation’s productive capital assets and are positioned to OWN the FUTURE productive wealth, from which they earn dividend income and valuable capital gains asset growth. This is why there is widening economic inequality resulting in class conflict between the so-called 1 percent “successful” ownership class and the 99 percent, who are capital-less or under-capitalized, and whose ONLY source of income is a job or taxpayer-supported government welfare derived from tax extraction and national debt. This Income inequality is exponentially crippling the United States from realizing its creative and social and just economic potential.

Thus, there is the imbalance between production and consumption. A few wealthy people are thereby able to rig the “system” to manipulate the lives of people who struggle with declining labor worker earnings and job opportunities, and then accumulate the bulk of the money through monopolized productive capital ownership. Our scientists, engineers, and executive managers who are not owners themselves, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital owner more productive. How much employment can be destroyed by substituting machines for people or lowering operational costs is a measure of their success — always focused on producing at the lowest cost. Only the people who already own productive capital are the beneficiaries of their work, as they systematically concentrate more and more capital ownership in their stationary 1 percent ranks. Yet the 1 percent are not the people who do the overwhelming consuming. The result is the consumer populous is not able to get the money to buy the products and services produced as a result of substituting “machines” for people or devaluing labor wages and salaries. And yet you can’t have mass production without mass human consumption. It is the exponential disassociation of production and consumption, which is the problem with the United States economy, and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well being.

The solution is to employ capital credit mechanisms to facilitate the productive capital acquisition by EVERY citizen, whether poor or in the middle class, to fuel a larger and more affluent economy. This can be facilitated on the basis of self-finance, whereby the productive capital assets, after returning its acquisition costs, begin to pay a fully-distributed capital earnings dividend to its new owners, thus initially supplementing their labor income and reducing their taxpayer-supported welfare dependence, and over time building income to replace their dependency on job earnings and secure their retirement as they age.

For the nation to overcome widening income inequality, the obvious, logical solution is for people to OWN THE “MACHINES” and non-human means of production that result from technology. Broadening productive capital ownership should be the priority course of action for the FUTURE. “FUTURE” is capitalized to emphasize that the private property rights of ALL citizens MUST be respected, honored, and protected. Thus, ANY solution(s) to transform the United States into an OWNERSHIP CULTURE must not undermine or seize the private property of the 1 to 10 percent who now own up to 90 percent of the corporate wealth. Instead, the solution(s) MUST expand the ownership pie over time and result in EVERY American child, woman and man earning income to support an affluent life. The result would be that those who now own America would still be owners but their percentage of the total ownership would decrease over time, as ownership gets broader and broader and benefits the traditionally disenfranchised poor and working and middle class, who will become sought-after “customers with money.” Thus, productive capital income would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote economic growth. This also means that society can profitably employ unused and idle productive capacity and invest in more productive capacity to service the demands of a growth economy.

Significantly, by facilitating the acquisition of FUTURE wealth-creating productive capital assets by ALL Americans, everyone will increasingly be able to afford to purchase with their productive capital earnings (dividend income) what is increasingly produced by productive capital. This in turn will create the market conditions for sustainable economic growth, and as private, individual ownership spreads, the larger the economy will grow as people’s incomes increasingly grow and they purchase more products and services to satisfy their needs and wants. Thus, the effect created would be a self-propelling economic engine of growth capable of producing general affluence for every American, and not limited to those few who now OWN America’s productive power and whose consumption needs are satisfactorily, if not overly met.

This balanced Just Third Way approach to building a FUTURE economy that supports affluence for EVERY American is presently not in the national discussion. It appears that the President of the United States, the elected Congressional representatives and Senators, academia, and the media are oblivious to this principled solution that has the ingredients to power economic growth at double-digit GNP rates. This is the political situation, even though many are wealthy themselves because they OWN productive capital assets.

To achieve this goal requires investment in FUTURE income-producing, wealth-creating productive capital assets while simultaneously broadening private, individual ownership of the resulting expansion of existing large corporations and future corporations. Not only is employee ownership the norm to be sought wherever there are workers but beyond employee ownership the norm should be to create an OWNERSHIP CULTURE whereby EVERY American can benefit financially by owning a SUPER IRA-TYPE Capital Homestead Account (CHA) portfolio of income-producing, full-voting, full-dividend payout securities in America’s expanding corporations and those newly created to produce the future products and services needed and wanted by society.

This master plan agenda can be accomplished by applying the logic of corporate finance, which is self-financing and asset-backed credit for productive uses to grow the economy. People invest in capital ownership on the basis that the investment will pay for itself. The problem facing the nation, which prevents broadening capital ownership simultaneously with the growth of the economy, is routed in the financial system, which must be reformed.

The wealthy ownership class understands and employs the strategy of investing in opportunities expected to pay for themselves in a reasonable period of time, typically 5 to 7 years, perhaps 10 in some circumstances. This is the fundamental logic of corporate finance couched in “return on investment (ROI)” terms. This same logic is the personal investment strategy steadfastly followed by successful capitalized and under-capitalized investors. The rich further understand that once the acquisition cost is paid for out of the FUTURE earnings of the productive capital investment, the asset then continues to earn income indefinitely, or in perpetuity. This is precisely the process used by the rich to get richer.

The solution is not to focus on JOB CREATION but to focus on OWNERSHIP CREATION whereby EVERY American can acquire private, individual ownership in FUTURE income-producing productive capital asset investments without the need to limit their financing requirements to past savings and/or require workers to reduce their consumption incomes to become owners. This is not about creating small businesses, which tend to be operated by hands-on entrepreneurs and proprietors, but about creating a viable portfolio of income-producing, full-dividend, full-voting stock ownership in large corporations growing the economy, whereby there is no education and talent requirement to simply be a share owner. Large corporations are already publicly owned by millions of Americans. But what they have purchased is value-diluted stock through the “stock market exchanges,” purchased with their earnings as labor workers. Their stock holdings are relatively miniscule, as are their dividend payments compared to the top 10 percent of capital owners. And no one addresses whether Dow Jones gains have anything to do with the reality of the health of businesses. The stock market deals in secondhand securities, which essentially translates to a gambling casino. Wall Street has convinced us to see ourselves as “investors” instead of “gamblers” and “perceived values” instead of “bets.”

It is important to understand that, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively minuscule, as are their dividend payments compared to the top 10 percent of capital owners. Pew Research found that 53 percent of Americans own no stock at all, and out of the 47 percent who do, the richest 5 percent own two-thirds of that stock. And only 10 percent of Americans have pensions, so stock market gains or losses don’t affect the incomes of most retirees.

Conventionally, most people do not have the right to acquire productive capital with the self-financing earnings of capital; they are left to acquire, as best as they can, with their earnings as labor workers. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital.

America has tried the Republican “cut spending, cut taxes, and cut ‘entitlements’,” and the Democrat “protect ‘entitlements,’ provide tax-payer supported stimulus, lower middle and working class taxes, tax the rich, and redistribute” brands of economic policy, as well as a mixture of both. Republican ideology aims to revive hard-nosed laissez-faire appeals to hard-core conservatives but ignores the relevancy of healing the economy and halting the steady disintegration of the middle class and working poor. Unfortunately, not enough conservative thinkers have acknowledged the damaging results of a laissez-faire ideology, which furthers the concentration of productive capital ownership. They are floundering in search of alternative thinking as they acknowledge the negative economic and social realities resulting from greed capitalism or “Hoggish” — the term I give to institutionalizing greed (creating concentrated capital ownership, monopolies, and special privileges).

The Just Third Way is a balanced approach, which encompasses the realization that the troubling economic and social trends (global capitalism, free-trade doctrine, tectonic shifts in the technologies of production, and the steady off-loading of American manufacturing and jobs) caused by continued concentrated ownership of wealth-creating productive capital assets will threaten the stability of contemporary liberal democracies and dethrone democratic ideology, as it is now understood. Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status.

Economic democracy has yet to be tried. We are absent a national discussion of where consumers earn the money to buy products and services and the nature of capital ownership, and instead argue about policies to redistribute income or not to redistribute income, or to engage in austerity measures or pursue government stimulus.

But how will we ever achieve affluence for EVERY American and eliminate poverty and reliance on taxpayer-supported government welfare, which is fueling national debt? This will require a return to higher income tax and corporate tax rates, which are lowered or entirely eliminated when corporations have demonstrated growth decisions that enable their workers and other citizens to finance their future growth and share in the companies’ fate as share owners. This would enable us to more effectively create investment stimulus incentives through reduced tax rates tied to creating new owners.

While tax and investment stimulus incentives are excellent tools to strengthen economic growth, without the requirement that productive capital ownership is broadened simultaneously, the result will continue to further concentrate productive capital ownership among those who already own, and further create dependency with redistribution policies and programs to sustain purchasing power on the part of the 99 percent of the population who are dependent on their labor worker earnings or welfare to sustain their livelihood. By stimulating economic growth tied to broadened productive capital ownership the benefits are two-fold: one is that over time the 99 percenters will financially benefit from acquiring productive capital assets that are paid for out of the future earnings of the investments and gain greater access to job opportunities that a growth economy generates.

Starting with the business corporation, a legal entity created and sanctioned by state and federal government and judicial law, the government should provide tax incentives for full-dividend payouts to its stockholders, or alternatively legislate that from now on 100 percent of all profits be paid out fully as dividend payments to stockholders (thus, eliminating the corporate income tax), with the dividend income subject to individual taxation. This would effectively prohibit retained earnings financing of new productive capital formation (reinvesting the corporate earnings already earned). The government could also limit debt financing by legislating some ratio formula to annual revenue under which a corporation could debt finance new productive capital formation with borrowed monies. Both retained earnings and debt financing only enhance the ownership holding value of the existing corporate ownership class and do nothing to create new owners. Thus, the rich get richer systematically and capital ownership concentration is furthered, facilitated by financing further productive capital acquisition out of the earnings of existing productive capital.

In place of retained earnings and debt financing, the government should incentivize business corporations to issue and sell full-voting, full-dividend payout stock to more people to underwrite new productive capital formation, with the purpose of providing opportunity for new owners, both employees of corporations and non-employees, to participate in a growing economy. This approach can be applied to singular corporations or multiple corporate diversification portfolios facilitated with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). This would provide the solution to the need for a financial mechanism put in place that will guarantee loan risks; otherwise banks and lending institutions will not make the loans, and the system will continue to limit access to capital acquisition to those who already own capital—the rich and who have “psst savings” to pledge as collateral. This is because “poor” people have no security or collateral, or sufficient income to pledge against the loan as security, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.

Criteria must be created to qualify the corporations subject to this policy and those corporations that qualify overseen so as to ensure that their executives exercise prudent fiduciary responsibility to generate loan payback. Once the guaranteed loans are paid back, the new capital formation will continue to produce income for existing and future owners, and subsequently provide “customers with money” to support the output of the economy.

This approach would use the existing taxing power of government in a way to restructure the economy along the guidelines of universal access to ownership of productive capital wealth with a thrust toward the creation of new wealth.

The ultimate result of the use of the taxing power of government to stimulate the widespread access to ownership of productive capital wealth should be a growing independence of an economically emancipated people both from reliance upon government and from the wage slavery brought into being by monopolistic and oligarchic ownership; and the role and function in our lives both of government and of monopoly and oligarchy ownership ought to diminish.

The national goal should be to foster an economic policy direction toward broadening private ownership participation for all people in the capital wealth base of our economy.

The American Dream since the time of the Founding Fathers has been to foster individually owned free enterprise. Our economic policies, and tax laws foster concentration of business ownership in the hands of a wealthy few by subsidizing and favoring narrowly owned conglomerates and monopolistic combines. This is not good. We need a new economic policy thrust, which will promote the birth of profitable new business enterprises and expand the ownership of large corporations, while stimulating the entrepreneurial creative spirit of business innovators.

