On June 18, 2013, Richard (RJ) Eskow writes on NationOfChange.org:
Economically, millennials should run from Randian Republicanism and its Selfishness Lite Democratic version. Culturally, they should run from their elders’ ideas about home ownership and consumerism – ideas which left them in thrall to corporations and banks.
What should they run to?
To politicians like Warren who speak for them and to them, rather than against them and down to them. To the people who tell them the truth. To the streets, parks, and public squares – anywhere demonstrations are being held against the corporate agenda and in favor of an economy for all.
And they should run for office. The oldest millennials will soon be qualified to run for president. They can already hold every other office. I’m not a big believer in identity politics – look where it got us last time – but millennials need candidates who speak to their needs and are equally invested in their future.
We need them too, because their New Deal will be everyone’s.
We need the courage of the young. Yours is not the task of making your way in the world, but the task of remaking the world which you will find before you. May every one of us be granted the courage, the faith and the vision to give the best that is in us to that remaking!– Franklin D. Roosevelt
That “New Deal” is the implementation of the Capital Homestead Act developed by the Center for Economic and Social Justice (www.cesj.org).
SUMMARY OF THE CAPITAL HOMESTEAD ACT
The Capital Homestead Act: A Blueprint for Redesigning Any Nation’s Economic System Based on Economic Justice and the Logic of Binary Economic Theory
Capital Homesteading is a comprehensive set of national legal and policy reforms based on the logic of Binary Economics and the principles of the Just Third Way (i.e., the three principles of economic justice and the four pillars of an economically just society). We believe it offers one possible model that has the potential to change the legal order at the local, national, regional, and even global levels.
Capital Homesteading is construed as an extension of the nineteenth century American programs enacted as the Homestead Act of 1862 to bring about a broad distribution of the ownership of frontier land. Broad-based citizen ownership was the key to accelerated rates of expansion of the U.S. food production capability compared to other countries the world. But the land frontier by its nature was a limited frontier.
Capital Homesteading rests mostly on systemic changes proposed first by Louis Kelso. These ideas expand the concept of democratized ownership to the unlimited frontier of advanced technologies, including management, marketing and distribution systems, through equity shares in enterprises capable of competing without special protections within a free, just and competitive global economy.
The proposed Capital Homestead Act is a refinement by the Center for Economic and Social Justice (CESJ) of what Louis Kelso in 1965 called “the Second Income Plan” and President Reagan in 1974, based on Kelso’s ideas when he was Governor of California, called for an “Industrial Homestead Act.” Kelso developed a comprehensive set of reforms and a new national economic policy agenda based on the binary growth model. It was designed to lift barriers in the present financial and economic system for universalizing citizen access to the means of acquiring and possessing capital assets. The Capital Homestead Act would allow every man, woman and child to accumulate in a tax-sheltered Capital Homestead Account, a target level of assets sufficient to generate an adequate and secure income for that person without requiring the use of existing pools of accumulated savings or reductions in current levels of consumption. It would serve as a substitute for costly retirement plan now burdening many U.S. companies. And it would substitute over time for the mounting spending deficits from the growing number of government pay-as-you-go entitlement programs whose projected unfunded liabilities threaten to bankrupt the U.S. Government and States like California and Illinois over the next few generations.
Under Capital Homesteading, basic economic laws and policies would be established to encourage national and regional central banks, corporate and individual income tax authorities, commercial and investment bankers, capital credit insurance and reinsurance companies, industrial and community development planners, legal and enterprise financial advisors, and unions to determine the nation’s annual needs for the quantity of money needed for accelerated rates of sustainable private sector capital growth and asset transfers to provide every citizen personal access to capital credit repayable with the projected future pretax earnings of the acquired capital. As a substitute for collateral required in today’s financial world to cover potential risk of default of borrowing for investment, the new system would cover risk through capital credit insurance financed by the pooling of risk premiums on all borrowed money. Only those who have already accumulated large accumulations of past savings today can provide such collateral. This explains why the rich will automatically accumulate most of the growth capital in the world, unless Capital Homesteading reforms are adopted.
Every man, woman and child from birth to death could be granted periodically (at least annually) an equal allotment of asset-backed and privately insured capital credit repayable with future savings. Such credit would flow through a personal tax-sheltered capital asset accumulation trust or “Capital Homestead Account” established at a local bank. Citizens, supported by licensed advisors, would have informed choices of investing their allotment of capital credit in shares in an enterprise for which a member of the family works, or public utilities, for-profit Citizens Land Banks or Community Land Cooperatives, and other approved categories of commercial, industrial or agricultural enterprises willing to issue full dividend payout shares.
