The Huge Gap Between America’s Rich And Superrich Exposes A Fundamental Misunderstanding About Inequality

On July 8, 2017, Pedro Nicolai da Costa writes on Business Insider:

Destabilizing levels of income inequality, once a problem reserved for developing nations, is now a defining social and political issue in the United States.

Donald Trump seized on the issue during the presidential campaign, vowing to become a voice for forgotten Americans left behind by decades of widening wealth disparities.

While America’s enormous gap between rich and poor and the sorry state of its middle class are well-documented, a less prominent trend tells an equally important story about the American economy: the divide between the well-off and the stratospherically rich.

This particular pattern is especially important since some economists and conservative commentators have tried to blame inequality on educational levels, arguing that those with college degrees have fared well in the so-called knowledge economy while those with a high school diploma or less lack the skills to do the jobs available.

Others, however, point to runaway salaries for top executives in industries like energy and finance as the key underlying drivers of inflation, which has been characterized by huge gains at the very top of the income distribution. Executive compensation is driven in large part by corporate boards that have cozy relationships with firms’ CEOs, rather than market forces.

From Aspen, Colorado, the New York Times columnist David Brooks recently wrote:

“There is a structural flaw in modern capitalism. Tremendous income gains are going to those in the top 20 percent, but prospects are diminishing for those in the middle and working classes. This gigantic trend widens inequality, exacerbates social segmentation, fuels distrust and led to Donald Trump.”

Gabriel Zucman, an economist at the University of California, Berkeley and a preeminent researcher of inequality, wasted little time in countering the argument.

“Tremendous gains are not going to the top 20%. They are going to top 1%,” he tweeted at Brooks, adding that this is key to understanding the Republican Party’s agenda.

ZucmanGabriel Zucman

Richard Reeves, a senior fellow at the Brookings Institution, makes a similar case as Brooks.

“The strong whiff of entitlement coming from the top 20 percent has not been lost on everyone else,” he wrote in a recent opinion piece. His book is titled “Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It.”

Nicholas Buffie, an economic-policy researcher in Washington, eloquently took issue with the 20% argument in a blog he wrote when he was at the Center for Economic and Policy Research.

“The problem with this type of analysis is that it misleads readers into thinking that a large group of well-educated Americans have benefited from the rise in inequality,” Buffie said. “In reality, the ‘winners’ from increased inequality are really a much smaller group of incredibly rich Americans, not a large group of well-educated, upper-middle-class workers.”

In other words, blaming America’s wealth divide merely on educational differences may be easy, but not particularly useful.

http://www.businessinsider.com/income-gap-between-upper-middle-class-and-very-rich-2017-7

Gary Reber Comments:

Interestingly, while to some degree all of the causes cited in the author’s article are true, the author does not zero in on why the rich and super-rich are wealthy. Simply, the reason they are rich is because they OWN the vast means of non-human, wealth-creating, income-producing capital assets. They will continue to get richer and richer as long as the system requires “past savings” to finance future capital asset formation,

One feasible way is to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. Removing barriers that inhibit or prevent ordinary people from purchasing capital that pays for itself out of its own future earnings is paramount as an actionable policy. 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 with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings. The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today — management and banks — that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed (ala the Federal Housing Administration concept). This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

We need to reevaluate our tax, monetary and central banking institutions, as well as, labor and welfare laws. We need to innovate in such ways that we lower the barriers to equal economic opportunity and create a level playing field based on anti-monopoly and anti-greed fairness and balance between production and consumption. In so doing, every citizen can begin to accumulate a viable capital estate without having to take away from those who now own by using the tax system to redistribute the income of capital owners. What the “haves” do lose is the productive capital ownership monopoly they enjoy under the present unjust system. A key descriptor of such innovation is to find the ways in which “have nots” can become “haves” without taking from the “haves.” Thus, the reform of the “system,” as binary economist Louis Kelso postulated, “must be structured so that eventually all citizens produce an expanding proportion of their income through their privately owned productive capital and simultaneously generate enough purchasing power to consume the economy’s output.”

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

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/.

 

 

 

A Global Progressive Tax On Individual Net Worth Would Offer The Best Solution To The World’s Spiralling Levels Of Inequality

Published by the London School of Economics:

The issue of inequality is one of the most salient in global and European politics. Thomas Piketty writes on the economic forces which have impacted upon inequality since the end of the First World War. He argues that with disparities in income and wealth rising substantially over recent decades, a global progressive tax on individual net worth would offer the best option for keeping inequality under control. He writes that although implementing such a tax would be a major challenge politically, it would be feasible if the EU and the United States, each accounting for around a quarter of world output, put their combined weight behind it.

The distribution of income and wealth is one of the most controversial issues of the day. History tells us that there are powerful economic forces pushing in every direction – towards greater equality, and away from it. Which prevail will depend on the policies we choose.

America is a case in point. Here is a country that was conceived as the antithesis of the patrimonial societies of old Europe. Alexis de Tocqueville, the 19th century historian, saw America as the place where land was so plentiful that everyone could afford property and a democracy of equal citizens could flourish. Until the First World War, the concentration of wealth in the hands of the rich was far less extreme in the US than in Europe. In the 20th century, however, the situation was reversed.

Between 1914 and 1945 European wealth inequalities were wiped out by war, inflation, nationalisation and taxation. After that, European countries set up institutions which – for all their faults – are structurally more egalitarian and inclusive than those of the US.

Ironically, many of these institutions drew inspiration from America. From the 1930s to the early 1980s, for example, Britain maintained a balanced distribution of income by hitting what were deemed to be indecently high incomes with very high tax rates. But confiscatory income tax was in fact an American invention – pioneered in the interwar years at a time when that country was determined to avoid the disfiguring inequalities of class-ridden Europe. The American experiment with high tax did not hurt growth, which was higher at the time than it has been since the 1980s. It is an idea that deserves to be revived, especially in the country that first thought of it.

The US was also first to develop mass schooling, with nearly universal literacy – among white men, at any rate – in the early 19th century, an accomplishment that took Europe almost another 100 years. But again, it is Europe that is now more inclusive. True, the US has produced many of the world’s outstanding universities, but Europe has done better at producing solid middle-ranking ones. According to the Shanghai ranking, 53 of the 100 best universities in the world are in the US, and 31 in Europe. Look instead at the top 500 universities, however, and the order is reversed: 202 in Europe against 150 in the US.

People often talk up the virtues of their national meritocracies, but – whether in France, America or elsewhere – such rhetoric seldom fits the facts. Often the purpose is to justify existing inequalities. Access to American universities – once among the most open in the world – is highly unequal. Building higher education systems that truly combine efficiency and equal opportunity is a major challenge facing all countries.

Mass education is important, but it does not guarantee a fair distribution of income and wealth. US income inequality has sharpened since the 1980s, largely reflecting the huge incomes of people at the top. Why? Have the skills of the managerial cadre advanced further than everyone else’s? In a large organisation, it is hard to know how much each person’s work is worth. But another hypothesis – that top managers by and large have the power to set their pay themselves – is better supported by the evidence.

Even if wage inequality could be brought under control, history tells us of another malign force, which tends to amplify modest inequalities in wealth until they reach extreme levels. This tends to happen when returns accrue to the owners of capital faster than the economy grows, handing capitalists an ever larger share of the spoils, at the expense of the middle and lower classes. It was because the return on capital exceeded economic growth that inequality worsened in the 19th century – and these conditions are likely to be repeated in the 21st. According to Forbes global billionaire rankings, top wealth holders have been rising more than three times faster than the size of the world economy between 1987 and 2013. The Table below illustrates the overall trend in wealth and income growth for different groups.

Table: Average annual growth rate in the wealth/income of groups of the world’s population

Source: Capital in the 21st Century

US inequality may now be so sharp, and the political process so tightly captured by top earners, that this will not happen – much like in Europe before the First World War. But that should not stop us from aspiring to improve. The ideal solution would be a global progressive tax on individual net worth. Those who are just getting started would pay little, while those who have billions would pay a lot. This would keep inequality under control and make it easier to climb the ladder. And it would put global wealth dynamics under public scrutiny. The lack of financial transparency and reliable wealth statistics is one of the main challenges for modern democracies.

Of course there are alternatives. China and Russia, too, must deal with wealthy oligarchies, and they do it with their own tools – capital controls, and jails whose bleak walls can contain the most ambitious oligarchs. For countries that prefer the rule of law and an international economic order, a global wealth tax is a better bet. Maybe China will come round to it before we do. Inflation is another potential solution. In the past it has helped lighten the burden of public debt. But it also erodes the savings of the less well off. A tax on vast fortunes seems preferable.

A global wealth tax would require international co-operation. This is difficult but feasible. The US and the EU each account for one-quarter of world output. If they could speak with one voice, a global registry of financial assets would be within reach. Sanctions could be imposed on tax havens that refused co-operation. Short of that, many may turn against globalisation. If, one day, they found a common voice, it would speak the disremembered mantras of nationalism and economic isolation.