This is an agenda for “a quiet revolution” — a national movement for economic justice, tax equity, and governmental responsibility. The thrust of this movement is to focus upon tax reformation and economic policy. To guide this movement toward realizing the goal of economic justice, positive and constructive reforms in the tax laws, policies, and procedures of the U.S. Government will be necessary.

When the Federal income tax was authorized by the 16th amendment to the Constitution, it was designed to levy taxes in a progressive and fair way on all income, “from whatever source derived,” in order to pay for the legitimate functions of government as authorized by the people through their elected representatives.

But, over the years, exception after exception has been made to this principle; tax loopholes have allowed the wealthy and the wealthy owners of the corporations to escape high taxes. This means that the tax burden has fallen increasingly on low- and moderate-income working people.

The average American worker works at least 2 out of 5 days just to pay taxes, while scores of wealthy people with incomes over $1 million pay no Federal income taxes at all.

This is not just.

There is hardly any progressivity in taxation. Those with low and moderate incomes pay a higher percentage in taxes than those with higher incomes.

Tax loopholes and government subsidies are really a welfare program for the rich.

Recommendations For Tax Reformation: A Just Tax Concept For The U.S. Government

Implicit in the original income tax concept was the “ability-to-pay-theory,” that those who earn or receive more income should pay a progressively larger proportion of their incomes to support government.

Another concept inherent in the original income tax law was that government should limit in some manner the vast personal incomes derived by a few people or legal entities owning huge amounts of capital wealth and property.

Tax policies today encourage concentration of capital wealth and property, generating on one hand a huge governmental bureaucracy to regulate centralized economic activity, and on the other hand, an ever-expanding number of economically dependent people requiring another huge government bureaucracy to administer to their needs.

The economic, social, and legal injustices of our society are fostered by tax policies, which enable the rich to become richer, while the majority of the working people, the elderly, small businessmen, family farmers, and poor pay the taxes.

As a nation, we must adopt an economic policy designed to broaden private individual ownership of all forms of property — particularly property ownership rights which yield viable incomes to people. The function of Federal tax policy then should be to encourage broadened private, individual ownership, and discourage private concentrations of capital wealth and excessive personal incomes from property holdings.

For genuine tax reform, positive, constructive, and just reforms in tax law, with review every 5 years or less, are needed.

Recommended Tax Reforms

Personal earned incomes and property-derived incomes

The tax rate would be a single rate for all incomes of natural persons from all sources above a personal exemption level so that the budget could be balanced automatically and even allow the government to pay off the growing unsustainable long-term debt, but the poor would pay the first dollar over their exemption levels as would the hedge fund operator and others now earning billions of dollars from capital gains, dividends, rents and other property incomes (which under some tax proposals would be exempted from any taxes). Provide an exemption of $100,000 for a family of four to meet their ordinary living needs.

Eliminate the payroll tax on workers and their employers, but pay out of general revenues for all promises for Social Security, Medicare, Medicaid, government pensions, health, education, rent and subsistence vouchers for the poor until their new jobs and ownership accumulations provide new incomes to substitute for the taxpayer dollars to fill these needs.

Inheritance and estate taxes

As a substitute for inheritance and gift taxes, a transfer tax would be imposed on the recipients whose holdings exceeded $1 million, thus encouraging the super-rich to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes; teachers; health workers; police; other public servants; military veterans; artists; the poor; and the disabled.

Each year tens of billions of dollars in wealth-creating productive capital assets are passed along to heirs under current tax laws. The revenues generated from inheritance taxes should be pledged to support the Social Security program, thus achieving a reduction in Social Security taxes, which are becoming a tax burden.

Corporations and business taxes for non-small business enterprises

Investment credit tax incentives — The net result of new capital wealth formation is to create more productive land, industrial plant and equipment, machinery, tools, et cetera. In a highly technological economy the purpose of scientific advancement is not to create jobs (labor intensive production), but to substitute more efficient machines, buildings, tools, and productive land for labor — human work effort. This is the basis of increasing productiveness, and has been since the invention of the wheel to today’s age of cybernetics. Invention and innovation are supposed to save labor and free people for the enjoyment of the good life, the pursuant of happiness, and the improvement of their minds and bodies — to enable the fulfillment of the needs of the flesh (man’s material needs and well-being), so that the works of the soul may flow.

With an economic policy designed to foster widespread private equity ownership participation in the capital wealth assets of our economy, the use and purpose of the investment tax credit device as a special governmental subsidy to private corporations has a significant potential for encouraging broader ownership of income-producing productive property rights among all people.

If an investment tax credit is given to a business organization, it should be limited to finance real new capital wealth expansion for widespread private ownership participation by individuals and families.

The Federal Reserve should stop monetizing unproductive debt and begin creating an asset-backed currency that could 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 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 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.

Nonpublic close corporations — All non-publicly registered and traded corporations, that is, those that are close corporations owned by a few people, and not classified under definitions set by the Small Business Administration, Department of Commerce, as a “small business,” or whose stock is not traded on the open markets and broadly owned, should be taxed as personal holding companies. The tax policy for close corporations, which by their nature concentrate wealth and limit free enterprise, should result in expanded ownership of capital wealth and discourage such organizations.

The income of such corporations should be treated as the personal incomes of their owners and taxed at personal income tax rates as herein recommended.

This tax policy will discourage private concentrations of capital wealth, and encourage viable small businesses and widespread private popular ownership shares in the small and large business corporations of America.

Public corporations — Tax policy of the Federal Government should encourage broad private ownership of public corporations, Publicly registered business corporations should be taxed on a basis, which encourages broad ownership and the fullest distribution of earnings to their owners.

The following tax policies for all publicly owned private corporations should be applied, based upon the philosophy that a corporation is a creature of the State, created by law, recognized as an “artificial person,” able to amass vast amounts of capital wealth with limited liability, and can have a life in perpetuity. Since a corporation is a legally created entity, and not a human being, its function, powers, responsibilities, and ownership are a matter of significant social, political, and economic policy.

Public corporations should be taxed as follows:

If profits are retained, that is, reinvested and not paid to the stockholder-owners, the corporation will pay a 90 percent tax on retained earnings.

Dividends paid out to stockholders-owners would be deductible from corporate earnings thus making these earnings subject to personal income tax rates.

All subsidiary corporations and partially or wholly owned enterprises of a parent or holding corporation will be taxed as a separate enterprise entity, as under the above recommended policy.

Business sole proprietorships and partnerships, and close corporations classified as small business

No change in existing tax procedure are necessary, except that the tax rate on such business incomes would be the same for individuals.

Capital gains tax — non-public corporations and close corporations

For individuals, capital gains realized on the sale of a personal residence, owned and occupied by a natural person or persons and/or a family would be taxed at the personal income tax rate.

All other capital gains in property interests (real or personal, securities et cetera) unless exchanged within 1 year for property of equivalent value, would be taxed at the personal income tax rate.

Capital property holdings tax: Limits on ownership

All individuals, whether their property is combined with others in joint tenancies, co-tenancies, or community property holdings of natural persons should be subject to a capital property holdings tax if the certified net worth or equity value of the property holding of the taxpayer exceeds $1 million.

Tax loopholes and subsidies

Eliminate all.

Legitimate Functions Of Government And Governmental Responsibility

Tax policy must, by necessity, be linked to a definition of the legitimate functions of government and governmental responsibility with respect to the uses of Federal tax revenues.

Therefore, the tax revenues flowing to the Federal Government as a result of these recommendations should be used for the following purposes:

  1. Promote the general welfare for all people.
  2. Encourage viable and broadly owned business enterprise, and a free competitive market.
  3. Foster broad private individual ownership of the capital wealth base of our economy.
  4. Insure a fair and meaningful stake among individuals in the future of our nation.
  5. Promote economic justice for all people.
  6. Enhance civilization, and encourage the arts, science, significant educations, and other creative human endeavors.
  7. Guarantee individual liberty, and economic security and independence for all people.
  8. Promote peace and world enrichment, while providing for the common defense.
  9. Encourage community enhancement and environmental quality.
  10. Enhance life, health, and personal happiness for all people.
  11. Foster domestic tranquility and fraternity.
  12. Encourage human tolerance, respect, and personal responsibility and dignity.
  13. Promote mutual cooperation and trust for mutual benefit for all people.

The ultimate result that we should seek is growing independence of an economically emancipated people both from reliance upon government and from the wage slavery brought into being by monopolistic and oligarchic ownership, and the role and function in our lives both of government and of monopoly and oligarchic ownership ought to diminish.

Recommendations For Future Study

While these tax reform recommendations will generate substantial revenue increases to the Federal Government, strengthen the nation, and result in reducing the burden upon all poor and working people, particularly those families with incomes under $30,000 per year, an in-depth study is necessary to determine the full impact of such a new tax and economic policy thrust, as herein advocated.

A Tax Reformation Commission should be established by the U.S. Congress to conduct an in-depth study of these tax reform recommendations and those of others to determine the impact of these measures on the economy, the structure of private property ownership and free enterprise, the concentration of wealth, income distribution, and revenues generated to the Federal Government.

The U.S. Congress should establish a census of wealth valuation inventory. Every five years, the Commissioner of Internal Revenue, in conjunction with the Bureau of the Census, should conduct a valuation census of the property holding of all individuals, held in accordance with regulations published in the Federal Register. These records should be treated with the same confidentiality as is presently given to personal income tax records.

The wealth valuation computations for each individual would be used to establish one’s priority relative to other individuals for qualifying for government programs aimed at strengthening the self-sufficiency of the individual through acquisition and ownership of new and/or transferred capital wealth assets.

Concluding Remarks

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

A National Right To Capital Ownership Act and the Capital Homestead Act (aka Economic Democracy Act) that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and devaluation due to tectonic shifts in the technologies of production.

The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today — management and banks — that each transaction is viably feasible so that there is virtually no risk to the Federal Reserve. The Federal Reserve Board is already empowered under Section 13 of the Federal Reserve Act to reform monetary policy to discourage non-productive uses of credit, to encourage accelerated rates of private sector growth, and to promote widespread individual access to productive credit as a fundamental right of citizenship. The Federal Reserve Board needs to re-activate its discount mechanism to encourage private sector growth linked to expanded productive capital ownership opportunities for all Americans.

The labor union movement should transform to a producers’ ownership union movement and embrace and fight for this new democratic capitalism. They should play the part that they have always aspired to — that is, a better and easier life through participation in the nation’s economic growth and progress. As a result, labor unions will be able to broaden their functions, revitalize their constituency, and reverse their decline. Unfortunately, at the present time the movement is built on one-factor economics — the labor worker. The insufficiency of labor worker earnings to purchase products and services increasingly produced by productive capital gave rise to labor laws and labor unions designed to coerce higher and higher prices for the same or reduced labor input. With government assistance, unions have gradually converted productive enterprises in the private and public sectors into welfare institutions.

The unions should reassess their role of bargaining for more and more income for the same work or less and less work, and embrace a cooperative approach to survival, whereby they redefine “more” income for their workers in terms of the combined wages of labor and capital on the part of the workforce. They should continue to represent the workers as labor workers in all the aspects that are represented today — wages, hours, and working conditions — and, in addition, represent workers as full voting stockowners as capital ownership is built into the workforce. What is needed is leadership to define “more” as two ways to earn income.

If we continue with the past’s unworkable “trickle-down” economic policies, governments will have to continue to use the coercive power of taxation to redistribute income that is made by people who earn it and give it to those who need it. This results in ever-deepening massive debt on local, state, and national government levels, which leads to the citizenry becoming parasites instead of enabling people to become productive in the way that products and services are actually produced.

There is a solution to America’s economic decline, which will result in double-digit economic growth and simultaneously broaden private, individual ownership so that EVERY American’s income significantly grows, providing the means to support themselves and their families with an affluent lifestyle. This new paradigm is the subject of the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797 and is founded on the concept of Monetary Justice (http://capitalhomestead.org/page/monetary-justice).