Once the citizen’s offer (in the form of a bill of exchange) to purchase new shares on insured capital credit is scrutinized and the offer accepted by the commercial bank lender, the bank would create asset-backed money for the purchase of the shares. The bank,would create the new asset-backed money by approving a promissory note or establishing a deposit account for the borrower. The bank’s discount rate would cover all bank service charges and the risk premium. Commercial banks would immediately rediscount all Capital Homesteading loans for new currency supplied interest-free (since no past savings would be involved) by the central bank, thereby ensuring an elastic, stable, uniform and private sector asset-backed currency to replace the currencies that in most of the world are backed almost entirely by non-productive government debt.
Growth of the economy would no longer be subject to the slavery of past savings, reflected in the subtitle of the second book by Kelso and Adler. (The New Capitalists: A Proposal to Free Economic Growth from the Slavery of [Past] Savings.) Kelso based his revolutionary “pure credit” approach to financing broad-based capital ownership on the 1935 book by Harold Moulton, then president of Brookings Institution, entitled The Formation of Capital. (CESJ republished Moulton’s book, the Foreword of which is at http://www.cesj.org/homestead/reforms/moneycredit/formationofcapital_cesj.pdf. Both Kelso-Adler books can be downloaded free at http://www.cesj.org/publications/freedownloads.html)
Wealthy citizens with large accumulations (who would have the same privilege as non-rich citizens to an equal annual Capital Homestead allotment of capital credit) would be encouraged to spend their savings which would enable the economy to grow even faster or to enable the rich to invest in high risk ventures not eligible for Capital Homestead credit, or to engage in charity and spending for improving the nation’s education and health systems and other investments for the common good.
Dividends on shares financed through Capital Homesteading would be tax deductible at the enterprise level, deferred from personal taxation when used to repay shares held in the purchaser’s tax-sheltered Capital Homestead Account, but taxable when available as consumption income when distributed at the personal level. Thus, the poorest citizen, whether employed or disabled, could continue over their lives to accumulate assets on a tax-deferred basis and over time begin to receive rising capital incomes to supplement consumption incomes from other sources, free and independent from the need for charity or welfare.
Summary of the U.S. Model for Specific Systemic Reforms Under the Capital Homestead Act (Adaptable to any Country)
The Capital Homestead Act is a comprehensive national economic strategy for empowering every American citizen, including the poorest of the poor, with the means to acquire, control and enjoy the fruits of productive corporate assets.
This long-range agenda involves major restructuring of our tax system and our Federal Reserve policies to lift unjust artificial barriers to more equitable distribution of future corporate capital and faster growth rates of private sector investment. It would shift primary national income maintenance policies from inflationary wage and unproductive income redistribution expedients to market-based ownership sharing and dividend incomes.
The Capital Homestead Act’s central focus is the democratization of capital (productive) credit. By universalizing citizen access to direct capital ownership through access to interest-free productive credit, it would close the power and opportunity gap between today’s haves and have-nots, without taking away property from today’s owners.
The Goals of the Capital Homestead Act
As Summarized below, the Capital Homestead Act is designed to:
1. Generate millions of new private sector jobs by lifting ownership concentrating Federal Reserve credit barriers in order to accelerate private sector growth linked to expanded ownership opportunities, at a zero rate of inflation.
2. Radically overhaul and simplify the Federal tax system to eliminate budget deficits and ownership-concentrating tax barriers through a single rate tax on all individual incomes from all sources above basic subsistence levels. It tax reforms would:
a. eliminate payroll taxes on working Americans and their employers;
b. integrate corporate and personal income taxes; and
c. exempt from taxation the basic incomes of all citizens up to a level that allow them to meet their own subsistence needs and living expenses, while providing “safety net” vouchers for the poor.
The “Capital Homestead Account“ or “CHA“ is the primary tax-sheltered vehicle for the democratization of capital credit through local banks. It would enable every man, woman and child to accumulate wealth and receive dividend incomes from newly issued shares in new and growing companies, without being taxed on the accumulations (including property and shares gained through inheritance, savings, and arrangements like ESOPs, CSOPs and CICs/). In addition to serving as a source of capital credit for corporate workers, CHAs would also provide an ownership-building account for individuals who do not work for profit-making enterprises, such as school teachers, civil servants, military personnel, police, and health workers, and for individuals who have no remunerative employment, such as the disabled, the unemployed, homemakers and children.