A global progressive tax on individual net worth would offer the best solution to the world’s spiralling levels of inequality

Gary Reber Comments:

Such redistribution schemes, which tax those who are productive either through their capital wealth or labor or both, strengthen the politicians and State control over citizens. The focus should be on empowering EVERY citizen to be productive through access to the means of acquiring and possessing property, simultaneously with the growth of the economy, while abating further concentration of capital wealth. Thomas Piketty states that people viewed America as the place where land was so plentiful that everyone could afford property and a democracy of equal citizens could flourish. But the land is now all owned; there is no more. But capital formation is virtually unlimited. And there should be the focus – broadening its ownership simultaneously with its formation so that over time EVERY child, woman and man accumulates a significant capital estate.

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

Mark Zuckerberg: The U.S. Should Learn From This State’s Basic Income Program

Facebook founder Mark Zuckerberg writes on Futurism:

AN APPROACH WORTH EMULATING

An excursion is always a learning experience. That was certainly true for Facebook founder and CEO Mark Zuckerberg and his wife Priscilla Chan when they visited Alaska. The social media entrepreneur was impressed by the various social programs he found in America’s Last Frontier, particularly a basic income initiative that Alaska’s been running since 1982.

The Alaska Permanent Fund Dividend (PFD) is a basic income program that allots $1,000 or more per citizen. “[A] portion of the oil revenue the state makes is put into [the PFD],” Zuckerberg wrote in a Facebook post. “Rather than having the government spend that money, it is returned to Alaskan residents through a yearly dividend.”

Another basic income Zuckerberg learned about is by Native Corporations in Alaska. These privately owned corporations that develop land run and owned by Native Alaskans give annual dividends to to their native shareholders according to the resources they develop. “So if you’re a Native Alaskan, you would get two dividends: one from your Native Corporation and one from the state Permanent Fund,” Zuckerberg wrote.

UBI’S BIGGEST HURDLE

Under a universal basic income (UBI) program, individuals receive a fixed amount of income regardless of their social or employment status. UBI is an old idea that’s become more popular recently as a potential response to unemployment due to automation, but it is not without critics. An issue these critics often bring up is funding. Zuckerberg was impressed by how the Alaskan basic income model solves this. “[I]t’s funded by natural resources rather than raising taxes,” he wrote.

This means that running a UBI program isn’t impossible, at least in some cases. In fact, a number of countries already have trial programs to test UBI — most notably Finland, which launched the program in 2016. Canada has two initiatives in the works, while Hawaii recently passed legislationthat will study implementing UBI in the state.

In the end, Zuckerberg thinks it’s all about mentalities. “[W]hen you’re profitable, you’re confident about your future and you look for opportunities to invest and grow further. Alaska’s economy has historically created this winning mentality, which has led to this basic income,” he noted. “That may be a lesson for the rest of the country as well.”

Mark Zuckerberg: The U.S. Should Learn From This State’s Basic Income Program

Gary Reber Comments:

First off, the Alaskan Permanent Fund Dividend (PFD) is derived from taxes on the earnings from oil revenues generated by oil companies operating in Alaska. While the Fund uses “Dividend” in its title, this is really not a dividend in the sense that it is not tied to individual citizens owning shares of an economic development corporation or what I would prefer to call a Citizens Land Bank corporation. The PFD, a government agency, is owned by the State of Alaska. The fund is driven by the state’s royalty oil (50 percent) and the value of investments (50 percent) such as stocks, bonds and real estate. These earnings are distributed to qualified Alaskan citizens on an annual basis.

While this has been casted as “The oil companies don’t own the oil, ALASKANS DO!,” it is somewhat mislead, but telling of a growing segment of the American population that is challenging the conventional notion that our natural resources can be owned by narrowly owned extraction companies.

Also, privately owned Native Corporations in Alaska develop land run and owned by Native Alaskans. The earnings from development of resources are returned annually in the form of dividends to their native shareholders.

A far more powerful alternative that would directly benefit EVERY Alaskan citizen would be to incorporate a Citizens Land Bank, which would own the public lands under which the oil fields lie and would otherwise acquire ownership of other landed oil fields.

The Citizen Land Band would be a for-profit, professionally-managed, citizen-owned-and-governed community land planning and development enterprise, designed to enable every citizen of a community of any size to acquire a direct ownership stake in local land, natural resources and basic infrastructure.

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

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

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

The Citizen Land Bank is a major feature in a proposed national economic agenda known as “Capital Homesteading for Every Citizen,” which is designed to reform existing monetary, credit and tax barriers to provide every American an equal opportunity to share in the governing powers and profits from new entrepreneurial ventures, new technologies, new structures, and new rentable space built upon the land. Capital Homesteading offers a “Just Third Way” of reversing unsustainable federal deficits and debt, and revitalizing and growing the American free enterprise system in a sustainable and environmentally sound way.

With a Citizen Land Bank in place Alaskan citizens would generate income by leasing conditioned rights of natural resource extraction to the oil companies wanting to profit from such extraction. In this way the land and the natural resources would truly Be Owned by Alaskans, each owning an equal share of the assets and benefiting from the income generated.

For more information on the Citizens Land Bank see http://www.cesj.org/?s=Citizen+Land+Trust

We are getting near to one solution to generating annual income to citizens. But we need more than Citizen Land Banks to generate more income to citizens.

So, let me address what is avoided in all articles about a universal basic income – alternatives.

While a Universal Basic Income sounds appealing to those solely dependent on a job or welfare, there is a far better way for EVERY child, woman and man to EARN more income by providing equal opportunity to acquire personal ownership in future wealth-creating, income-producing capital formation using insured (lending protection) interest-free capital credit, repayable out of the future earnings of the investments in the corporations growing the economy. This would not require anyone to pledge as collateral (past savings/equity as security for repayment).

Using such new owner-creation financial mechanisms would enable EVERY citizen to contribute productivity to the economy, create demand for a higher standard of living, while not taking from those who already are capital owners through taxation to support otherwise under-productive and non-productive citizens.

We should be looking at how “the rich are getting richer,” not on how we can take and redistribute the earnings of the rich and middle class. Obviously, the distinction between the rich and the non-rich is that the rich OWN wealth-creating, income-producing capital assets, the very essence of technological progress, and the poor only have their labor to sell to the wealthy capital ownership class.

The fact that the core function of technological invention and innovation is to invent “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, should surprise no one who is conscious and who has even causally observed the constant shift to non-human productive inputs in the manufacturing, distribution, and sales of products, as well as the delivery of services, that has been occurring during their lifetime.

The urgency is to figure out means for people to earn an income without dependency on jobs. The focus should not be on a pro-job growth future but an alternative to wage dependency as economists across the board predict further losses as AI, robotics, and other technologies continue to be ushered in.

Such future invention and innovation should be financed using mechanisms that create new owners simultaneously with the growth of the economy, while respecting the private property rights who now own, and ensuring that any further concentrated capital ownership acquisition will be abated.

The fundamental challenge to be solved is how do we reinvent and redesign our economic institutions to keep pace with job destroying and devaluing technological innovation and invention so not all of the benefits of owning FUTURE productive capacity accrues to today’s wealthy 1 percent ownership class, and ownership is broadened so that EVERY American earns income through stock ownership dividends so they can afford to purchase the products and services produced by the technology economy.

A National Right To Capital Ownership Bill 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 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 capital ownership is. Therefore, by ignoring such issues of economic justice and capital ownership, our leaders are ignoring the concentration of power through monopoly ownership of productive capital, with the result of denying the 99 percenters equal opportunity and access to become capital owners.

The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” and thus, “how do we get from a world in which the most productive factor—physical capital—is owned by a handful of people, to a world where the same factor is owned by a majority—and ultimately 100 percent—of the consumers, while respecting all the constitutional rights of present capital owners?”

There is a solution, 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. The Just Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.

The solution is obvious but our leaders, academia, conventional economist and the media are oblivious to the necessity to broaden ownership in the new capital formation of the future simultaneously with the growth of the economy, which then becomes self-propelled as increasingly more Americans accumulate ownership shares and earn a new source of dividend income derived from their capital ownership in the “machines” that are replacing them or devaluing their labor value.

The solution will require the reform of the Federal Reserve Bank to create new owners of future productive capital investment in businesses simultaneously with the growth of the economy. The solution to broadening private, individual ownership of America’s future capital wealth requires that the Federal Reserve stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every 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. Policies need to insert American citizens into the low or no-interest investment money loop to enable non- and undercapitalized Americans, including the working class and poor, to build wealth and become “customers with money.” The proposed Capital Homestead Act would produce this result.

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

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/.

RICH PEOPLE IN AMERICA HAVE TOO MUCH MONEY, SAYS THE WORLD’S SECOND-RICHEST MAN, WARREN BUFFETT

On June 27, 2017, Jason Le Miere writes on Newsweek:

One big problem in America is that while there is plenty of money, rich people have too much of it. So says the world’s second-richest man, Warren Buffett. The 86-year-old CEO of investing house Berkshire Hathaway has a net worth of $75.6 billion, according to Forbes, and he says massive sums like that are the reason why many people are struggling to get by.

“The real problem, in my view, is the prosperity has been unbelievable for the extremely rich people,” he told PBS Newshour Monday.

“If you go to 1982, when Forbes put on their first 400 list, those people had $93 billion. Now they have $2.4 trillion, [a multiple of] 25 for one. This has been a prosperity that’s been disproportionately rewarding to the people on top.”