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

Also see “The Path To Eradicating Poverty In America” at http://www.huffingtonpost.com/gary-reber/the-path-to-eradicating-p_b_3017072.html and “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html.

Also see the article entitled “The Solution To America’s Economic Decline” at http://www.foreconomicjustice.org/9206/financing-future…economic-decline and “Education Is Critical To Our Future Societal Development” at http://www.foreconomicjustice.org/?p=9058.

Too Poor To Retire And Too Young To Die

On January 29, 2016, John M. Glionna writes in the Los Angeles Times:

At the wise age of 79, Dolores Westfall knows food shopping on an empty stomach is a fool’s errand. On her way to the grocery store last May, she pulled into the Town & Country Family Restaurant to take the edge off her appetite.

After much consideration, she ordered the prime rib special and an iced tea — expensive at $21.36, but the leftovers, wrapped carefully to go, would provide two more lunches.

The problem, she later realized, was that a big insurance bill was coming due. How was she going to pay it? Was she going to tip into insolvency over a plate of prime rib?

“I thought I could handle eating and shopping,” she said, “but lunch put me over the top.”

Westfall — 5 feet 1 tall, with a graceful dancer’s body she honed as a tap-dancing teenager — is as stubborn as she is high-spirited. But she finds herself these days in a precarious place: Her savings long gone, and having never done much long-term financial planning, Westfall left her home in California to live in an aging RV she calls Big Foot, driving from one temporary job to the next.

“I want to live life as much as I can. Before I don’t have any.”

She endures what is for many aging Americans an unforgiving economy. Nearly one-third of U.S. heads of households ages 55 and older have no pension or retirement savings and a median annual income of about $19,000.

A growing proportion of the nation’s elderly are like Westfall: too poor to retire and too young to die.

Many rely on Social Security and minimal pensions, in part because half of all workers have no employer-backed retirement plans. Eight in 10 Americans say they will work well into their 60s or skip retirement entirely.

Westfall hadn’t planned to keep working. But in 2008, as the U.S. economy spasmed, she lost her home and tumbled out of the middle class.

Today, Westfall is one of America’s graying nomads. Although many middle-class retirees ply the interstates in Winnebagos as a lifestyle choice, for Westfall and many others, life on the move is not as much a choice as a necessity.

Her seven-year journey has taken Westfall to 33 states and counting. She’s worked as a cavern tour guide, resort receptionist, crowd control officer, hustling clerk at an Amazon warehouse. Others like her have cleaned toilets, picked beets, plucked chickens.

Her monthly income consists of $1,200 in Social Security and a $190 pension, plus pay from her seasonal jobs. She owes $50,000 on her credit cards. There’s also a $268 monthly loan payment for her aging rig.

Nearing 80, Westfall suffers daily aches and pains. Big Foot has its own problems: The roof leaks, so do the pipes beneath the sink. The water pump feeding the shower and sink is failing. “One of us is going to give out first,” Westfall says with a laugh. “It’s either me or Big Foot.”

There have been times when she has survived on brown rice and milk — and worried the milk would run out.

Westfall spent the Christmas season of 2014 working at a Fort Lauderdale, Fla., mall for $10 an hour, then hit Virginia for a stint selling photos door-to-door on commission. By May 2015, she brought her roadshow into the Darien Lake Theme Park in upstate New York for a job as a kiddie ride operator. The pay: $9 an hour. The job would carry her only through September.

She untethered from Big Foot the tiny white Smart car she calls Little Tow and set up camp in a field among two dozen other seasonal workers, nearly all of them retirement age. Wearing an electric orange work shirt, she’d soon become known among youngsters there as “the Ride Lady.”

Nearing 80, she suffers daily aches and pains — leg cramps and arthritis and weakness from low blood sugar. Big Foot has its own problems: The roof leaks, so do the pipes beneath the sink. The water pump feeding the shower and sink is failing. “One of us is going to give out first,” Westfall said with a laugh. “It’s either me or Big Foot.”

She avoided disaster after the prime rib dinner by persuading the insurance company to space out her payment in installments. But then that same month, she was caught driving 43 mph in a 35-mph zone. The ticket: $300.

“I could just cry,” she wrote in her journal. “I won’t have earned $300 in all of May. If I can get it lowered to $150, it will still be more than my entire grocery budget. Don’t know how I’m going to manage it.”

One of Westfall’s favorite books is John Steinbeck’s “Travels With Charley: In Search of America,” which begins “When I was very young and the urge to be someplace else was on me, I was assured by mature people that maturity would cure this itch.” For her, it never did.

For weeks in the spring of 2008, Westfall lingered alone inside Big Foot, parked outside her double-wide trailer in a mobile home park in Kelseyville, a rural town in Northern California.

The furniture was sold, the mobile home up for sale, and Westfall was living in the driveway. She thought about killing herself.

“I had a serious out-loud talk with myself,” she recalled, about how to get out of her financial fix — an unforeseen downturn in a long and independent life.

The New York City native had put herself through business school and had spent time as a bank executive secretary and a museum curator. She’d later started her own interior design consulting firm. That’s when she bought Big Foot, using it as a mobile office to meet clients across California.

Westfall didn’t know it, but she was perched on the fault line of an economic temblor: In a few months, U.S. housing prices would record their largest drop in history.

The Great Recession would hit older Americans hard. Of the 4.7 million home foreclosures from 2007 to 2011, one-third, or 1.5 million, involved people ages 50 and older. Studies show that older single women are the most vulnerable: They make less than male workers, and those that take time off to have children often miss chances for seniority and pay raises.

At the Darien Lake Theme Park in upstate New York, Westfall joins two dozen other seasonal workers, nearly all of them retirement age. But she has long been used to being on her own. In her youth she took solitary road trips into the desert and mountains. But life on the road taught her to be more resourceful, bolder.

Westfall married twice decades ago but never had children, deciding she was at her loneliest with a man in her life. After her retirement in 2007, she had planned on selling the double-wide to finance a lifelong dream: touring the nation from behind the wheel of Big Foot.

She knew the move would be a stretch. The financial fallout had rendered her modest stock portfolio worthless, and she’d never put away much in savings.

The mobile home was worth $40,000, but there was a catch: The trailer park’s new owner had tripled the rent, making it impossible to sell her unit. She reached out to the local senior law center, even her county supervisor, scrambling for a solution.

It was around this time in 2008 that Sheila Faulds died; she’d been a friend of Westfall’s for half a century and she left her $20,000. “Promise me you won’t pay bills with the money,” Faulds had told her. “I want you to buy a car.”

Westfall’s journal oozed despair: Her best friend was gone. And she was stuck: How could she hit the road without selling her double-wide? Her skin flushed with hives. She couldn’t sleep.

“I burst into tears and had a big long whopping cry,” she wrote in her journal. Then she pounded her fists on the sofa until she fell asleep.

She awoke to this thought: There was another option.

With a pad and pencil, she produced a pro-and-con ledger to assess her predicament. On one side of the page, under “Bad,” she wrote, “No money. No job. Insufficient income. Big debt. No place to go. No plans.”

Under “Good”: “Motor home to live in (though part of the debt). Ability to make plans.”

Then she made another two-sided list. One column read, “What have I always wanted to do in retirement?” The other: “How close can I get to it.”

She could hit the road, but she would have to keep working. And just maybe, there might be money for a few nice things. It was all so scary but also a little exciting.

Westfall sold off most of what was left of her belongings and put the rest in storage. Her friend’s gift would launch her life as a road gypsy, and she would leave the double-wide behind without getting a dime for it.

She started Big Foot’s engine, drove down the blacktop driveway and turned right, heading south onto Soda Bay Road and a life as a tumbleweed on wheels.

“I’m not sure if I even closed the gate behind me,” she recalled. “I just drove away.”

Where to go next? Despite hours of phone work, Westfall still doesn’t know whether she’s heading to Maryland for a door-to-door sales gig or to Georgia for a mall kiosk job.

Westfall has long been used to being on her own. In her youth she took solitary road trips into the desert and mountains and once took flying lessons. But life on the road taught her to be more resourceful, bolder.

She once raced north out of Texas to escape a hurricane and rode out the remnants of the storm at a truck stop in Little Rock, Ark. One Christmas in Florida, she scared off a would-be armed robber who accosted her at an ATM, yelling, “I haven’t got any more money, fool.”

Last summer, a few weeks after getting the speeding ticket, Westfall stood in traffic court to fight the $300 fine. She persuaded the judge to reduce it to $75 — but missed a day’s pay to plead her case.

Two months later, in August, she still didn’t know where she’d be working after Darien Lake, and faced yet another nasty choice between need and want.

“I’m beginning to feel ineffectual,” Westfall says. “And I’ve never felt that before. I don’t feel desperate, but I’m getting close.”

Should she go to the dentist, or take a guided tour of buildings designed by her favorite architect, Frank Lloyd Wright? Each cost $100.

She picked Frank Lloyd Wright. Her teeth could wait.

“I believe doing something fun, no matter how frivolous it might seem, is food for the soul,” she said. “You need to feed yourself some pleasure once in a while to keep feeling alive. Otherwise, it’s just drudgery.”

But there is little money to see the sights. She earns too much to receive food stamps, and a lot of it goes to groceries. She tries to eat organic food, with her low blood sugar. That rules out cheap but filling Big Macs — as well as the food kitchens whose mass-produced meals, she decided, are unhealthful.

She can’t buy in bulk because Big Foot has little storage space. Often, she’s forced to purchase smaller-sized products — at convenience store prices — that fit a smallish RV refrigerator. At laundromats, she tries to keep wash day under $10, always scouting the hotter money-saving dryers.

Her key ring is crowded with plastic discount tags for supermarkets and places like Staples and Books-A-Million.

But Westfall finds that she is now more in debt than when she hit the road. She hasn’t been able to visit her younger sister, Mary Ann, in California since she set out; she can afford to take only the shortest route to the next job, and the jobs haven’t taken her that way. The biggest blow came in 2013 when she faced $8,000 in charges for emergency dental work and rig repairs. It was a gut punch from which she has yet to recover.

She tries to do the repairs herself when she can. One day at Darien Lake, she climbed a ladder to lean over the RV’s roof, looking for the source of a leak that was dripping water onto her laptop. Time was, she’d climb all the way up on the roof to take care of things. But not anymore.

“I’m beginning to feel ineffectual,” she said. “And I’ve never felt that before. I don’t feel desperate, but I’m getting close.”

Wearing an electric orange work shirt, Westfall is known among youngsters at the Darien Lake Theme Park as “the Ride Lady.” On her last day, an hour before the park began shutting down for the year, Westfall has to deal with an irate mother. Later, the six teenagers she’d worked with that summer invite her to Denny’s for a going-away dinner.

Westfall was working her last shift at the theme park on a warm Sunday afternoon in late September. While some co-workers slouched glumly at the controls, she was a blur of activity. Using a stick, she measured each tyke to make sure they were tall enough to ride; she strapped the youngest ones in tightly.

Wearing the leopard-spotted glasses she’d bought at a truck stop, she stooped face-to-face with little ones for conversations that never condescended. Some wrapped her in a spontaneous hug.

They’d ask, “Did you get your glasses at Target?” or “Are you nice.”

Her favorite: “How did you get so old.”

She responded, “By hanging around a really long time.”

Her feet hurt constantly from standing 12 hours at a stretch, six days a week, racking up overtime. On her last day, an hour before the park would begin to shut down for the year, Westfall gently corrected a mother who’d barged into the ride area to check on her child after the security gate was closed. That was her job, Westfall explained.

The mother exploded. She shouted inches from Westfall’s face, spittle flying.

“Just because you’re a miserable old lady with your effing $7-an-hour job,” she hissed. “You don’t have a life.”