The “Citizens Land Bank“ or “CLB“ (also known as a for-profit Citizens Land Cooperative” or CLC”; previously known as the for-profit “Community Investment Corporation” or “CIC”) allows residents of a community to share in the control and profits associated with land planning and development.
The “Employee Stock Ownership Plan“ or “ESOP“ channels low-cost credit for financing the needs of business corporations (such as expansion, capitalization and ownership transfers), and links private sector workers to ownership shares and dividend incomes in the companies for which they work. Shares acquired on credit by worker-owners are paid for out of the future corporate profits they help to generate.
The “Consumer or Customer Stock Ownership Plan“ or “CSOP“ lets customers of utilities share in the governance and profitability of “natural monopolies,” like telecommunications, water and power companies, mass transit and cable television.
Policy Objectives of Capital Homesteading
To meet Social Security and Medicare entitlements, and provide for their eventual phasing out as the mainstay of retirement income for most Americans, and to shift the Federal Government’s role from today’s income redistribution policies to the more limited and healthy role of encouraging economic justice through free enterprise growth, a Capital Homestead program would:
• Promote Private Sector Growth Linked to Broadened Ownership. Recreate in the 21st Century the conditions that resulted from the first Homestead Act of 1862, including full employment, declining prices, and widespread, individual and effective ownership of income generating assets. Set a realistic long-term target, based on the nation’s industrial growth potential, to achieve a minimum Capital Homestead stake for every American family. As an initial measure, this could be geared conservatively toward an equity accumulation of, for example, $150,000 over the next 20 years.
• Stimulate Maximum Growth, with a Balanced Budget and Zero Inflation Rate. Remove barriers to maximum rates of sustainable and environ,environmentally sound, private sector growth to achieve a balanced Federal budget and a zero inflation rate under the Capital Homestead program.
• Establish a Tax System That Stimulates Economic Growth and Jobs, and is More Accountable to Taxpayers. Re-write and radically simplify the existing Federal tax system to automatically balance the budge. Keep more money in the pockets of taxpayers from their initial earnings to cover their own health, education, housing and other basic household living expenses. Make Congress more directly accountable and responsive to all taxpayers. Eliminate all tax provisions, personal deductions, tax credits, and exemptions (except for the front-end exemptions for adults and dependents) that unjustly discriminate against or discourage property accumulations and investment incomes for poor and one-rich families.
For example, a single tax rate on all sources of labor or capital income over exemptions would be automatically set to meet all Federal entitlement and other programs, and to pay down past deficits. To meet personal living costs the basic incomes of all taxpayers up to $30,000 per adult and $20,000 per dependent (or $100,000 for a family of four) would be free from any income or payroll taxes. To increase taxable incomes for all citizens, corporations could escape from the multiple tax on corporate incomes by deducting dividend payouts.
• Restructure the Credit and Tax Systems to Encourage Universal Health Care through the Private Sector. Capital Homestead reforms, supplemented by health care vouchers for the poor, would provide a sustainable way to finance the health care system. These reforms would empower each citizen and family with the means enjoy and pay for affordable, quality health coverage of their choice. Through market-disciplined, comprehensive health care enterprises that are owned and controlled by health care providers and health care subscribers (patients), the doctor-patient relationship could be restored, while providing greater insurance portability, accountability and lower administrative overhead costs throughout the system.
• Solve the Home Foreclosure Crisis and Make Home Ownership Accessible to all Citizens. Starging in communities with homes whose market values are deflated due to the subprime mortgage crisis, resident-ownerd Homeowners’ Equity Corporations (HECs) could receive interest-free credit to buy up the foreclosed properties. As occupants of the homes in default pay the HEC their monthly rents (which could be supplemented with housing vouchers for the poor), these would be applied toward debt service, using pre-tax dollars to pay off the loans that the HEC used to purchase the foreclosed properties. As they make their regular monthly lease payments, these renters would become full owners of HEC shares and their dwellings.
• Stop Federal Reserve Monetization of Government Debt. Terminate use of the Federal Reserve’s powers to create debt-backed money, to support foreign currencies, or to buy and sell primary or secondary Treasure securities. This would reduce excessive Government spending and improve accountability. It would force Government to borrow for deficits directly from savers in the open markets.
• Stabilize the Value of the Currency. Require the Federal Reserve to create a stable, asset-backed currency to encourage ownership by all citizens of productive private sector assets rather than non-productive public sector debt or future ownership monopolies.