Since the 1980s, the richest 1 percent of Americans have seen their share of total income roughly double, to 20 percent. Meanwhile, the bottom 50 percent have seen their share decline in a big way, to 12 percent from 20 percent. Inequality in America is now even more pronounced than in China.

“The economy is doing well, but all Americans aren’t doing well,” Buffett added. “But we have got $57,000 or $58,000 of [gross domestic product] per person. That is a lot of stuff.”

Buffett said that the inequality is a natural result of an evolving economy in the U.S., but that more needs to be done in order to help those who have seen their jobs go by the wayside.

“We actually export 12 or 13 percent of our GDP,” he said. “It was only 5 percent in 1970. But it benefits us. It benefits the rest of the world. It doesn’t benefit the steelworker maybe in Ohio. And that’s the problem that has to be addressed because when you have something that’s good for society, but terribly harmful for given individuals, we have got to make sure those individuals are taken care of.”

Buffett pointed out that the economy has been growing since 2009, following the recession the previous year. Since entering the White House in January, and even before, President Trump has been quick to claim credit for any sign of further improvement in the economy.

Buffett, though, urged Trump to be careful what he claimed responsibility for.

“If I ever get elected president, I will never claim credit for anything the market does, because I don’t want to be blamed when it goes the other direction,” he said.

http://www.newsweek.com/rich-people-america-buffett-629456?utm_source=Facebook&utm_campaign=NewsweekFacebookSF&utm_medium=Social

Gary Reber Comments:
Hmm? I know Warren Buffet is not stupid but appears to not know why economic inequality has and is getting worse, or is not willing to tell the truth. He should examine why is is fundamentally rich and what distinguishes himself from those who are not rich. Hopefully, he will see clearly the obvious why: he owns massive capital assets while the non-rich do not own capital assets.
Warren Buffet probably does not see himself as a “hoggist” capital owner with the ability 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, but effectively that is what he has become. Buffett is in solid membership standing in the wealthy capital ownership class who seeks to own productive power that they cannot or won’t use for consumption. As such, they are beggaring their neighbor — the equivalency of mass murder — the impact of concentrated capital ownership.

Buffett has said the solution is simple: “They [people] should just keep buying and buying and buying a little bit of America as they go along. And 30 or 40 years from now, they will have a lot of money.” Yet the reality is the vast majority of Americans are either in poverty, near-poverty, afloat due to consumer credit and living week-to-week or month-to-month. They are in situations that prevent them from saving and speculating, as Buffet has said he has since he was 11.

With all his wealth tied to his personal OWNERSHIP of wealth-creating, income-producing productive capital assets held by him in the business corporations that he has an ownership interest under the Berkshire Hathaway  multinational conglomerate company (18 percent share capital ownership), you would think that he would be educating himself to and advocating financial mechanisms that, with NO requirement of past savings (equity worth), would empower EVERY child, woman, and man to acquire ownership interests in new, productive and viable capital asset formation simultaneously with the growth of the economy, on the basis that the investments will generate their own earnings sufficient to repay the insured (lender security), interest-free capital credit and then go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.

Buffett is part of the problem by not recognizing and advocating for broadened wealth-creating, income-producing capital asset ownership. The exponential disassociation of production and consumption 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.

At the top of the order of Buffett’s and fellow billionaires’ philanthropy is a plan to use at least half of their their wealth to support causes focused on “poverty alleviation” and “education.”

I think the most good can result if the focus of their wealth is on reforming the monetary and financial system to eliminate the requirement of “past savings” to qualify for capital credit to finance viable capital asset formation projects and provide for EVERY citizen to acquire ownership stakes in future viable capital asset formation simultaneously with the growth of the economy, without taking from those who already own.

A study of billionaires would certainly result in either inheritance of large sums of capital asset ownership stakes or savings accumulated to invest in wealth-creating, income-producing capital assets, on the basis that the investments paid for themselves. In either case, the key operative is “past savings,” which the vast majority of people do not have as they are dependent on jobs in which they earn insufficient income to meet their personal and family consumption needs. And because they are trapped in poverty or near poverty, or even in middle-class status, they cannot earn sufficient income to satisfy their wants above their consumption necessities, and even then they carry high consumer debt.

If only these billionaires would support education to enlightened all Americans and politicians to reform the monetary and financial system and enact legislation to provide an annual allocation into the capital credit account of EVERY child, woman, and man strictly for investment in new viable capital asset formation projects tied to the growth of the economy, which generate their own revenue stream to initially pay off he loan and following produce a full-earnings dividend for consumption (creating further demand for the economy’s growth).

Of course, there needs to be 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. This is because “poor” people have no security or collateral, or sufficient income resulting in savings to pledge against the loan as security, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.

What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home or small business that can be pledged as loan security — those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer through their continuous accumulation of capital asset ownership, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it. This is what Buffet is vaguely referring to when he says: “The real problem, in my view, is the prosperity has been unbelievable for the extremely rich people,”

Thus, the question is who pledges the security and takes the risk of failure to return the expected yield from which to repay the loan. The answer is the capital credit loan security (collateral) requirement can be replaced with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept).

Criteria must be created to qualify the corporations, both new start-ups and established ones, subject to this policy and those corporations that qualify overseen so as to insure that their executives exercise prudent fiduciary responsibility to generate loan payback. Once the guaranteed loans are paid back to the lending entity, the new capital formation will continue to produce income for existing and new owners.

The non-profit Center for Economic and Social Justice (www.cesj.org) is dedicated to such education to alleviate poverty and educate on the financial mechanisms and legislation necessary to put American on a path to inclusive prosperity, inclusive opportunity, and inclusive economic justice.

At the CESJ Web site are volumes of articles and proposed legislation focused on broadening individual capital asset wealth and income simultaneously with the growth of the economy, without redistribution by empowering EVERY citizen to be productive through their capital asset and their labor contributions to the economy.

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

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

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

Support the Capital Homestead Act (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/.

The World Is Now $217,000,000,000,000 In Debt, And The Global Elite Like It That Way

On July 2, 2017, Michael Snyder writes on The Mind Unleashed:

The borrower is the servant of the lender, and through the mechanism of government debt virtually the entire planet has become the servants of the global money changers.  Politicians love to borrow money, but over time government debt slowly but surely impoverishes a nation.  As the elite get governments around the globe in increasing amounts of debt, those governments must raise taxes in order to keep servicing those debts.  In the end, it is all about taking money from us and transferring it into government pockets, and then taking money from government pockets and transferring it into the hands of the elite.  It is a game that has been going on for generations, and it is time for humanity to say that enough is enough.

According to the Institute of International Finance, global debt has now reached a new all-time record high of 217 trillion dollars

Global debt levels have surged to a record $217 trillion in the first quarter of the year. This is 327 percent of the world’s annual economic output (GDP), reports the Institute of International Finance (IIF).

The surging debt was driven by emerging economies, which have increased borrowing by $3 trillion to $56 trillion. This amounts to 218 percent of their combined economic output, five percentage points greater year on year.

Never before in human history has our world been so saturated with debt.

And what all of this debt does is that it funnels wealth to the very top of the global wealth pyramid.  In other words, it makes global wealth inequality far worse because this system is designed to make the rich even richer and the poor even poorer.

Every year the gap between the wealthy and the poor grows, and it has gotten to the point that eight men have as much wealth as the poorest 3.6 billion people on this planet combined

Eight men own the same wealth as the 3.6 billion people who make up the poorest half of humanity, according to a new report published by Oxfam today to mark the annual meeting of political and business leaders in Davos.

This didn’t happen by accident.  Sadly, most people don’t even understand that this is literally what our system was designed to do.

Today, more than 99 percent of the population of the planet lives in a country that has a central bank.  And debt-based central banking is designed to get national governments trapped in endless debt spirals from which they can never possibly escape.

For example, just consider the Federal Reserve.  During the four decades before the Federal Reserve was created, our country enjoyed the best period of economic growth in U.S. history.  But since the Fed was established in 1913, the value of the U.S. dollar has fallen by approximately 98 percent and the size of our national debt has gotten more than 5000 times larger.

It isn’t an accident that we are 20 trillion dollars in debt.  The truth is that the debt-based Federal Reserve is doing exactly what it was originally designed to do.  And no matter what politicians will tell you, we will never have a permanent solution to our debt problem until we get rid of the Federal Reserve.

In 2017, interest on the national debt will be nearly half a trillion dollars.

That means that close to 500 billion of our tax dollars will go out the door before our government spends a single penny on the military, on roads, on health care or on anything else.

And we continue to pile up debt at a rate of more than 100 million dollars an hour.  According to the Congressional Budget Office, the federal government will add more than a trillion dollarsto the national debt once again in 2018…

Unless current laws are changed, federal individual income tax collections will increase by 9.5 percent in fiscal 2018, which begins on Oct. 1, according to data released today by the Congressional Budget Office.

At the same time, however, the federal debt will increase by more than $1 trillion.

We shouldn’t be doing this, but we just can’t seem to stop.

Let me try to put this into perspective.  If you could somehow borrow a million dollars today and obligate your children to pay it off for you, would you do it?