As the irate woman was finally escorted away by security, a bystander sent her daughter over with a $10 bill. She said Westfall deserved a nice dinner.

An hour later, Westfall walked to her car, exhausted and preoccupied: She still had not lined up her next job. Suddenly, a small crowd rushed the vehicle, and Westfall tensed: the irate mother again?

It was six teenagers she’d worked with that summer. They rocked her car back and forth, chanting, “We love Dolores! We love Dolores.”

The youngsters pulled Westfall out for a group hug and invited her to Denny’s for a going-away dinner. Her face flushed at this gift of grace. At the restaurant, she laughed along with high schoolers that in another life could have been her grandchildren.

After a waitress dropped off the check, a manager approached and put a hand on Westfall’s shoulder. “So, you’re going to pay for the whole crew.”

The group ignored him and divvied up the bill. Westfall’s portion came to $10; Her AARP card cut the damage to $8 and change.

She walked into the night feeling less alone. Later, she sat at the picnic table next to her rig, one she’d cozied up with a red-and-white plastic tablecloth.

 

Most of the RVs belonging to other seasonal workers had already departed. On a gray October morning, a flock of geese flew in formation overhead, and Westfall knew she’d have to flee too. Big Foot could never keep her warm in winter, but she couldn’t travel too far south; she knew from experience that south Florida was too expensive.

But where to go? Despite hours of phone work, Westfall still didn’t know whether she was heading to Maryland for a door-to-door sales gig or to Georgia for a mall kiosk job.

Big Foot was another problem. The roof still leaked, and the plumbing was acting up. Thanks to a surprise $1,000 limit increase on one credit card, she had a bit of headroom, but $400 of that was already spent.

The deadline for leaving Darien Lake was the next day. She turned on the kitchen faucet. Water collected in the sink.

A flash of weariness crossed her face. “I don’t like this,” she said.

Big Foot’s roof still leaks and now the plumbing is acting up. “You’re getting damned uninhabitable,” Westfall scolds.

Westfall, in a brown house robe, began once again storing her life for the next move. The driver and passenger seats and floor were stacked with boxes marked “writing,” “receipts,” “credit cards” and “insurance.”

She emerged from the bathroom looking glum: The foot pedal toilet flusher had just broken.

Soon a security guard knocked.

“Hi,” he said. “I just wanted to know when you plan on leaving.”

“Oh, in about a year,” Westfall said with a laugh. “You know, packing one of these is like putting your house on wheels.”

As the afternoon waned, she finished organizing and moved outside. Winding up several hoses, her fingers ached in the cold. Then a brace on the rig’s stairwell snapped. In frustration and despair, she banged on Big Foot’s side.

“You’re getting damned uninhabitable,” she scolded.

With the sun sinking, Westfall drove to a repair shop.

The mechanics confirmed the busted water pump. Without it, she couldn’t save money by parking at truck stops and would have to pay to stay at campgrounds with water hookups.

But the mechanics wanted thousands for the repair. So Westfall did without it, scouting half-price campgrounds while hopscotching south to the Carolinas, where she found a mechanic to fix the pump for $200.

By late October, she was parked at a campsite in Savannah, Ga., her Christmas season working grounds. She was entering her eighth year on the road, ready to start the entire process all over again.

Dinner was back to brown rice and milk. Big Foot’s kitchen sink still drained slowly.

Big Foot and Little Tow at the Darien Lake Theme Park campsite. Westfall is entering her eighth year on the road. Her journey has taken her to 33 states and counting.

http://graphics.latimes.com/retirement-nomads/

NEIL BUCHANAN: WHY DID SO MANY AMERICANS VOTE TO BE POORER?

On January 15, 2017 Neil H. Buchanan writes on Newsweek:

Donald Trump has now made clear that he has no intention of eliminating his conflicts of interest, saying, in essence, that he is keen to cash in on the “corruption premium.”

Meanwhile, the rush by Senate Republicans to confirm Trump’s Cabinet nominees without adequate vetting continues on its shameless path.

Trump’s apologists have come up with an amazing defense of this spectacle, which is that people like Trump and his Cabinet of billionaires are too rich to be corrupt. As The New York Times‘s Paul Krugman recently pointed out, this argument is completely at odds with the usual conservative line about how rich people think, amounting in fact to a repudiation of the logic of trickle-down economics.

Think back to any argument that you have heard against progressive taxation, whether it is higher taxes on business profits, taxes on large concentrations of wealth (especially the estate tax) or even the notion of having an income tax at all. The core conservative retort is that we must not “kill the goose that lays the golden eggs.”

That is, if we reduce the take-home rewards that rich people reap from engaging in their wealth-producing activities, they will supposedly stop producing wealth. But if rich people apparently still pursue monetary rewards, why would they not pursue such rewards when given enormous political power without any effective ethical limits?

The hypocrisy is rank, and it has me once again thinking about other categories of hypocrisy that flow so readily from the right side of the aisle in American politics.

A few months ago, for example, in “Conservative Word Police,” I described conservatives who deride liberals for so-called political correctness yet are positively obsessed with policing people’s word choices. (Somehow, I failed to mention in that column conservatives’ response to “Black lives matter”—”What, you’re saying that only black lives matter?!”)

Another form of hypocrisy has also recently made its way back into the political conversation. In a recent op-ed in The New York Times, “Why Rural America Voted for Trump,” a liberal journalist from Iowa argued that rural Americans are mostly conservative Christians and that conservative Christians do not believe in weak-kneed liberal nonsense about root causes and all that.

The op-ed quoted former Republican congressman J.C. Watts, an Oklahoman who is now a born-again Baptist minister, who said in a political speech in Iowa in 2015: “The difference between Republicans and Democrats is that Republicans believe people are fundamentally bad, while Democrats see people as fundamentally good.”

As the son of a Presbyterian minister, I did not quite see how these obviously caricatured views of human nature mapped onto political opinions. Watts seemed to be saying that Democrats are either atheists or not true Christians, while Republicans and Christians are one and the same.

01_13_Trump_Supporters_01Donald Trump supporters scream and gesture at members of the press at a rally in Cincinnati on October 13, 2016. Neil Buchanan writes that because they did not vote in their self-interest, many Trump voters, and others too, will soon have lower incomes, worse health care, dirtier air, more extreme weather, a greater likelihood of living (and possibly dying) in a nation at war and on and on.MIKE SEGAR/REUTERS

That is obviously wrong along a number of dimensions, but I soon understood the real point when Watts brought it home: “Democrats believe that we are born good, that we create God, not that he created us. If we are our own God, as the Democrats say, then we need to look at something else to blame when things go wrong—not us.”

And there it is, in all its illogical glory, the religious gloss on the personal responsibility meme. Democrats supposedly get it wrong when they refuse to see that people are to blame for their own problems. (They are apparently also wrong to think that rich people are corruptible by money. Even though everyone is fundamentally bad, apparently some people are above reproach—and not just those who have been born again.)

Helping the poor, according to this view, does not allow them to find their way to a better life. It merely wastes the money of the good people. Paul Ryan’s embrace of dependency theory thus finds support from something other than Ayn Rand’s novels. Of course, the lack of empirical support for the predictions of dependency theory need not be acknowledged by Republicans like Watts or Ryan, because they simply know what is true.

More important for the current political moment, this theory has interesting implications for the claim that the key voters who gave Trump his victory need to be understood rather than criticized.

By now it has become the conventional wisdom among a large group of commentators on both the left and the right that Hillary Clinton’s Electoral College loss in 2016 was a result of Democrats’ failure to take the concerns of the white working class seriously enough.

This is the whole “identity politics” smear, in which we learn once again that all too many people are willing to say that a concern for the civil and economic rights of marginalized people is a mere indulgence that Real Americans will not abide.

The implication of that theory is that liberals need to try to understand why people would vote against their own interests by voting for Trump. The idea is apparently that good people can make bad decisions, so it is important not to say that these voters are racists (or racist-tolerant) or are in other ways blameworthy for being illogical or uninformed.

This argument came up in a slightly new form earlier this past week when conservatives (and some liberals) criticized Meryl Streep’s comments at the Golden Globe Awards show. After pointing out how Trump and many conservatives revile artists, Streep talked about the importance of the arts to society, saying that without them there would be nothing left to entertain us but football and mixed martial arts.

The reactions were predictable and absurd. I happened to be in an airport during one of CNN’s painful panel discussions, so I could not change the channel. There was a long discussion of a claim by John McCain’s daughter (and Fox News contributor) Meghan McCain, who claimedthat “this Meryl Streep speech is why Trump won.”

Although the younger McCain was rightly mocked for the odd time-traveling aspect of her assertion, let us give her the benefit of the doubt and say that she was calling out Hollywood liberals in general for being too willing to denigrate things that white working-class voters like. Those voters simply feel disrespected, apparently, and this is meant to justify why they would vote for Trump.

Of course, if that is the point, then Streep’s speech is a particularly bad example of the genre. She was describing how important it is to have a full range of entertainment available, and the people with whom she works are particularly vulnerable to cultural crackdowns by bullies who dislike being confronted with differing views.

She did not say that football and martial arts are bad. She said that a world where only those two forms of entertainment are available would be a rather empty world. As a football fan, I agree.

Throughout the post-election discussion about the sensibilities of white working-class voters, I have been more than willing to say that it is important to reach the reachable Trump voters. This includes respecting the idea that, contra Watts, people are not born good or bad or with certain political views but rather that people with real economic insecurity can start to act in ways that they would not otherwise act.

That, in fact, is the common thread of all of the emerging proto- (and not so proto-) fascist movements around the world. Scared people are willing to embrace extreme measures and to elevate extremist leaders who would otherwise find no audience.

What bothers me about that conversation, however, is that it tends to remove all agency—free will, for lack of a better term—from these voters’ thoughts and actions. In its extreme form, in fact, this argument brings to mind the complaint from conservatives about how liberals have coddled children into believing that they are all special. Giving everyone awards for participation, and not keeping score at soccer games so that no one feels like a loser, is supposedly a big liberal plot to make us all weak.

I happen to find that argument unpersuasive (or at least wildly overblown), but there is more than a hint of just that kind of condescension in the post-election attempts to “understand” working-class voters. Such voters were supposedly feeling disdained by Democrats, so they acted on those feelings by voting for Trump, who promised to throw out immigrants and bring back factory jobs.

Who can blame them for being willing to stick their collective thumbs in the eye of the dreaded establishment? They were wrong, but at least they tried.

The problem is that it did not require any particular expertise, or even paying especially close attention to the news, to see that Trump is a con man. He continually denied having said things that he had said. His record of cheating his own workers and contractors was well known.

He was never going to drain the swamp. He is a New York City billionaire (maybe) who opportunistically changed his views to win the biggest prize he could find.

As a matter of political strategy, I can see why Democrats do not want to say any of that. Because I am not a Democratic strategist, however, I will not willfully avoid noticing this rather uncomfortable implication of the effort to exculpate people’s bad decisions.

After all, when a working-class white voter decided to vote for Trump, he was not actually being selfish. I would actually have been ecstatic if those voters had pursued their own self-interest. But because they did not, they (along with many other people) will soon have lower incomes, worse health care, dirtier air, more extreme weather, a greater likelihood of living (and possibly dying) in a nation at war and on and on.

And this is all because people like Meryl Streep supposedly have disdain for working people?

The reliance on “feelings” as a defense is certainly popular. Just this week, Trump’s nominee for attorney general responded to accusations of being a racist by saying that it hurt him deeply to be called such a thing. It is an awfully convenient distraction, and it works because ultimately Republicans want to have it both ways: attacking Democrats for not being hard enough on people but then wanting sympathy and understanding when it suits them.

To be clear, I continue to be very concerned about the economic stagnation that has made so many people receptive to the demagoguery of bigots. Even so, there is still a responsibility to respond to personal fears and uncertainty in a productive way.