Maybe if you really hate your children you would, but most loving parents would never do such a thing.

But that is precisely what we are doing on a national level.

Thomas Jefferson was strongly against government debt because he believed that it was a way for one generation to steal from another generation.  And he actually wished that he could have added another amendment to the U.S. Constitution which would have banned government borrowing…

“I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.”

And the really big secret that none of us are supposed to know is that governments don’t actually have to borrow money.

But if we start saying that too loudly the people that are making trillions of dollars from the current system are going to get very, very upset with us.

Today, we are living in the terminal phase of the biggest debt bubble in the history of the planet.  Every debt bubble eventually ends tragically, and this one will too.

Bill Gross recently noted that “our highly levered financial system is like a truckload of nitro glycerin on a bumpy road”.  One wrong move and the whole thing could blow sky high.

When everything comes crashing down and a great crisis happens, we are going to have a choice.

We could try to rebuild the fundamentally flawed old system, or we could scrap it and start over with something much better.

My hope is that we will finally learn our lesson and discard the debt-based central banking model for good.

The reason why I am writing about this so much ahead of time is so that people will actually understand why the coming crisis is happening as it unfolds.

If we can get everyone to understand how we are being systematically robbed and cheated, perhaps people will finally get mad enough to do something about it.

This article (The World Is Now $217,000,000,000,000 In Debt And The Global Elite Like It That Way) was originally created and published on TheEconomic CollapseBlog.com by Michael Snyder and is republished here.

The World Is Now $217,000,000,000,000 In Debt, And The Global Elite Like It That Way

Gary Reber Comments:

In the United States, the national debt is debt not associated with productive growth. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.

Instead, the Federal Reserve needs to stop monetizing unproductive debt, including bailouts of banks “too big to fail,” Wall Street derivatives speculators, war and begin creating an asset-backed currency that could enable every child, woman and man to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.

The CHA would process annually an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets.

The shares would be purchased using interest-free credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the added technology, renewable energy systems, manufacturing factories, rentable space for entrepreneurial endeavor and infrastructure, both repair and new, added to the economy.

Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, but would not require citizens to reduce their funds for consumption to purchase shares.

We need to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. Removing barriers that inhibit or prevent ordinary people from purchasing capital that pays for itself out of its own future earnings is paramount as an actionable policy. 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 with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings.

The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today — management and banks — that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

Making EVERY citizen productive is the ONLY way that the real economy will grow along with incomes from both wages and dividends to repay the national debt and set our nation on a course of inclusive prosperity, inclusive opportunity and inclusive economic justice.

See my article “What Is Needed To Resolve The Destruction Of American Jobs Problem?” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9.

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/.

 

No, Seattle’s $15 Minimum Wage Is Not Hurting Workers

On June 30, 2017, Michelle Chen writes in The Nation:Minimum wage

A sign that reads “15 Good Work Seattle” is displayed below Seattle City Hall and the Columbia Center after the Seattle City Council passed a $15 minimum wage, June 2, 2014. (AP Photo / Ted S. Warren)

What happens when wages go up? Workers make more money. It seems intuitive, but now we have proof of concept. It’s happening in one of the first major cities to delve into the $15 wage experiment.

 In April of 2015, Seattle implemented a new law that raised the city’s hourly base wage, with the ultimate target of reaching $15 per hour by 2021. The slow phase-in, which has increased the minimum wage each year at different levels depending on various factors like the size of the company paying a given worker, would eventually be indexed to inflation. In 2017, the increases finally began reaching the full $15 base wage, and now the nationwide “Fight for 15” campaign is finally bearing fruit in the industry where the mobilizations began: restaurants.

The study, by University of California-Berkeley’s Institute for Research on Labor and Employment (IRLE), tracks the policy’s initial implementation phases, starting with firms with 500 or more employees without insurance. Other researchers found that, at least for restaurant workers, bosses are complying with the law, and workers benefit. Much of the improvement accrues to so-called “limited service” restaurants (such as fast-food franchises), where some of the poorest workers, in the most precarious positions, are concentrated.

According to economist Sylvia Allegretto, coauthor of the study, the analysis shows that under the $15 minimum wage “we do see, especially in the limited service sector…a large and statistically significant increase in wages.” They concluded that “the policy is working as much as you want the policy to increase the wages of low-wage workers.”

The researchers also stress that food-service workers are generally reflective of other local low-wage workers, like retail workers, indicating that similar industries would also see gains as the $15 hourly wage is phased in.

There are, of course, naysayers. A recent University of Washington studyargued that Seattle’s wage hike would actually hurt workers overall because an hourly increase would be offset by a reduction of workers’ hours and decreased employment. But IRLE researchers and others challenged that study as excessively limited in scope, based on an unrepresentative sample of workers. The Berkeley researchers contend that their analysis focuses on material impacts in a more representative sector.

The IRLE analysis does not present a comprehensive picture of the law’s long-term effects on issues like employment or job quality. But previous studies suggest raising wage standards generally improves workers’ well-being, does not significantly undermine jobs, and might even make workers more productive and improve worker retention. Struggling low-wage workers are “always trying to look for better opportunities,” Allegretto notes, and there’s strong evidence that by lifting base wages, “businesses will have a little bit less turnover.”

Nationwide, eight other cities and eight states, including California and New York, are implementing minimum-wage increases in the $12-to-$15 range, eventually impacting several million workers. Boosted by election-season grassroots campaigns, a bill for a national $15 minimum wage was recently introduced by Bernie Sanders and other progressive senators, reflecting the energetic mobilizations of Fight for $15 campaign groups over the past several years.

An earlier IRLE analysis projected that in California a $15 base wage would increase earnings for “5.26 million workers, or 38.0 percent” of the statewide workforce. The vast majority of these workers would be over age 20, and nearly half would have some college education. The beneficiaries would be primarily Latino workers, disproportionately working only part-time jobs, and who would be less likely to currently have workplace health benefits. In the long-term, the additional wages would strengthen workers’ families as well, through increases in parents’ and children’s health and school achievement.

The Seattle study suggests that as $15-an-hour wages roll out, concrete gains will go toward workers in at least one major service sector. And, despite what conservatives argue, the raise would likely take only a tiny bite out of your restaurant bill.

“The price of your hamburger isn’t completely deterministic by minimum-wage workers and what they make,” Allegretto says. “It has to do with rent, it has to do with how much the food actually costs, it has to do with transport.” So any price increases would ultimately be much less than the added benefit to wages. And why not ask consumers to pay a few pennies more on the dollar if “that helps them cover the cost of the increase in the minimum wage without having to lay off workers”?

The findings may seem obvious, but minimum-wage rates on both the state and federal levels have sunk to irrational levels since the government first instituted the concept of a “minimum wage” during the Depression, seeking to reverse the downward spiral of poverty and mass unemployment as employers ruthlessly exploited a surplus of desperate job seekers.

Since then, state and federal minimum wages have regressed absurdly. The current federal minimum, arbitrarily set at the starvation rate of $7.25 an hour, is basically unsustainable for a worker’s family anywhere in the country. Had the floor simply risen with inflation over the past 50 years, it would be worth about $19 an hour today. In other words, even $15 amounts to a depressed base wage compared to the more realistic, inflation-adjusted national standard.

 In Seattle’s King County, with its extreme income inequality, a single parent of two would need to make about $34.50 an hour to cover basic needs. Daycare costs alone can consume $1,600 a month of a typical restaurant worker’s income. Other complexities of Seattle’s economy make it even harder to get by; the prevalence of part-time jobs without benefits, low union representation, and classification of short-term workers as “contractors” so they don’t qualify as wage-earning employees.

 One unprecedented regression in Seattle’s law aims blatantly to placate businesses: The law introduces a tipped-wage credit for full-service restaurants, Though the offset is smaller in Seattle than the federal standard, as well as that of many others states, the new $1-to-$2 credit benefits employers by telling them to pass additional labor costs to customers, so diners subsidize low wages, whether those diners end up being cheap or generous in their tips. The findings suggest that the workers in food-service jobs with a regular hourly wage would see a larger economic benefit than bartenders and waitstaff typically would.

Despite the Seattle law’s breaks for business and slow phase-in (the real value of the $15 wage itself will have eroded by 2021), IRLE’s research helps further bolster the case for the reasonableness of $15 an hour with concrete evidence that restaurant workers do okay at $15 an hour. And a look around Seattle shows that its restaurants seem to be chugging along.

No, Seattle’s $15 Minimum Wage Is Not Hurting Workers

Gary Reber Comments:

This is yet another article now submitted in the debate squabble for and opposed a $15.00 minimum wage.

This is fundamentally a wage cost increase without increasing productivity on the part of humans.

For centuries technological change has make tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power — and relatively constant). The technology industry is always changing, evolving and innovating. And as businesses are faced with increased costs they are in constant search for solutions to lower their operational costs, which translates to employing the non-human means of production. The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.

Furthermore, if businesses cannot off set increased costs outside of their control, the result is they raises prices, which results in inflation.

The study says so what, what a few cents or dollars more?

 “The price of your hamburger isn’t completely deterministic by minimum-wage workers and what they make,” Allegretto says. “It has to do with rent, it has to do with how much the food actually costs, it has to do with transport.” So any price increases would ultimately be much less than the added benefit to wages. And why not ask consumers to pay a few pennies more on the dollar if “that helps them cover the cost of the increase in the minimum wage without having to lay off workers”?

At some point, hopefully people will wake up and grasp the wisdom (today’s word for yesterday’s common sense) of what the late labor statesman Walter Reuther pointed out half a century ago in his testimony before the Joint Economic Committee of Congress, February 20, 1967:

The breakdown in collective bargaining in recent years is due to the difficulty of labor and management trying to equate the relative equity of the worker and the stockholder and the consumer in advance of the facts. . . . If the workers get too much, then the argument is that that triggers inflationary pressures, and the counter argument is that if they don’t get their equity, then we have a recession because of inadequate purchasing power. We believe this approach (progress sharing) is a rational approach because you cooperate in creating the abundance that makes the progress possible, and then you share that progress after the fact, and not before the fact.  Profit sharing would resolve the conflict between management apprehensions and worker expectations on the basis of solid economic facts as they materialize rather than on the basis of speculation as to what the future might hold. . . . If the workers had definite assurance of equitable shares in the profits of the corporations that employ them, they would see less need to seek an equitable balance between their gains and soaring profits through augmented increases in basic wage rates. This would be a desirable result from the standpoint of stabilization policy because profit sharing does not increase costs. Since profits are a residual, after all costs have been met, and since their size is not determinable until after customers have paid the prices charged for the firm’s products, profit sharing as such cannot be said to have any inflationary impact upon costs and prices. . . . Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America’s vast corporate wealth.”

Louis Kelso’s Employee Stock Ownership Plan (ESOP) was one step on the path Reuther laid out. Capital Homesteading is another. Perhaps it’s time world leaders took economic reality and common sense into account. . . .

Instead of engaging in inflationary bandaids and capping earnings of workers by solely focusing on wage levels, the logical answers are to think outside the one-factor LABOR/WAGE box and begin to think how to make EVERY citizen productive through OWNING interests in the corporations growing the economy. To acquire OWNERSHIP, financial mechanism are needed to provide interest-free capital credit without the requirement of “past savings” and repayable out of the future earnings of the investments in our economy’s growth and quality living standards. How to solve the “past savings” security collateral problem to make good on the relatively few bad loans that are inevitable, is to insure banks against such risks using commercial capital credit insurance and reinsurance (ala the Federal Housing Administration concept).

Researchers should start with this proposal and study its impact.

See my article “What Is Needed To Resolve The Destruction Of American Jobs Problem?” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9.

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/.

Robots Stealing Human Jobs Isn’t The Problem. This Is.

On June 29, 2017, Alia E. Dastagir writs on USA Today:

A 15-hour work week. That’s what influential economist John Maynard Keynes prophesied in his famous 1930 essay “Economic Possibilities for Our Grandchildren,” forecasting that in the next century technology would make us so productive we wouldn’t know what to do with all our free time.

This is not the future Keynes imagined.

Many higher income workers put in 50 or more hours per week, according to an NPR/Harvard/Robert Wood Johnson Foundation poll. Meanwhile, lower-income workers are fighting to get enough hours to pay the bills, as shown in a University of Washington report on Seattle’s $15 minimum wage publicized this week.

Yet some of today’s best minds are making Keynes-like predictions. This month, Apple co-founder Steve Wozniak said robots will one day replace us — but we needn’t worry for a few hundred years.

In May, Facebook CEO Mark Zuckerberg told Harvard’s 2017 class that increased automation would strip us not only of our jobs but also of our sense of purpose.

The problem: Skills gap

Automation. Artificial intelligence. Machine learning. Many experts disagree on what these new technologies will mean for the workforce, the economy and our quality of life. But where they do agree is that technology will change (or completely take over) tasks that humans do now. The most pressing question, many economists and labor historians say, is whether people will have the skills to perform the jobs that are left.

“We are moving into an era of extensive automation and a period in which capitalism is just simply not going to need as many workers,” said Jennifer Klein, a Yale University professor who focuses on labor history. “It’s not just automating in manufacturing but anything with a service counter: grocery stores, movie theaters, car rentals … and this is now going to move into food service, too.

“What are we going to do in an era that doesn’t need as many people? It’s not a social question we’ve seriously addressed.”

Instead of worrying about the mass unemployment a robot Armageddon could bring, we should instead shift our attention to making sure workers — particularly low-wage workers — have the skills they need to compete in an automated era, says James Bessen, an economist, Boston University law lecturer, and author of the book Learning by Doing: The Real Connection Between Innovation, Wages, and Wealth.

“The problem is people are losing jobs and we’re not doing a good job of getting them the skills and knowledge they need to work for the new jobs,” Bessen said.

Addressing this skills gap will require a paradigm shift both in the way we approach job training and in the way we approach education, he said.

“Technology is very disruptive. It is destroying jobs. And while it is creating others, because we don’t have an easy way to transition people from one occupation to another, we’re going to face increased social disruption,” he said.

In this new age, Bessen said, we can’t treat learning as finite.

“We need to move to a world where there is lifelong learning,” he said. “You have to get rid of this idea that we go to school once when we’re young and that covers us for our career. … Schools need to teach people how to learn, how to teach themselves if necessary.”

Universal basic income

A universal basic income (UBI) has been proposed as one possible solution to the loss of jobs caused by automation. A UBI would give everyone a fixed amount of money, regularly, no matter what. Proponents say not only would it help eradicate poverty, but it would be especially useful for people whose jobs are eliminated by automation, giving them the flexibility to learn new skills required in a new job or industry, without having to worry about how they’d eat or pay rent.

Some also suggest it would breed innovation. In his Harvard speech, Zuckerberg told the audience: “We should have a society that measures progress not just by economic metrics like GDP, but by how many of us have a role we find meaningful. We should explore ideas like universal basic income to give everyone a cushion to try new things.”

Several countries are exploring or experimenting with a UBI, including Kenya, Finland, the Netherlands and Canada.

Concerns about automation aren’t new

Americans have been worrying about automation wiping out jobs for centuries, and in some occupations, automation has drastically reduced the need for human labor.

  • In 1900, 41% of American workers were employed in agriculture, but by 2000, automated machinery brought that number down to just 2%, MIT professor David Autor wrote in the Journal of Economic Perspectives in 2015.
  • The arrival of the automobile ushered out horses, reducing the need for blacksmiths and stable hands.
  • In the 21st century, computers are increasingly performing tasks humans once did.

But the relationship between automation and employment is complex. When automation replaces human labor, it can also reduce cost and improve quality, which, in turn, increases demand.

Marlin Steel in Baltimore was able to stay in business by automating its processes to stay competitive when many other manufacturing jobs went overseas. Video by Jasper Colt, USA TODAY

Such was the case in textiles. In the early 19th century, 98% of the work of a weaver became automated, but the number of textile workers actually grew.

“At the beginning of the 19th century, it was so expensive that … a typical person had one set of clothing,” Bessen said. “As the price started dropping because of automation, people started buying more and more, so that by the 1920s the average person was consuming 10 times as much cloth per capita per year.”

More demand for cloth meant a greater need for textile workers. But that demand, eventually, was satisfied.

When ATMs were introduced in the 1970s, people thought they would be a death knell for bank tellers. The number of tellers per bank did fall, but because ATMs reduced the cost of operating a bank branch, more branches opened, which in turn hired more tellers. U.S. bank teller employment rose by 50,000 between 1980 and 2010. But the tasks of those tellers evolved from simply dispensing cash to selling other things the banks provided, like credit cards and loans. And the skills those tellers had that the ATMs didn’t — like problem solving — became more valuable.

When computers take over some human tasks within an occupation, Bessen’s research shows those occupations grow faster, not slower.

“AI is coming in and it’s going to make accountants that much better, it’s going to make financial advisers that much better, it’s going to make health care providers that much more effective, so we’re going to be using more of their services at least for the next 10 or 20 years,” Bessen said.

These examples, though, are of occupations where automation replaces some part of human labor. What about when automation completely replaces the humans in an entire occupation? So far, that’s been pretty rare. In a 2016 paper, Bessen looked at 271 detailed occupations used in the 1950 Census and found that while many occupations no longer exist, in only one case was the demise of an occupation attributed mostly to automation: the elevator operator.

2017 report from the McKinsey Global Institute found that less than 5% of occupations can be completely automated.

What’s in store

History has taught us a lot about how automation disrupts industries, though economists admit they can’t account for the infinite ways technology may unsettle work in the future.

When a new era of automation does usher in major economic and social disruption — which Bessen doesn’t predict will happen for at least another 30 to 50 years — it’s humans that will ultimately decide the ways in which robots get to change the world.

“It’s not a threat as much as an opportunity,” he said. “It’s how we take advantage of it as individuals and a society that will determine the outcome.”

https://www.usatoday.com/story/money/2017/06/29/ai-stealing-human-jobs-isnt-problem-is/412217001/

Gary Reber Comments:

This article misses the solution that is starring them in the face. Citizens need to OWN the technology!