Saying, “I’m mad, so screw the system!” might feel good in the moment, but it is a profoundly harmful reaction.

http://www.newsweek.com/neil-buchanan-why-did-so-many-americans-vote-be-poorer-542453

The underlying core rebellion is the vast majority of Americans are increasingly worried about their economic standing in an economy that increasingly is restructuring with the end result being a future where there will be hordes of citizens of zero economic value.

The current system (aka the establishment system) is not working to better the well being of the vast majority, whose fears about personal economic collapse are pushing them to the edge because the current establishment system does not allow them to find their way to a better life. The past presidential election was a NO vote for the establishment system.

The opposition to Donald Trump was yet another shadily corrupt and opportunistic candidate Hillary Clinton, both sharing in common membership in the wealthy capital ownership class. And both seek further personal enrichment as system insiders who would benefit from their position aspolitical controllers and insiders privy to others among the wealthy capital ownership class that attempt to influence legislation that benefits their interests, resulting in mutual benefit for each party. The legislation is typically argued as a job creator, but never is there a discussion of who benefits from OWNING.

The wealthy capital ownership class – virtually every member of elected representation is a member of or will become, as a result of election – perfectly understands that it is ownership of wealth-creating, income-generating capital assets that makes them wealthy. Yet, not one advocates for system reform to empower EVERY citizen to acquire ownership in the wealth-creating, income-producing capital assets resulting from future technological invention and innovation. They are perfectly fine with the current establishment system which ONLY empowers them and those that can satisfy the requirement of past savings as collateral to insure against the failure of a future investment financed with bank capital credit. Thus, the wealthy ownership class is the ONLY group of Americans that are in the position to OWN the future, as they have the past and as they do today.

The wealthy capital ownership class has used the argument, as Buchanan points out that “if we reduce the take-home rewards that rich people reap from engaging in their wealth-producing activities, they will supposedly stop producing wealth. But if rich people apparently still pursue monetary rewards, why would they not pursue such rewards when given enormous political power without any effective ethical limits?” It is the ages-old paradigm that power (political) naturally and necessarily follows property (wealth) – Daniel Webster.

The opposition solutions that are most discussed among the opposition all relate to some form of income redistribution through taxation, but never reform to broaden capital ownership, leaving the wealthy ownership class intact, though with reduced “take-home rewards.”

Because productive capital (property) is increasingly the source of the world’s economic growth it should become the source of added property ownership incomes for all, not just the minority wealthy capital ownership class of today. The reality is if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all.

Who OWNS America and should OWN America should be the headline topic of discussion in our national economic and political discourse. See my article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html and by OpEd News at http://www.opednews.com/articles/THE-Absent-Conversation–by-Gary-Reber-130429-498.html.

Rise Of The Machines: We Can Stop Automation From Destroying Society

On April 14, 2017, Karla Lant writes on Futurism:

The widespread adoption of automated systems threatens to further widen the gap between the rich and poor. However, stifling the technology is not the best way to cope with the problem of worker displacement.

A GROWING GAP

Widespread automation has the potential to amplify existing income disparities and produce an unparalleled level of economic inequality. As artificial intelligence (AI)improves and algorithms get more advanced, automated systems can replace more of the workforce, meaning fewer people are needed to generate the same (or greater) amounts of wealth for those at the top. If technology advances far enough, traditional labor may be rendered obsolete.

Will Automation Steal My Job?
Click to View Full Infographic

The advancement of technology has never posed quite such a threat in the past as automation has traditionally created new jobs as it replaced old ones. The Guardian cites the example of bank tellers. ATMs appeared in the 1970s, but there are more human tellers now than back then. Today’s tellers do more than dispense cash, though; they sell financial services and provide advice.

However, the ATM example may not apply as AI improves. If ATMs can dispense cash and advise customers about their mortgage options, too, banks may not need human tellers.

This situation only matters if the ownership of wealth is limited, and at this point in the U.S., it is. Right now, unless you own capital, what you have is your wage. Unfortunately, although productivity has improved since the 1970s, wealth has moved toward ownership and more capital, not wages. Wages and labor are the only source of wealth for most people, and they are also one of the only ways workers can assert themselves in the workplace and advocate for change. If automation renders labor redundant, labor as a source of wealth and power in the workplace will evaporate.

EQUITY AND AUTOMATION

The very wealthy are not likely to be affected by any of these changes. It’s the people working in industries like transportation, insurance, medicine, and customer service that will be hit the hardest.

The Bureau of Labor Statistics (BLS) reported that more people worked as retail salespeople (4.5 million) and cashiers (3.5 million) in May 2016 than any other occupation. Another 4.6 million people were working in transportation and warehousing as of 2014. Clearly, huge portions of the workforce will be affected by the presence of AI, but this disruption will not have a negative effect on the wealthiest people in the world.

The real issue here isn’t the tech itself — it’s the widening gap between economic classes and the incredible poverty it will cause, not to mention the erasure of the working class. Thankfully, there are several proposed solutions to this potential crisis of equity that don’t require slowing down technological advancement. They include universal basic income (UBI), a tax on robots that replace workers, and job guarantee programs.

UBI has been subjected to heated debate, but many, including Bill Gates and Elon Musk, believe it will be feasible in the near future. Former President Obama has also acknowledged that UBI will need to be seriously discussed within the next 10 to 20 years.

Bill Gates and others have argued that robots that replace human workers should pay taxes — or, more accurately, that their owners should. This would place the existing wage burden back on the wealthy and provide money into the “pool,” which could then be used for UBI or education for workers to take on the new jobs that automation creates. These taxes could also fund job guarantee programs.

Job guarantee programs through the government would guarantee a living wage for anyone doing public sector or non-profit work (depending on the program). This is similar in theory to 1933’s Works Progress Administration program. It also shifts the power away from private owners of wealth, who can demand that workers do whatever menial tasks they want at wages they set, and allows people to do anything from teaching to environmental cleanup for a decent wage.

With the National Bureau of Economic Research reporting that the wealthiest 1 percent of U.S. households held roughly 42 percent of the country’s wealth in 2014, we can’t afford to let automation further widen the gap between the haves and the have nots.

Rise of the Machines: We Can Stop Automation From Destroying Society

I do not agree with the solutions the author presents to providing income for millions in a future where there will be hordes of citizens of zero economic value. Exponentially words of citizens will be affected by the exponential impact the non-human factor of production is having on how our economy produces goods, products and services, allowing us to produce more goods, products and services with far less or the same amount of human labor, doing work that humans are entirely not capable of or would rather not toil at, and doing such most efficiently and at greater consistent quality at less costs to the business corporations who substitute labor workers with the non-human means of production.

All three solutions addressed by the author are “redistribution” solutions that use the coercive powers of government to create a society wherein all citizens will eventually become dependent for their economic well-being on an elite wealthy capital ownership class who control the State, instead of empowering citizens as owners to meet their own consumption needs with government becoming more dependent on economically independent citizens.

All three proposals depend on taxation of those who contribute productively to the economy, whether through their labor or their productive capital assets they own (or both).

The only way to far greater prosperity, opportunity, and economic justice is to embrace technological innovation and invention and the resulting human-intelligent machines, super-automation, robotics, digital computerized operations, etc. as the primary economic engine of growth.

But significantly, unless we reform our system to empower EVERY American to acquire, via pure, interest-free insured capital credit loans, viable full-ownership holdings (and thus entitlement to full-dividend earnings) in the corporations growing the economy, with the future earnings of the investments paying for the initial loan debt to acquire ownership, the concentration of ownership of ALL future productive capital will continue to be amassed by a wealthy minority ownership class. Companies will continue to globalize in search of “customers with money” or simply fail, as exponentially there will be fewer and fewer customers to support their businesses worldwide. Why, because the majority will be disconnected from the dividend income derived from the non-human means of production that is replacing the need for labor workers who earn wages and salaries, which are then used to purchase products and services.

Soon, industrial monopoly capitalism will reach its twin goals: concentration of productive capital ownership among the elite ownership class and work performed with as few labor workers and the lowest possible wages and salaries.

None of the three proposals eliminate the further concentration of productive capital ownership among the already wealthy capital ownership class. Instead, they attach a tax on those who are productive rather than providing equal opportunity for EVERY child, woman and man to contribute productively to the economy.

Significant substitution of labor workers with the non-human means of production is a never-ending process, and the speed at which this shift in the technologies of production occurs is dependent on the demand for economic growth fueled by “customers with money.” No or decreasing levels of “customers with money” means economic growth halts or becomes slower. The three proposals seek to increase the level of “customers with money” by taxing those who are productive and redistributing the income — not the ownership and control — to those who need income, instead of creating the condition for EVERY citizen to produce income and become self-sufficient to meet their own consumption needs.

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

The result is that the price of products and services are extremely competitive as consumers will always seek the lowest cost/quality/performance alternative, and thus for-profit companies are constantly competing with each other (on a local, national and global scale) for attracting “customers with money” to purchase their products or services.

No one can deny the fact that over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 239 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advances amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

People invented “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive — the core function of technological invention and innovation. Binary economist Louis Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary.

Furthermore, according to Kelso, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. Kelso postulated that if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive, and ignore the necessity to broaden personal ownership of wealth-creating, income-producing capital assets simultaneously with the growth of the American economy.

It is this ignorance of the necessity for broadened individual wealth-creating, income-producing capital simultaneously with the growth of the economy that is the real problem. If we financed what growth we have in ways that create new capital owners and the earnings of that capital growth were fully paid out as dividend income to the owners, this would create more “customers with money” to demand exponential growth to realize general affluence for EVERY child, woman, and man. Creating demand is how to speed productivity growth, which also will create significant employment opportunities as labor workers also will be needed to work in conjunction with the non-human means of production to build a future affluent economy. This, in turn, will substantially increase tax revenues to support education and infrastructure revitalization and expansion and other expenditures of societal development.

In a democratic growth economy, based on Kelso’s binary economics (human and non-human productive inputs), the ownership of productive capital assets would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen, including the traditionally disenfranchised poor and working and middle class. Thus, productive capital income, from full earnings dividend payouts, would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote environmentally responsible economic growth and more profitable enterprise. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy. As a result, our business corporations would be enabled to operate more efficiency and competitively, while broadening wealth-creating ownership participation, creating new capital owners and “customers with money” to support the products and services being produced.

We need to understand that what has prevented us from solving economic inequality is manifested in the myth that labor work is the ONLY way to participate in production and earn income, and that individual talent and effort are what distinguish the wealthy from the non-wealthy. Long ago that was once true because labor provided 95 percent of the input into the production of products and services. But today that is not true. Physical capital provides not less than 90 to 95 percent of the input. When the “tools” of capital owners replace labor workers (non-capital owners) as the principal suppliers of products and services, labor employment alone becomes inadequate. Thus, we are left with government policies that redistribute income in one form or another.

A significant problem has been that the Federal Reserve has been pushing down interest rates to try to boost demand, as growing productivity increases the ability of the economy to produce more goods and services. But the system, as structured, benefits those already wealthy with lower interest rates that enable the present wealthy capital ownership class to use cheap capital credit secured by their past savings and equity. Instead, what we should do is lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers. We need to free the system of dependency on Wall Street and the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting Federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency of with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings.

The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each future capital formation transaction, determined by the same expertise that determines it today — management and banks––that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. Such capital credit insurance would substitute for the security demanded by lenders to cover the risk of non-payment, thus enabling the poor and others with no or few assets (the 99 percenters) to overcome the collateralization barrier that excludes the non-halves from access to productive capital. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

We can no longer disregard the reality that productivity gains, without system reform, will continue to concentrate and further enrich the already wealthy capital ownership class. The solution to earning higher income is through capital ownership, not jobs.