When Abraham Lincoln enacted the 1862 Homestead Act, his efforts to broaden ownership could go only so far as  land is limited, and by 1893 Frederick Jackson Turner could, with a great deal of justification, declare the closing of the land frontier.  What is needed today is the opening of the effectively unlimited industrial and commercial technological frontier with a “Capital Homestead Act.” — an initiative in which the billionaires could lead the way.

I written about the solution extensively and my response here will refer readers to my article “What Is Needed To Resolve The Destruction Of American Jobs Problem?” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9 and “Education Is Critical To Our Future Societal Development” at http://www.foreconomicjustice.org/?p=9058.

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/.

What Should We Make Of The UW Minimum Wage Study?

Ed murray minimum wage r6mdxs

 

On June 27, 2017, Hayat Norimine writes on the  Seattle Met:

Rarely does a study put University of Washington researchers at odds with the city, but that’s what happened today with new analysis released on the city’s minimum wage. Seattle officials have in the past looked to the top-rated university’s experts as a resource to develop policy—UW Law (Hugh Spitzer) for the city’s income tax, UW School of Public Health (Jim Krieger) for the soda tax, UW Aquatic and Fishery Sciences (Jeff Cordell) for the seawall’s salmon habitat. This time, though, a University of California Berkeley professor briefed the city on the effects of the minimum wage the same morning a group of UW researchers came out with their study on the same topic.

On Monday mayor Ed Murray-championed minimum wage bill took a hit when UW researchers released conclusions that the legislation led to fewer hours worked (a 9 percent cut) and a total loss in wages ($125 a month). Berkeley professor Michael Reich pointed out that UW’s results are three times more than what minimum wage critic David Neumark estimated. Robert Feldstein, director of the mayor’s Office of Policy and Innovation, on Monday sent a letter to Jacob Vigdor—a professor from UW’s Daniel J. Evans School of Public Policy—echoing criticisms from Reich. Before the UW study came out, the mayor’s office asked him for comments, according to a letter from Reichdated Monday.

“Although we appreciate the time and effort invested by your team, professor Reich’s concerns lead us to believe that your report may not, in fact, tell the full story of the effects of Seattle’s minimum-wage policy,” Feldstein wrote to Vigdor. “We would hope that future work will address these substantive and methodological concerns, and that your team will be open to looking at how to examine more precisely the characteristics of Seattle’s labor market.”

The study had very different results to previous minimum wage reports that have been published—including a Berkeley study published just last week–and Reich at a city council briefing Monday said UW’s findings “are not credible. They have a lot more work to do.”

But, as Vigdor pointed out, both UW and Berkeley studies reported the same results among restaurant jobs. The minimum wage didn’t hurt those jobs. UW’s report included employees’ number of hours worked and included seven faculty members, as well as some graduate students.

“If you do an apples-to-apples comparison, there’s absolutely no contrast between our reports,” Vigdor told PubliCola. “The catch is that restaurant employment is not the same thing as low-wage employment. It’s when we look specifically at low-wage employment that we’re picking up very different results.” Vigdor said a lot of restaurant jobs, especially in Seattle, cater toward affluent Seattleites and hire employees who have a fair amount of experience in the service industry. That means higher wages.

Criticism: The UW report excluded multi-site businesses. 

Explanation: UW researchers used data from the Employment Security Department, to which employers send their data every three months. Let’s say business owners have two locations, one in Seattle and one in Bellevue. Owners then have two options when they’re reporting their numbers—they can either add to an existing ESD account or open up a second account to keep their locations separate. With a multi-site business, you can’t tell which employees are based in Seattle and which are based in Bellevue, Vigdor said. Employees outside of the city wouldn’t be affected by Seattle’s minimum wage bill.

So yes, it’s possible some of those jobs “lost” actually just got transferred outside the city. But Vigdor said a survey showed those businesses—which tend to be larger corporations with more employees—are also more likely to report reducing employment as a consequence of minimum wage.

Criticism: The UW report compared Seattle to other parts of the state, as opposed to similar cities across the country. 

Explanation: Data varies quite a bit depending on the state. For example, it would be tough to compare Seattle to San Francisco because there’s a completely different state agency that collects employment data in California. The quality of data collected by Washington state’s Employment Security Department is way better—it includes the number of hours worked.

Criticism: The UW report went too low by capping low-wage jobs to $19 an hour. 

Reich said over the same period, jobs at all pay levels increased at single-site businesses.

Explanation: Vigdor said the researchers put a lot of thought into where to draw the line between low-wage and high-wage jobs. They repeated their analysis 13 different ways, he said, experimenting with wages anywhere between $13 to $25 an hour. “The results don’t change.”

Criticism: The UW report didn’t adequately account for Seattle’s economic boom and how that factors into the results. 

This is the toughest factor to consider. With an economic boom, employers replace low-wage jobs with higher-wage jobs to compete with other employers in the area—so maybe jobs aren’t disappearing, just paying better. Reich pointed out that it’s difficult to separate out the boom’s effects, especially in the UW report. The control cities UW used (other cities in the state) aren’t booming like Seattle, and may not be adequate controls at all.

Explanation: “You have to ask yourself, ‘Was Seattle in the economic doldrums until January 2016, when it suddenly grew explosively?’ That’s the only kind of boom that could explain away our results,” Vigdor said, which showed those employment impacts appear beginning of 2016. That’s exactly when the $13 minimum wage began. “Anybody living in Seattle back in 2015 will probably recall that it was booming pretty well back then too.”

It’s fair to say UW did its due diligence—and though some may still dispute the researchers’ claims, it certainly wasn’t out of any sort of negligence.

The big takeaway? Vigdor said it’s too early for that. The UW study isn’t perfect, and Vigdor said they’re not claiming any sort of conclusion. The message is not, “Seattle’s minimum wage is terrible for poor workers.” (Though some headlines offer some derivative of that.) There’s still a lot of work to do and a lot of unanswered questions. Researchers have 30 other papers in the works on the minimum wage, Vigdor told PubliCola, and they’re not expected to finish that research until 2025.

“We get this question asked repeatedly,” Vigdor said. “What should Seattle do about this? What should another city that’s contemplating another minimum wage think about this study? There’s still more that we need to know before you make any kind of judgment call like that.”

For one thing, the UW study doesn’t elaborate which low-wage employees are being hurt the most. Is it teenagers who still live with their parents, or, say, single mothers who work well over 40 hours a week and barely cover their rent? Which workers are being impacted, and how? The data researchers received from the Employment Security Department include names, social security numbers, and information about the hours they work and their wages, but they know nothing about the people beyond that.

The next step, Vigdor said, is to bring data in from the Department of Social and Health Services—to keep track of who’s eligible for benefits like SNAP, Medicaid, and housing assistance—and Department of Licensing to get birthdates. Because of the sensitivity of that private information, Vigdor said, taking appropriate cautions to protect people’s identity and finalizing a contract with DSHS will take another few months.

https://www.seattlemet.com/articles/2017/6/26/what-should-we-make-of-the-uw-minimum-wage-study

Gary Reber Comments:

I have written extensively on this subject. Below is a bit of history provide by my colleague Michael D. Greaney at the Center for Economic and Social Justice:

“In 1914, Henry Ford more than doubled the base wage at the Ford Motor Company from $2.34 per day, to $5.00 per day for certain classes of machinists and widows with children. He was soon forced to raise it across the board for every Ford worker or face a strike.

“Other automakers had to raise their base wages in order to keep trained workers. Riots ensued in the middle of a Michigan winter — which destroyed a number of small businesses and were broken up with fire hoses — when vast numbers of unemployed workers descended on Detroit to apply for jobs at Ford.

“Ford’s unilateral increase in wages without any corresponding increase in productivity is credited with being the “official” start of the modern wage-price inflationary spiral (“cost-push inflation”). Combined with Keynesian monetary theory intended to stimulate demand by issuing massive amounts of government debt (“demand-pull inflation”), the U.S. economy was eventually ground between the upper and nether millstones of increasing the costs of production with no increase in production, and creating demand without producing anything at all. Jobs either disappeared as workers were replaced with more productive (and thus lower relative cost) technology, or went to lower wage areas where workers would produce the same goods at less cost.

“The lesson here is that increase the cost of anything without a corresponding increased benefit, and you decrease demand for it. How much you can increase the cost or price of something varies according to the “elasticity of demand” for a particular good or service, but regardless how inelastic or elastic demand might be, if the price keeps going up, eventually everyone will be priced out of the market.

At least Ford were playing with his own money. “Three years ago the city of Seattle, Washington, decided to play with other people’s money, and mandated the gradual implementation of a $15.00 per hour minimum wage. When the increases started, studies showed no change in employment, although the data sometimes appeared a little questionable.

“What did change was the cost of living. Rents started increasing, forcing people on fixed incomes to find lower cost housing in the city, or move. While not factored in to employment statistics (most people on fixed incomes are retired), there was a spate of angry articles about greedy landlords and price-gouging grocers, etc., as if such increases were unheard of in the wake of across the board pay increases . . . as happens inside the Washington, DC Beltway every time the government gives an across the board increase.

“The latest study, though, shows something unexpected by virtually everyone, ourselves included. There have been some layoffs and cutbacks in hours. This is usual, as would happen, e.g., if the definition of “full time worker” (with a corresponding increase in benefits) was defined in some areas as working 40 hours a week. A large number of workers would find themselves scheduled for 39½ hours per week.