Productivity growth should never be viewed as the enemy of workers, that is ONLY if workers and in the larger context, EVERY child, woman and man share in the productivity gains as OWNERS, and not be limited to wages alone or a redistributed basic income or a living wage provided by the State for anyone doing public sector or non-profit work.

Comment from Center for Economic and Social Justice (www.cesj.org):

Bill Gates’s idea about taxing robots has been getting a lot of play recently. The problem is that it would create more problems that it solves. The solid foundation of any economy is whether it can produce what people consume, and whether every producer is a consumer, and vice versa. To put it more simply, if you want a sound economy, you have to produce what you consume, and consume what you produce, one way or another. Thus, if only labor is productive, then everybody needs to own his or her own labor — which, unless you’re a slave, is always the case. If only land is productive, then everybody needs to own land.  If only technology (“robots”) is productive, then everybody needs to own technology. Obviously, claiming that only one factor is productive is wrong; in a perfect world, everyone needs to own each factor of production, whether labor or capital, in the same proportion as it is used in production. This is not usually feasible, especially when people take advantage of their social nature and specialize, but it gives a good rule of thumb to follow. For example, if technology is ten times more productive than human labor, someone has to own technology that will produce ten times what his or her labor would produce just to have a decent income (absent distortions such as minimum wage laws and redistribution, of course). The bottom line is that only by owning — not taxing — robots will ordinary people gain enough income and restore Say’s Law of Markets so that all production is for consumption, and people have enough production to be able to consume.

 

With Automation Looming, The US Needs To Make Education Affordable Or Fail

On April 16, 2017, Patrick Caughill writes on Futurism:

Crafting Well Rounded Minds

Education is the cornerstone of society. This is because knowledge is the only thing that lets one be an informed and productive member of society. Of course, education is not limited to just traditional schooling (i.e. a classroom), but includes knowledge gleaned from friends, family, mentors, personal experiences, and on and on.

That said, in our society, traditional schooling is a major part of how we educate the coming generations.

Today, we spend our most formative years in school, learning about the world and how to function in it. In the modern world, which is continually becoming more globalized, it is more important than ever to be able to think critically and analytically about all aspects of our world—from politics, to economics, to the arts, to (of course) science and technology.

A well-rounded liberal arts education can provide this to its students. According to Willard Dix, a college admissions expert and contributor to Forbes,“a liberal arts education provides a multi-faceted view of the world. It enables students to see beyond one perspective, encouraging them to understand others’ even if they don’t agree. It instructs us to base our opinions on reason, not emotion.”

And at a time of increasing polarization, dialogue and understanding are invaluable qualities.

Even disciplines that are thought to be exclusively “fact-based,” such as the STEM fields, can greatly benefit from a liberal arts focus, as critical thinking skills are what allow individuals to analyze and make meaning from new information and move fluidly through society and careers. Case in point, the current president of Miami University, Gregory Crawford, went to school to study physics and now, as an education administrator, he advocates for an educational system that is multifaceted:

“There are extraordinary skill sets to learn from the liberal arts, like communication, analytical skills, writing, global awareness. Can you tell a story in a world of data and analytics? When students are exposed to the liberal arts they become more self-aware, more self-disciplined and develop other virtues like empathy and courage.”

A liberal arts focus not only can prepare students for the job market, but also life after college in general.

Dwindling Market

Speaking of the job market, education, in general, is about to become even more of a requirement, thanks to the steady rise of automation. Experts predict that developed countries may lose a staggering 30 percent of jobs in the next 15 years. Much of this job loss, if not all of it, will impact blue collar workers—a study from the National Bureau of Economic Research says that each robot that makes its way into the workforce replaces six humans.

Thus, as the years progress, industries that used to be home to extremely well paying blue collar positions will increasingly become a thing of the past.

However, individuals that have an understanding of a broad spectrum of fields will largely be able to protect themselves from the impact of automation, as they will be able to seamlessly (or more seamlessly) move between industries. This adaptability is precisely what a liberal arts education, at its best, provides. But there is a problem for those pursuing such an education in the United States: Money.

Tackling Affordability

One of the most significant obstacles to an education for young adults today is debt, and a significant portion of that comes from education. Student debt in the United States has hit an unbelievable $1.2 trillion, according to the Consumer Financial Protection Bureau. A trillion of those dollars belong to federal student loans. While other nations face affordability issues of their own, the situation in the United States is extreme.

The United States is the fourth most expensive country in which to get a college education, with the average cost being greater than $29,300 each year, according to a list compiled by FairFX. Increases in cost are not showing any signs of slowing, and with figures like that, higher education is no longer just out of reach to the poorest Americans. Now, many mid-level American families also can’t make the cut.

What can be done to ensure everyone will be equipped to thrive in the workforce of the very near future?

In Germany, they answered that question by eliminating tuition costs altogether. The country abolished tuition all the way back in 1971. They were briefly brought back from 2006 – 2014, but they were removed again due to widespread problems, even though the costs only averaged €500 ($630 USD).

In fact, more than 40 countries around the world offer free higher education. Obviously, when people use the word “free” what they really mean is that nations use tax dollars to pay for education in the same way that they use tax dollars to pay for subsidies for corn and fossil fuels and to pay for war efforts (do keep in mind, the United States has a defense budget larger than many developed nations combined).

But now, thanks to a recent development, it looks like the United States is going to start reallocating funds to test the free tuition waters.

Empire State of Mind

Recently, Governor Andrew Cuomo made New York the first state in the country to offer a tuition-free four-year education for residents. Dubbed the Excelsior Scholarship program, it will provide four years of college tuition for families who make less than $100,000 per year. The program will begin this fall, with the income cap raising by $10,000 in 2018 and an additional $15,000 the following year.

The governor said, “Today, college is what high school was—it should always be an option even if you can’t afford it.”

NBC News tells us that this plan will benefit a remarkable 80 percent of the state’s families with college-age kids. The plan also requires that students complete at least 30 credits per year and stay within their program’s minimum GPA requirements. There are also requirements regarding living and working in the state for a certain period after graduation, which will ensure that students give back to the state that is paying for their education. Governor Cuomo explained the importance of this move in his statement:

“The Excelsior Scholarship will make college accessible to thousands of working and middle class students and shows the difference that government can make. There is no child who will go to sleep tonight and say, ‘I have great dreams, but I don’t believe I’ll be able to get a college education because my parents can’t afford it.’ With this program, every child will have the opportunity that education provides.”

While many families may be overjoyed with the opportunities this will provide their children, other entities were not so keen when the idea was proposed. Some private colleges, including the Governor’s own alma-mater, even went so far as to ask their students to oppose this historic move.

For example, the president of Keuka College, a small liberal arts school in central New York, Jorge L. Díaz-Herrera, sent an email to his students urging them to oppose the program.

While it is understandable that private colleges may fear the future, efforts such as the ones outlined here come off as tone-deaf, at best, or selfish, at worst. Keuka is a school that is well out of the price range of most individuals, costing a staggering 40K a year. And while there are some programs that assist low-income students, the cost is beyond the affordability of most.

Ultimately, such call to action does not seem to fully weigh the (very justifiable) panic of students, which has become endemic in today’s higher education climate. And of course, the letter makes no mention of the “940,000 middle-class families” who will be able to send their children to school as a result of this legislation, many of which may not have had the luxury before its passing.

Since the passing earlier this month, Keuka has released another statement.

“It’s too early for any of us in New York’s private colleges and universities to know what this will mean for recruitment and retention at our institutions. But what we do know is that competition is the bedrock of our economic system. To stay competitive, Keuka College must continue to adapt and change.”

They may not be celebrating the news, but they have gotten to the heart of the matter: Just as the workforce is going to have to adapt and change with the proliferation of automation, our educational institutions are going to have to change to accommodate that workforce and lead them to be fully capable of thriving in the economy and society of tomorrow.

To remain a global leader, we will need to rethink how we educate and seriously consider the barriers that exist that limit who can benefit. Those conversations need to start now.

With Automation Looming, the US Needs To Make Education Affordable Or Fail

Back on July 11, 2013, I wrote an article which was published by Nation Of Change, which addresses this topic.

Education Is Critical To Our Future Societal Development

Gary Reber

ForEconomicJustice.org

A recent study from researchers at Georgetown University projects that there will be 55 million new jobs by 2020 for which there will be a growing call for more educated workers with the necessary education and training to meet the demand.

This is a report that is out-of-sync with the economics of reality (herewith updated).

Given the current invisible structure of the economy, except for a relative few, the majority of the population, no matter how well educated, will not be able to find a job that pays sufficient wages or salaries to support a family or prevent a lifestyle, which is gradually being crippled by near poverty or poverty earnings. Thus, education is not the panacea, though it is critical for our future societal development. And younger, as well as older people, no matter how well educated, will increasingly find it harder and harder to secure a well-paying job — for most, their ONLY source of income — and will find themselves dependent on taxpayer-supported government welfare, open and disguised or concealed.

For decades employment opportunity in the United States was such that the majority of people could obtain a job that could support their livelihood, though, in most cases related to a family, it eventually required the father and mother to both work, if they aspired to live a “middle-class” lifestyle. With “Free Trade” and globalization of economic productiveness those opportunities began to disintegrate as corporations sought to seek lower-cost production taking advantage of global cheap labor rates and non-regulation, as well as lower tax rates abroad. This resulted in a chain reaction forcing more and more companies to outsource in order to stay competitive (thus the rise of China, India, Mexico, and other third-world nation economies).

At the same time, tectonic shifts in the technologies of production were exponentially occurring (and continue to do so), which resulted (and continues to result) in less job opportunities as production was shifted from people making things to “machines” (the non-human factor of technology) making things. The combination of cheap global labor costs and lower, long-term-invested “machine” costs has forced the worth of labor downward, and this will continue to be the reality. See the study from the National Bureau of Economic Research, which says that each robot that makes its way into the workforce replaces six humans.

Our only way to far greater prosperity, opportunity, and economic justice is to embrace technological innovation and invention and the resulting human-intelligent machines, super-automation, robotics, digital computerized operations, etc. as the primary economic engine of growth.

But significantly, unless we reform our system to empower EVERY American to acquire, via pure, interest-free insured capital credit loans, viable full-ownership holdings (and thus entitlement to full-dividend earnings) in the corporations growing the economy, with the future earnings of the investments paying for the initial loan debt to acquire ownership, the concentration of ownership of ALL future productive capital will continue to be amassed by a wealthy minority ownership class. Companies will continue to globalize in search of “customers with money” or simply fail, as exponentially there will be fewer and fewer customers to support their businesses worldwide. Why, because the majority will be disconnected from the dividend income derived from the non-human means of production that is replacing the need for labor workers who earn wages and salaries, which are then used to purchase products and services.

Soon, industrial monopoly capitalism will reach its twin goals: concentration of productive capital ownership among the elite ownership class and work performed with as few labor workers and the lowest possible wages and salaries. The question to be answered is “What then?”

The transition to the non-human factor of production has been occurring for decades but is now experiencing exponential development — the result of tectonic shifts in the technologies of production. As costs for computer-controlled machines and robots become less than the cost of human workers, and the skills and productivity of the machines exceed those of human workers, then robot worker numbers will rapidly increase and enable our society to build architectural wonders, revitalize and redevelop our cities and build new cities of wonder and amazement, along with support energy, transport, and communications systems. Super-automation and robotics is transforming the world of manufacturing as robots become lighter, more mobile, and more flexible with better artificial intelligent (AI) sensing, perception, decision-making, and planning and control capabilities due to advanced digital computerization. Super-automation and robotics operated by human-intelligent computerization will dramatically improve productivity and provide skills and abilities previously unique to human workers. This will effectively increase the size of the labor work force globally beyond that provided by human workers, no matter what the level of education attained — even if every singly human being achieved a university education. With advanced human-level artificial intelligence, computer-controlled machines will be able to learn new knowledge and skills by simply downloading software programs and apps. This means that the years of training that apply to personal human development will no longer apply to the further sophistication and operation of the machines. The result will be that productivity will soar while the need and demand for human labor will further decline, except for the most highly educated and those with the skills to maintain and repair the robotic work force.