“No, the unusual thing was that low-income workers started losing jobs to higher-income workers. Better-trained and experienced workers making $19.00 and $20.00 per hour can produce more goods and services in the same time than untrained and inexperienced workers paid less money, decreasing the relative cost of production.

“As a result, the average income of higher-income workers increased, while that of the average low-income worker (the one the increased minimum wage is supposed to be helping) decreased by $125.00 per month . . . just as costs are increasing in anticipation of their increased income. In effect, low-income workers are experiencing on the micro level what the U.S. economy has been experiencing on the macro level: rising costs, falling production.

“At some point, somebody is going to wake up and grasp the wisdom (today’s word for yesterday’s common sense) of what the late labor statesman Walter Reuther pointed out half a century ago in his testimony before the Joint Economic Committee of Congress, February 20, 1967:

“’The breakdown in collective bargaining in recent years is due to the difficulty of labor and management trying to equate the relative equity of the worker and the stockholder and the consumer in advance of the facts. . . . If the workers get too much, then the argument is that that triggers inflationary pressures, and the counter argument is that if they don’t get their equity, then we have a recession because of inadequate purchasing power. We believe this approach (progress sharing) is a rational approach because you cooperate in creating the abundance that makes the progress possible, and then you share that progress after the fact, and not before the fact.  Profit sharing would resolve the conflict between management apprehensions and worker expectations on the basis of solid economic facts as they materialize rather than on the basis of speculation as to what the future might hold. . . . If the workers had definite assurance of equitable shares in the profits of the corporations that employ them, they would see less need to seek an equitable balance between their gains and soaring profits through augmented increases in basic wage rates. This would be a desirable result from the standpoint of stabilization policy because profit sharing does not increase costs. Since profits are a residual, after all costs have been met, and since their size is not determinable until after customers have paid the prices charged for the firm’s products, profit sharing as such cannot be said to have any inflationary impact upon costs and prices. . . . Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America’s vast corporate wealth.’

“Louis Kelso’s Employee Stock Ownership Plan (ESOP) was one step on the path Reuther laid out. Capital Homesteading is another. Perhaps it’s time world leaders took economic reality and common sense into account. . . .

As for the question that is asked repeatedly, University of Washington’s Jacob Vigdor said. “What should Seattle do about this? What should another city that’s contemplating another minimum wage think about this study? There’s still more that we need to know before you make any kind of judgment call like that.”

The logical answers are to think outside the one-factor LABOR/WAGE box and begin to think how to make EVERY citizen productive through OWNING interests in the corporations growing the economy. To acquire OWNERSHIP financial mechanism are needed to provide interest-free capital credit without the requirement of “past savings” and repayable out of the future earnings of the investments in our economy’s growth and quality living standards. How to solve the “past savings” security collateral problem to make good on the relatively few bad loans that are inevitable, is to insure banks against such risks using commercial capital credit insurance and reinsurance (ala the Federal Housing Administration concept).

Researchers should start with this proposal and study its impact.

See my article “What Is Needed To Resolve The Destruction Of American Jobs Problem?” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9.

Billionaire Warren Buffett Says ‘The Real Problem’ With The US Economy Is People Like Him

On June 27, 2017, Catherine Clifford writs on CNBC Make It:

Warren Buffett says people like him are the problem with the U.S. economy.

With a net worth of more than $75 billionBuffett is currently the second richest man alive, according to Forbes. As the CEO of investing house Berkshire Hathaway, he is hallowed as the Oracle of Omaha. But for all his personal success, Buffett says the issue really is the 1 percent.

“The real problem, in my view, is — this has been — the prosperity has been unbelievable for the extremely rich people,” says Buffett on PBS Newshour.

“If you go to 1982, when Forbes put on their first 400 list, those people had [a total of] $93 billion. They now have $2.4 trillion, [a multiple of] 25 for one,” he says. “This has been a prosperity that’s been disproportionately rewarding to the people on top.”

“THE REAL PROBLEM, IN MY VIEW, IS … THE PROSPERITY HAS BEEN UNBELIEVABLE FOR THE EXTREMELY RICH PEOPLE.”-Warren Buffett, CEO of Berkshire Hathaway

The stock market has been trending upwards since the crash in March 2009 and the U.S. economy is growing at roughly 2 percent, says Buffett on Newshour. That growth rate (while a third less than the 3 percent rate President Donald Trump has been touting) is a healthy number for the economy and will improve the quality of life of many Americans.

It will add “$19,000 of GDP per person, family of four, $76,000 in one generation,” says Buffett. “So, your children and your children’s children and all that, they will live far, far, far better than we live with 2 percent growth.”

And yet, many individuals are stuck. “The economy is doing well, but all Americans aren’t doing well,” says Buffett.

Part of the reason some are struggling, says the octogenarian investor, is that the automation and digitization of the U.S. labor force is happening faster than employees can be retrained.

“We always see shifts in employment. If you think about it, if you go back to 1800, it took 80 percent of the labor force to produce enough food for the country. Now it takes less than 3 percent. Well, the truth is that market systems move people around,” says Buffett.

“There’s always a mismatch. I mean, you know, as the economy evolves, it reallocates resources.”

As employees fall out of the labor force because their skills are no longer utilized, Buffett says it ought to be the responsibility of society to take care of them as they are retrained to re-enter the workforce.

The evolving economy “doesn’t benefit the steelworker maybe in Ohio,” says Buffett on Newshour. “And that’s the problem that has to be addressed, because when you have something that’s good for society, but terribly harmful for given individuals, we have got to make sure those individuals are taken care of.”

Buffett made his extreme wealth by investing in the stock market, an interest that took hold young. Buffett bought his first stock when he was 11 and has been in the market for 75 years. He recommends others do the same.

“They should just keep buying and buying and buying a little bit of America as they go along. And 30 or 40 years from now, they will have a lot of money,” he says.

In an effort to compensate for the wealth inequality that he himself has benefited from, Buffett and his billionaire buddy Microsoft co-founder Bill Gates co-founded the Giving Pledge, a voluntary commitment by the richest people in the world to give away at least half of their wealth. The goal of the Giving Pledge is not only to help those in need but to encourage others to do the same.

http://www.cnbc.com/2017/06/27/warren-buffett-says-the-problem-with-the-economy-is-people-like-him.html

Gary Reber Comments:
Warren Buffet is a “hoggist” capital owner 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.

Buffett says to the solution is simple:”They [people] should just keep buying and buying and buying a little bit of America as they go along. And 30 or 40 years from now, they will have a lot of money.” Yet the reality is the vast majority of Americans on either in poverty, near-poverty, afloat due to consumer credit and living week-to-week or month-to-month. They are in situations that prevent them from saving and speculating, as Buffet says he has since he was 11.

With all his wealth tied to his personal OWNERSHIP of wealth-creating, income-producing productive capital assets held by him in the business corporations that he has an ownership interest, you would think that he would be educating himself to and advocating financial mechanism that, with NO requirement of past savings (equity worth), would empower EVERY child, woman, and man to acquire ownership interest in new, productive and viable capital asset formation simultaneously with the growth of the economy, on the basis that the investments will generate their own earnings sufficient to repay the insure, interest-free capital credit and then go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.

Buffett is part of the problem. 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.
 
Anyone who seeks to own productive power that they cannot or won’t use for consumption are beggaring their neighbor — the equivalency of mass murder — the impact of concentrated capital ownership.

At the top of the order of Buffett’s and fellow billionaires’ philanthropy is a plan to use at least half of their their wealth to support causes focused on “poverty alleviation” and “education.”

I think the most good can result if the focus of their wealth is on reforming the monetary and financial system to eliminate the requirement of “past savings” to qualify for capital credit to finance viable capital asset formation projects and provide for EVERY citizen to acquire ownership stakes in future viable capital asset formation simultaneously with the growth of the economy, without taking from those who already own.

A study of billionaires would certainly result in either inheritance of large sums of capital asset ownership stakes or savings accumulated to invest in wealth-creating, income-producing capital assets, on the basis that the investments paid for themselves. In either case, the key operative is “past savings,” which the vast majority of people do not have as they are dependent on jobs in which they earn insufficient income to meet their personal and family consumption needs. And because they are trapped in poverty or near poverty, or even in middle-class status, they cannot earn the income to satisfy their wants above their consumption necessities, and even then they carry high consumer debt.

If only these billionaires would support education to enlightened all Americans and politicians to reform the monetary and financial system and enact legislation to provide an annual allocation into the capital credit account of EVERY child, woman, and man strictly for investment in new viable capital asset formation projects tied to the growth of the economy, which generate their own revenue stream to initially pay off the loan and following produce a full-earnings dividend for consumption (creating further demand for the economy’s growth).

Of course, there needs to be 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. This is because “poor” people have no security or collateral, or sufficient income resulting in savings to pledge against the loan as security, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.

What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security — those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer through their continuous accumulation of capital asset ownership, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it.

Thus, the question is who pledges the security and takes the risk of failure to return the expected yield from which to repay the loan. The answer is capital credit loan security (collateral) requirement can be replaced with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept).

Criteria must be created to qualify the corporations, both new start-ups and established ones, subject to this policy and those corporations that qualify overseen so as to insure that their executives exercise prudent fiduciary responsibility to generate loan payback. Once the guaranteed loans are paid back to the lending entity, the new capital formation will continue to produce income for existing and future owners.

The non-profit Center for Economic and Social Justice (www.cesj.org) is dedicated to such education to alleviate poverty and educate on the financial mechanisms and legislation necessary to put American on a path to inclusive prosperity, inclusive opportunity, and inclusive economic justice.

At the CESJ Web site are volumes of articles and proposed legislation focused on broadening individual capital asset wealth and income simultaneously with the growth of the economy, without redistribution by empowering EVERY citizen to be productive through their capital asset and their labor contributions to the economy.

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

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

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

Support the Capital Homestead Act (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/.

Study: Seattle’s $13 Minimum Wage Led To Drop Of $1,500 In Income For Low-Wage Earners

On June 27, 2017, Ben Shapiro writes on The Daily Wire:

Remember that time Seattle’s socialist city council member Kshama Sawant pressed for the city to increase its minimum wage to $15 per hour? I actually debated Sawant on the issue; I asked her if she would be in favor of raising the wage to $1,000 per hour. She misdirected from the issue.

Seattle actually ended up embracing $13 per hour, raising the minimum wage from $9.47 in 2014 to $11 in 2015 to $13 in 2016 under the theory that an increase wouldn’t throw people out of work, wouldn’t encourage part-time hiring, and would inflate salaries enough to allow more affordability in the Seattle housing market.

A new study demonstrates that, as usual, central planning of the economy leads to precisely the reverse of the results the planners seek to achieve.

According to a new paper from the National Bureau of Economic Research:

“Using a variety of methods to analyze employment in all sectors paying below a specified real hourly rate, we conclude that the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent. Consequently, total payroll fell for such jobs, implying that the minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016. Evidence attributes more modest effects to the first wage increase. We estimate an effect of zero when analyzing employment in the restaurant industry at all wage levels, comparable to many prior studies.”

In other words, restaurants didn’t fire anybody, they just put them on part-time shifts and cut back their hours. That shouldn’t be a surprise, since that’s precisely what happens every time the government places an extra burden on employers. One of the great myths of minimum wage movement — and the central planning movement as a whole — is that business owners aren’t operating at a slim margin, but raking in dollars to hide in their Scrooge McDuck moneybins, depleting the potential income of their employees. But that’s not true. Thanks to competition — and competition is fierce in industries that employ minimum wage workers — profit margins are never enormous. Even in 2013, a booming year for the restaurant business, Capital IQ estimated the average profit margin for restaurants at 2.4%. Profitability varies by chain as well, and by local franchise.

Even leftists were taken aback by Seattle’s sizeable minimum wage increase. Jared Bernstein of the Center on Budget and Policy Priorities, a leftist himself, derided the minimum wage increases in Seattle as “beyond moderate” — extreme, in other words. But he admitted, “you [don’t] know what the outcome is going to be. You have to test it, you have to scrutinize it, which is why Seattle is a great test case.”

Or you could leave the market alone, since “testing” markets by cramming down interventionism puts people out of work, at least part-time. Here are the facts: Seattle barely had any jobs under the $11 threshold before the legislation passed. But that wasn’t true of $13 jobs. And the regulations essentially priced a good deal of full-time low-wage labor out of the market. Furthermore, the economy in Seattle right now is strong. What happens during a downturn, when businesses have to shed costs?

Government intervention isn’t the answer to the free market. The free market is. But don’t expect the Left to admit that they’re not merely punishing “evil” businessmen, they’re skewing the entire labor market and hurting a broad swath of people, including minimum wage employees.

http://www.dailywire.com/news/17933/study-seattles-13-minimum-wage-led-drop-1500-ben-shapiro#

Gary Reber Comments:

The squabbling debate between pro minimum-wage advocates and free market advocates continues.

The real issue we should be addressing is how to empower EVERY citizen to earn more income through ownership of the non-human factor of production – technological invention and innovation that results in more efficient “tools” (what economists call productive physical capital) that reduce or eliminate the necessity for human labor.

Just the other day I commented on a Harvard study (http://www.foreconomicjustice.org/?p=17155) that points to minimum wage increases resulting in worker layoffs, increased pricing and hour-cuts for existing workers, resulting in reduced employment. Furthermore, as profit margins are further squeezed, those with the ability to automate are doing so and those who don’t are closing their doors. All this is happening and yet the minimum wage of $15 set by some cities won’t become law until, at the earliest, July of 2018.

But raising the minimum wage was supposed not to kill jobs or create operational costs that would squeeze profit margins and result in business closures. Wasn’t it?

Using common sense, if raising the minimum wage will not kill jobs then why not raise the minimum wage to $25.00 or $50.00 or $100.00 per hour? Of course there are consequences that either are reflected in job elimination, increased prices or business closures. Virtually never are the OWNERS of corporations willing to reduce profits, which often are marginal.

Competition drives businesses to constantly figure out ways to reduce operational costs. Full employment is not an objective of businesses nor is conducting business statically in terms of geographical location. Companies strive to achieve cost efficiencies to maximize profits for the owners, thus keeping labor input and other costs at a minimum.

If wage levels were not a factor there would be also no reason for ANY company to exit production in the United States and move production to foreign lands with significantly less labor costs. Also, there is the impact on pricing levels, as any increases in the cost of production or service always results in pricing increases – inflation.

If this were not the case, then no companies would be compelled to seek other non-human more cost-efficient means of production or to move production to foreign countries whose workers are paid far less than  Americans.  Increasingly, companies are seeking more efficient and less long term costs that non-human technology can deliver to reduce their operating costs, provide higher build quality, automate service, and maximize profits for their OWNERS. As is virtually always the case, the OWNERS of companies do not want to reduce profits.

What the proponents of raising the minimum wage fundamentally are addressing is that low-paid American workers need to earn more income.

We need to begin focusing on the means for people to earn more income, and not solely dependent on earnings from jobs, which are being destroyed with tectonic shifts in the technologies of production. We need to implement financial mechanisms to finance future economic growth and simultaneously create new capital asset owners. This can be accomplished with monetary reform and using insured, interest-free capital credit (without the requirement of past savings, a job or any other source of income), repayable out of the future earnings in the investments in our economy’s growth.

But how, you ask, can such an OWNERSHIP CREATION solution be implemented?

We can and should do more to create universal capital ownership not only for workers of corporations but ALL citizens. What I believe is crucial to solving economic inequality and building a future economy that can support general affluence for EVERY citizen is to address concentrated capital ownership, the fundamental cause of economic inequality. The obvious solution is to de-concentrate capital ownership by ensuring that all future wealth-creating, income-producing capital asset formation will be financed using insured, interest-free capital credit, repayable out of the future earnings of the investments, creating ownership participation by EVERY child, woman, man. This should be about investment in real productive capital growth, not speculation as with the stock exchanges. But the problem is the vast majority of Americans have no savings, or at best extremely limited savings, insufficient to be meaningful as increasingly Americans are living week to week, month to month, and deeply in consumer debt. So forget about proposals for tax credits, retirement and health savings accounts.  There is no feasible way that past savings can continue to be a requirement for investment if we are to simultaneously create new capital owners with the productive growth of the economy. The current economic investment system is structured based on the requirement of past savings used directly or as security collateral for capital credit loans. But past savings are not necessary as viable capital formation projects pay for themselves. This is the logic of corporate finance.

Capital acquisition takes place on the logic of self-financing and asset-backed credit for productive uses. People invest in capital ownership on the basis that the investment will pay for itself. The basis for the commitment of loan guarantees is the fact that nobody who knows what he or she is doing buys a physical capital asset or an interest in one unless he or she is first assured, on the basis of the best advice one can get, that the asset in operation will pay for itself within a reasonable period of time – 5 to 7 or, in a worst case scenario, 10 years (given the current depressive state of the economy). And after it pays for itself within a reasonable capital cost recovery period, it is expected to go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.

Still, there is at least a theoretical chance, and sometimes a very real chance, that the investment might not pay for itself, or it might not pay for itself in the projected time period. So, there is a business risk. This can be solved using private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). On a larger scale, the path to solve the security issue, that is, the risk can be absorbed by capital credit insurance or commercial risk insurance. Thus, in order to achieve national economic democracy, we need a way to handle risk management in finance by broadly insuring the risks. 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.

One feasible way is to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers. We need to free the system of dependency on Wall Street and the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting Federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency of with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings.

The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today – management and banks – that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

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 capital ownership opportunities for all Americans (Section 13(2) Federal Reserve Act).

Until we address concentrated capital ownership and implement solutions to simultaneously broaden capital ownership by creating new capital owners with the growth of the productive economy, money power will reside in the hands of politicians and bankers, not in the hands of the citizens. That is why, to reform the system leaders and advocates for economic justice must focus on money, how it should be created and measured, how it should be controlled and why a more realistic and just money system is the key to universal and equal citizen access to future ownership opportunities as a fundamental human right. Then prosperity and economic democracy can serve as the basis for effective and non-corruptible political democracy, an ecologically sustainable environment, and global peace through justice.

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/.