Unfortunately, in the long term, unless the vast majority of people have a substantial and viable source of income other than wages and salaries, the impact of technological innovation and invention as embodied in human-level artificial intelligence, machines, super-automation, robotics, digital computerized operations, etc. will be devastating — no matter how well educated.

There are ONLY two options: either “Own or Be Owned.” The “Owned” model is what our society practices today and is expressed as monopoly capitalism (concentrated ownership) or socialism (taxpayer-supported redistributed social benefits controlled and dictated by an elite class under which all citizens are dependent for their economic well-being on the State and the coercive powers of government). The “Own” model, or what my colleagues and I term the Just Third Way (see http://foreconomicjustice.org/?p=5797, http://www.cesj.org/resources/articles-index/the-just-third-way-basic-principles-of-economic-and-social-justice-by-norman-g-kurland/, http://www.cesj.org/wp-content/uploads/2014/02/jtw-graphicoverview-2013.pdf and http://www.cesj.org/resources/articles-index/the-just-third-way-a-new-vision-for-providing-hope-justice-and-economic-empowerment/), has yet to be implemented on the scale necessary to empower every child, woman, and man to acquire private, individual ownership stakes in the future wealth-creating and income-producing productive capital assets of the “intelligent automated machine age”––facilitated by the future earnings of their investments in the corporations developing and employing this unprecedented non-human economic power.

Unfortunately, the disruptive nature of exponential growth in technology and its impact on productivity––tectonically shifting production of products and services from human workers to non-human means––is not understood, and is ignored by the economic establishment, academia, and our political leaders.

While the rate of technological progress is directly proportional to the number and quality of the people engaged in the fields of science and engineering, economic policy is the mechanism that fuels investment and development of technological innovation and invention. This is where education is critical to our future societal development.

Education should be encouraged and expanded. Everyone should have the opportunity to personally develop their own exceptional innate abilities and unlock their creativity.

But except for the personal development benefit to advancing one’s education, the reality is that far less “educated” people will be necessary in the long term to produce the products and services necessary and valued by society. This is due to the exponential development of human-level artificial intelligence, which is embodied in advanced automation and robotics.

Those college graduates who do succeed within the fields of science and engineering are hired workers to do what? Our scientists, engineers, and executive managers, who are not owners themselves of the companies they work for, except for those in the highest employed positions, are encouraged to work to destroy employment by making the capital owners’ assets more productive. How much employment can be destroyed by substituting machines for people is a measure of their success––always focused on producing at the lowest cost.

We need to realize that full employment is not a function of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever-increasing role.

We need to reform and restructure our economy and set as the GOAL broadened private, individual ownership of future wealth-creating, income-generating productive capital assets among ALL Americans, with capital estates ever building as the economy grows. Without a policy shift to broaden productive capital ownership simultaneously with economic growth, further development of technology and globalization will undermine the American middle class and make it impossible for more than a minority of citizens to achieve middle-class status. By changing course, over time and within a few decades, our “machined-powered” growth economy would produce greater wealth, and widespread private, individual ownership would assure prosperity, opportunity, and general affluence for every citizen. Broadened productive capital ownership would strengthen our democracy and individuals and families would be less or non-dependent on government welfare, whether disguised or not.

This prosperous society is achievable because, fortunately, in the near term, we can begin to grow our way out of the swelling unemployment and underemployment by increasing our investment significantly as a ratio of Gross Domestic Product (GDP) resulting in double-digit growth, while simultaneously broadening private, individual ownership of future income-producing productive capital investments, thus initiating the process of empowering every child, woman, and man to build over time a viable capital estate and reap the income generated, and in the process become “customers with money.” The key operative is BROADEN OWNERSHIP. Such investment would, in the short term, generate millions of new “real” productive jobs in a massive project to build a future economy that can support general affluence for EVERY citizen. The result would not only be that the GDP would dramatically grow but tax revenues from the high rate of economic growth would enable us to balance the federal budget, fully fund Social Security, Medicare, and Medicaid, provide Universal Health Care, Universal University Education, lower tax rates, and maintain a strong military, all simultaneously, and without inflation.

We have the opportunity to free economic growth from the “enslavement” of human labor and from the financial mechanisms that are based on the slavery of past savings. Technological progress, though, is no longer dependent on the number and quality of human workers. This fact will become obvious eventually to anyone who can think and analyze as they realize the reality that human labor will cease to be the primary source of wealth production in the future. As a result we can expect over the long term that unemployment and underemployment will remain high indefinitely. But the difference will be that people will drop out of the labor force voluntarily because they will be able to live off their dividend earnings via their ownership portfolios. This will create swelling demand for human workers who want to continue working. And with both dividend and wage and salary incomes for everyone there will be more customers to purchase the products and services produced, which in turn will create further dividends and earnings, which will create more customers, etc.

While the future holds less promise for universal job employment due to the ever-progressing contribution of technological-driven production using human-intelligent machines, super-automation, robotics and digital computerized operations, the jobs that will be in demand will require some mastery of technology, math, and science. As long as working people are limited by earning income solely through their labor worker wages, they will be left behind by the continued gravitation of economic bounty toward the top 1 percent of the people that the system is rigged to benefit.

If we don’t re-chart our economic policies to broaden private, individual ownership of new productive capital formation, then more troubling is that the continued stagnation of the American economy will further dim the economic hopes of America’s youth, no matter what their education level. The result will have profound long-term consequences for the nation’s economic health and further limit equal opportunity to earn as an owner of productive capital and further spread income inequality. As the need for labor decreases and the power and leverage of productive capital increases, the gap between labor workers and productive capital asset owners will increase, and the conditions will become very frightening and very chaotic.

Sadly, our leaders are not prepared and are not preparing the American people for the coming economic collapse and the next Great Depression, due to their lack of wisdom and foresight to understand that full employment is not an objective of businesses and private sector job creation opportunities are constantly being eroded by physical productive capital’s ever increasing role — as the use of human-intelligent machines, super-automation, robotics, digital computerized operations, etc. replaces labor workers to produce products and services at an exponential rate.

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

The path to prosperity, opportunity, and economic justice can be found in the writings about the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

For more overviews related to this topic see my article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html and by OpEd News at http://www.opednews.com/articles/THE-Absent-Conversation–by-Gary-Reber-130429-498.html.

Also see “The Path To Eradicating Poverty In America” at http://www.huffingtonpost.com/gary-reber/the-path-to-eradicating-p_b_3017072.html and “The Path To Sustainable Economic Growth” at http://www.huffingtonpost.com/gary-reber/sustainable-economic-growth_b_3141721.html, and the article entitled “The Solution To America’s Economic Decline” at http://www.foreconomicjustice.org/9206/financing-future…economic-decline.

Q & A’s On Binary Economics

This article on binary economics was published by the Global Justice Movement (www.globaljusticemovement.org). (Adapted and updated from a 2000 document by Richard Stutsman, WorldWorks Symposium™.  CESJ update, 2014.)

Introduction

Binary Economics is the systems theory underlying a new socio-economic paradigm. This conceptual framework challenges some basic premises that are taught by all conventional schools of economics — whether capitalist, socialist or Keynesian. These premises shape the way most of us (including economists, academics and politicians) believe the economy works, whether at the macro-level of a nation or the micro-level of a business enterprise.

We are all immersed in the current “system” and its assumptions.  The following Questions and Answers on the subject of binary economics offer a way to help us to reconsider some of these assumptions that may be limiting our ability to solve systemic economic problems. The very act of questioning can help us to understand how binary economics might be the revolutionary next step needed to catapult mankind into an era of universal economic prosperity.

For more detail be sure to check out the links on the CESJ website on binary economics, as well as recommended writings and books. There are also links to several other recommended binary economics sites.

Why is this economic system called “binary” economics?

“Binary” means “consisting of two parts”. Binary economics, a concept developed in the 1950s by the late lawyer-economist Louis Kelso, holds that there are two fundamental components to the production of economic goods and services and its consequent income: (1) The human component (labor), and (2) the non-human component (capital). Classical economic theory, on the other hand, regards all production and income to be derived from, or attributed to, labor whose productivity is enhanced by capital. This is an important distinction.

What is the distinction between the two binary components of production?

Labor income (wages, salaries, benefits, etc.) is what we get paid as employees of a business. Capital income is derived from productive capital investments. Most people earn most of their income from their labor. But in a binary economic system workers and other non-owning citizens would gradually accumulate more and more capital, mainly in the form of corporate shares, and begin earning dividends from their capital. By retirement age they would be able to live comfortably on their capital income alone.

What exactly do you mean by “capital”?

Capital is any source of production or output other than human labor. A mule, which can carry many times the weight or do many times the work of a human, is a capital asset for the owner of the mule. Tools and machinery are capital. Farmland is capital. Mining and logging rights are capital. Patents and other forms of intellectual property are capital. The productive assets of a corporation are capital.

Is money capital?

Money is only a symbol, a measure and store of value, and a means of exchange. It can take many forms (including currency and bills of exchange) but it essentially is anything that can be used in the settlement of a debt. By itself money is not considered capital, according to binary economic theory. However, it can easily be converted to capital through the purchasing of capital assets.

Is education capital?

Education enhances the value of a person’s labor. In that sense it is an “investment” one can make. But it is not considered to be capital from the viewpoint of binary economics. (There is no such thing in binary economics, for example, as “human capital,” which would be an oxymoron or referring to a slave.) One’s educational background cannot be transferred or sold as can capital assets; a person’s education or enhanced skills cannot be separated from the person.

Doesn’t capital act to increase the productivity of the workers’ labor?

Current economic theory assumes that capital doesn’t do the producing — that labor does all the producing. It asserts that capital merely increases worker productivity and therefore the market value of labor. In fact we have plenty of evidence that this is not the case.

For example, elevators used to require human operators; today there are no elevator operators. Under conventional concepts of “productivity” (measuring the amount of output per unit of labor input), the “productivity” of the now non-existent elevator operator is infinite. Under binary economics, the “productiveness” of labor is 0% and that of capital is now 100%.

Absent collective bargaining and minimum wage laws, the incomes distributed to human labor in a competitive free market would drastically shrink relative to the incomes distributed to the owners of capital (land, structures, equipment, computers, robotics, management systems, etc.) now producing the vast bulk of marketable goods and services.

While it is true that the market value of highly educated workers (such as those who can rapidly create intellectual property such as software) is fairly high, workers at all levels (from factory line workers, to bank tellers, to middle managers, to sports writers, lawyers, doctors, and engineers) are finding their labor being rapidly replaced by advanced technology.

How can you say labor isn’t worth much when steel, auto, and electrical workers make upwards of $45 per hour?

Take away progressive income taxation, minimum wage laws, the legally sanctioned power of unions to collectively bargain, the military industrial complex and the wars that justify it, the GI bill, food stamps, welfare, subsidized housing, etc., and how much do you think these workers would be making? How much do factory workers in Mexico, Guatemala, Haiti, China, Vietnam, and Bangladesh make? These are the workers who now manufacture our cars, appliances, and clothing. And their wages range from about twenty cents to a dollar per hour. They can barely feed, clothe, and shelter themselves, with every member of the household over six years of age working 16 hours a day, seven days a week. A pair of $70 shoes costs less than 25 cents in labor.

You see, the vast majority of the “work” that goes into manufacturing cars, appliances, and clothing is done by capital in the form of machinery and software, not labor. In the U.S. the owners of that capital have been forced to share the earnings of their capital with their workers in the form of higher wages and redistributive taxes. That is not true in the Third World countries whose workers we now hire at the true market value of their labor. The actual value of labor in U.S. manufacturing is about 1/100th the value of capital, because workers do only about 1/100 of the actual work, with capital doing the rest. And since most workers do not own any of the capital — not so much as the equivalent of a mule or a plow or a spinning wheel — they would in market terms “earn” only about 1/100 of the income produced by the sale of the manufactured product.

Don’t the wealthy use their capital earnings (or past savings) to purchase or create more businesses and  hire more workers — and therefore spread the wealth?

OK, so the capital owners earn the lion’s share of the proceeds from the sale of the manufactured product. Those very wealthy stockholders whose income from their investments far exceeds their need, desire, or ability to spend it all on consumer goods, do in fact often purchase additional capital with their excess income. That this “spreads the wealth” is the assertion of “trickle-down” economics. In fact, binary economics recognizes that tying the growth in the economy (and acquisition of productive capital) to the use of “past savings”, and reinvestment of their unconsumed income by the rich, merely accelerates the widening gap between the “haves” and “have-nots.”

Adam Smith realized, even before the advent of corporate capitalism, that the purpose of production is consumption. In order for supply and demand to be in balance, producers (both the workers and the capital owners) must consume what they produce or, as is more often the case, exchange their productions for the productions of others, in order to consume all the goods and services produced. Otherwise, what is not consumed (due to insufficient demand/customers with money) results in excess supply (market gluts).

Doesn’t everybody have an equal chance to own capital and become affluent?

Unfortunately not. Most of us spend virtually all of our income on our daily needs and have little or nothing to spare with which to purchase capital. The wealthy owner of capital can easily purchase more shares of stock with his capital earnings, and big businesses can finance new capital acquisitions using their current assets as collateral. The average person has no collateral other than his home and therefore has practically no opportunity to purchase a significant amount of capital assets. The result is that only those who already own lots of capital can acquire more, while the rest of us remain dependent on our labor for income.

Currently about 50 percent of all capital assets in the U.S. are owned by one percent of the population. Most of the income derived from that 50 percent of assets will not and cannot be spent on consumer goods or on the output of those same capital assets. A wealthy person can utilize and enjoy only so many villas, cars, appliances, and cruises. Therefore, that income is largely reinvested in new capital, increasing the supply of consumer goods without increasing demand, or it is used to repurchase existing assets, inflating the cost of assets. (Could this be why stock prices have been soaring recently?)

Is there a term for the capital that is created by reinvesting the earnings of capital?

Yes. Louis Kelso called this “morbid capital”. Morbid capital is capital whose output cannot be purchased by anybody because of insufficient demand (widely distributed purchasing power), or whose income is not used by its owners to purchase goods and services that have been produced (i.e., for consumption), but is reinvested in more capital.

What are the consequences of national or global excess accumulation of morbid capital?

The result may be another “Great Depression,” like the one that occurred during the late 1800s and 1930s. If any one thing can be said to be the cause of economic disparity and strife, not to mention depressions, it’s the mega-concentration of morbid capital in the hands a tiny fraction of the population.

Fueling that concentration is the gross misuse of money and credit. Consumer debt is forcing more people into wage slavery, debt slavery and welfare slavery. Mushrooming government debt is bankrupting communities, cities and nations. Government-debt-backed money created by central banks like the Federal Reserve is being pumped into the stock market to fuel speculation (thereby enriching a few hedge fund managers), rather than for financing broadly owned private sector growth that could distribute mass purchasing power.

Add to this toxic mix an unprecedented displacement of labor by advanced technologies and globalization, with growing public pressure to raise minimum wages and entitlements to reverse the shrinking purchasing power of the middle class. There you have a recipe for the sort of global financial crisis and social chaos that breeds terrorism and war.

So what are the most erroneous assumptions of the existing system that are holding back balanced and sustainable growth, and the equal opportunity of every person to become an economically liberated owner of capital?

The first erroneous assumption is that jobs are the only way for most people to earn a viable income. No other school besides binary economics recognizes capital ownership as another legitimate way of distributing mass purchasing power without violating private property rights and free market principles, or increasing the economic power of the State (society’s only legitimate monopoly over coercion).

The second erroneous assumption is that you must cut consumption in order to save enough to invest in capital. Most people live paycheck to paycheck, or hand to mouth, and cannot reduce their consumption to a degree sufficient to save enough to invest in a viable level of capital ownership. The wealthy, on the other hand, produce more income through their capital than they can consume on goods and services. Thus the owners of capital are the only producers who can accumulate enough savings to invest in capital and businesses. In this way, the ownership and control over the future economy remains in the hands of a tiny fraction of the population.

Then what is the solution?

Once you understand the absolute necessity for producers to consume what is produced and how concentration of capital ownership in a high tech, globalized economy makes that impossible, then it will become obvious that the solution lies in creating new opportunities and access of every person to the means of acquiring capital ownership. Secondly, a systemic solution will involve the financing of new capital formation so that its ownership is naturally distributed more evenly throughout the population, without the need for redistribution of existing wealth.

What is needed is legislation which would guarantee a certain amount of zero-interest “pure credit” and new asset-backed money for the average person, and especially for the poor. This  would be used to purchase newly issued capital shares whose earnings would, on the average, pay off the loans within five to seven years. Once the loans are paid off, all the earnings from those shares would thereafter go to the new owners. This is the essence of CESJ’s Capital Homestead Act proposal. This program would create equal opportunities to put new capital into the average person’s hands without taking anything away
from those who have accumulated any amount of capital.

Wouldn’t redistributing capital require taking capital away from those who have the lion’s share of it, and wouldn’t that be politically impossible to legislate and enforce?

No and yes. Binary economists do not advocate taking anything away from anybody. They recognize how politically unfeasible this would be. Furthermore, it would constitute a major violation of property rights, which binary economists hold sacrosanct.

With which political party or ideology is binary economics most compatible?

Hopefully all political parties will come to embrace the principles and applications of binary economics (as called for in the Capital Homestead Act) as a plank in their campaign platforms and as a basis for new legislation. However the current platforms and ideologies of both the Democratic and Republican parties are at odds with important aspects of binary economic theory. Nor have any independent parties or presidential candidates so far adopted binary economics as the framework for their prescriptions for the U.S. economy.

Republicans generally give lip service to “free market capitalism” and defend people’s right to become very wealthy without having to share that wealth through taxation or other redistributive policies. Democrats, on the other hand, want to progressively tax high earnings and wealth and favor other redistributive policies in order to subsidize the working and non-working poor. Binary economics eschews both positions. It advocates taking nothing from the wealthy and giving nothing to the poor. But at the same time, it proposes legislation which would give the poor and middle classes the opportunity that the wealthy already have to borrow money in order to purchase capital in the form of capital shares.

What would conservatives find appealing about binary economics?

Conservatives share with binary economists a belief in the importance of free and open markets, the limited economic power of government, and the sanctity of property rights. Binary economists oppose taking property away from the wealthy or from anybody in the process of expanding capital ownership to more people. Binary economists do not believe that there is anything wrong with being wealthy, provided you are able and willing to spend most of your income during your lifetime. They advocate a single-rate (non-progressive) income tax, the phasing out of Social Security and welfare subsidies (as people are able to become economically independent through their capital ownership), the abolition of minimum wage laws and estate taxes, and the full payment of all annual corporate profits as dividends to shareholders — all of these being attractive to most conservatives.

What would liberals like about binary economics?

The result of widely distributed capital ownership would spell the end of poverty and restore true democracy to our society. Corporations owned largely by their employees, customers, suppliers, and/or members of the communities in which their operations reside are much less likely to pollute the environment, oppress their workers, cheat or defraud their customers, or engage in other forms of unethical behavior. The end goals of communism (worker ownership of the means of production and a life of leisure) would have been achieved without the need for violent revolution, statist government, or the confiscation of property.

Are the goals of binary economics egalitarian like those of communism?

The term “egalitarian” is often used to mean “equal results” (as opposed to “equal opportunity”) — which is not the goal of binary economics. Binary economists believe in everybody having an equal opportunity to acquire capital assets and share in the new wealth created by technology, automation, and other forms of capital. This does not mean that everybody will choose to take advantage of the capital ownership opportunities afforded by the Capital Homestead Act. Those who work hard and smart and invest well, on the other hand, might well achieve million dollar capital incomes by the time they retire at relatively young ages, say, 50 or 60. But, as was called for in the 1776 Virginia Declaration of Human Rights (the precursor to the Declaration of Independence), binary economics enshrines as a basic human right the equal opportunity and access of every person to “the means of acquiring and possessing property” in order to obtain security and pursue happiness.

Bezos Says Artificial Intelligence To Fuel Amazon’s Success

On April 12, 2017, Spencer Soper writes on Bloomberg Technology:

  • CEO’s annual shareholder letter promises ‘much more to come’
  • Machine learning enhances products ‘beneath the surface’

The Robots Making Your Online Orders Faster

Amazon.com Inc. is embracing artificial intelligence to deliver goods more quickly, enhance its voice-activated Alexa assistant and create new tools sold to others through its cloud-computing division, Chief Executive Officer Jeff Bezos said in his annual shareholder letter.

Changes ushered in by artificial intelligence and machine learning will help the companies that embrace them and put up barriers for those who don’t, the world’s second-richest man wrote in a 1,700-word letter released Wednesday.

Bezos repeated familiar themes, such as the need to operate a business like it’s always “Day 1” to keep a startup mentality and the ability to act quickly on limited information to stay ahead, what he calls “high-velocity decision making.” His emphasis on artificial intelligence and machine learning was the most concrete indication of areas in which the e-commerce giant will continue to invest.

Machine learning is the science of getting computers to act without being programmed, and is used in autonomous cars, speech-recognition and internet search engines. The technology has influenced high-profile projects at Amazon such as drone delivery, its popular Echo voice-activated speaker and the new cashier-less Amazon Go convenience store unveiled late last year in Seattle, Bezos wrote.

“But much of what we do with machine learning happens beneath the surface,” he wrote. “Machine learning drives our algorithms for demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more. Though less visible, much of the impact of machine learning will be of this type — quietly but meaningfully improving core operations.”

Amazon Web Services, the company’s cloud-computing division, will offer affordable tools so clients can incorporate artificial intelligence and machine learning into their own operations. Such tools have already been used by to detect diseases and increase crop yields, Bezos wrote.

“Watch this space,” Bezos said. “Much more to come.”

https://www.bloomberg.com/news/articles/2017-04-12/bezos-says-artificial-intelligence-to-fuel-amazon-s-success

Artificial intelligence (AI) is undeniably the trend amongst business corporations seeking to improve product and service quality, reduce operational costs, and reap more profits for their OWNERS.

Unfortunately, the corporations growing the economy are narrowly OWNED by the tiny wealthy capital asset ownership class. The system, which requires past savings, ensures that ONLY those individuals who are able to save substantially or who have inherited large sums will OWN the future.

If we are to truly create an economic democracy wherein EVERY child, woman and man is empowered to acquire personal ownership stakes in the successful businesses growing the economy, we need a new system paradigm to free economic growth from the slavery of past savings. We need to enact monetary reform and the Capital Homestead Act (aka Economic Democracy Act).

The Capital Homestead Act is a comprehensive national economic strategy for empowering every American citizen, including the poorest of the poor, with the means to acquire, control and enjoy the fruits of productive corporate assets. This long-range agenda involves major restructuring of our tax system and our Federal Reserve policies to lift unjust artificial barriers to more equitable distribution of future corporate capital and faster growth rates of private sector investment.

It would shift primary national income maintenance policies from inflationary wage and unproductive income redistribution expedients to market-based ownership sharing and dividend incomes. The Capital Homestead Act’s central focus is the democratization of capital (productive) credit. By universalizing citizen access to direct capital ownership through access to interest-free productive credit, it would close the power and opportunity gap between today’s haves and have-nots, without taking away property from today’s owners.

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

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.