• Reduce Dependency on Past Savings for Financing Growth. Require the Federal Reserve to distinguish between “sound” and “unsound” uses of credit, by providing interest-free money to expand bank credit to enable every American to become an owner of a viable accumulation of new income-producing assets. This would reduce America’s dependency on past savings, corporate retained earnings, or foreign government wealth funds advantaged by America’s growing trade imbalances.
Require the Federal Reserve to supply sufficient asset-backed interest-free money and credit through local banks to meet the liquidity and broadened ownership needs of an expanding market-disciplined economy. Such “Fed-monetized” loans would be subject to appropriate feasibility standards administered by the banks and limited only by the goal of maintaining a stable value for the dollar.
Unsound uses of credit, such as the speculative credit that created subprime home mortgages and the global financial meltdown, would be financed from the accumulations of those wealthy Americans and foreigners who could afford the risk.
• Democratize Ownership of the Federal Reserve. Provide every citizen a single, lifetime, non-transferable voting share in the nation’s central bank and in one of the 12 regional Federal Reserve banks. This will ensure that the Fed’s board of governors is broadly representative of all groups affected by Fed policy, and that power over future money creation is spread widely among all citizens.
• Discourage Monopolies and Monopolistic Ownership. Link all economic reforms to methods that discourage privileged access to monopolistic accumulations of private property ownership of the means of production. Enforce anti-trust laws by providing access to interest-free capital credit to encourage broadly owned new competitors to enhance and sustain market-oriented growth.
• Introduce a Market-Driven Wage and Price System. Gradually eliminate rigid, artificially wage and price levels and other restrictions on free trade that afford special privileges to some industries, businesses and workers at the expense of American and foreign customers of U.S. products. Replace subsidies with interest-free credit incentives to farmers who wish to associate voluntarily in cooperatives and in enterprises jointly owned by farmers and workers, including integrated agribusinesses. The income generated by farmer-owned enterprises would supplement farm incomes and reduce the need for subsidies.
• Restore Property Rights in Corporate Equity. Restore the original rights of “private property” to all owners of corporate equity, particularly with respect to the right to profits and in the sharing of control over corporate policies. Preserve traditional powers of professional managers held accountable by Justice-Based Management corporate governance structures.
• Offer a More Just Social Contract for Workers. A top priority during he next decade would be developing a more just “social contract” for persons employed in the private sector. This would be geared toward establishing maximum ownership incentives. Instead of inflationary “wage system” increases, employees would begin to earn future increases in income through production bonuses, equity accumulations, and profit earnings. These “bottom-line” rewards would be linked to workers’ individual contributions, and to the productivity and success of their work team and the enterprise for which they work.
• Encourage More Harmonious Worker-Management Relations. Promote the right of non-management workers to form democratic unions and other voluntary associations. Instead of promoting the traditional “conflict model” of industrial relations, however, “labor” unions wold be encouraged to transform themselves into democratic “ownership unions.” These ownership unions could become society’s primary institutions for promoting universal access to a free market version of economic justice, while continuing to negotiate and advance workers’ economic interests, including worker ownership rights and Justice-Based Management policies.
• Encourage Special Ownership Incentives for Those Engage in Research and Development, especially in the search for new and sustainable sources of energy, ecological restoration and labor-saving technologies. Provide sufficient low-cost credit and royalty-free licensing for enterprises capable of commercializing life-enhancing technologies developed for the military and space programs. Subsidize the development of new methods of conserving and recycling non-repleishable and limited natural resources that are vital to civilization’s long-term survival, at least until suitable substitutes can be discovered and developed. Promote the teaching at all levels of education of universal principles of personal morality and social morality that are based on the inherent dignity and sovereignty of every human person within all institutions of a just social order, including the State.
• Reduce Public Sector Costs. Provide America’s military, policemen and firemen, teachers, and other public-sector workers with a growing and more direct equity stake in the free enterprise system, both as a supplement to their costly pension plans and so that they will better understand and defend the institution of private property. Whenever feasible, transform government-ownerd enterprises and services into competitive private sector companies, by offering their workers (and customers and other stakeholders in capital-intensive operations like TVA) opportunities to participate in ownership, governance and profits.
• Establish Workable Demonstrations of Capital Homesteading at the Community, State, Regional and Global Levels. Launch several Capital Homesteading demonstrations. These would be most effective in areas of high unemployment, such as the for-profit Citizens Land Cooperative now being developed in East St. Louis. Similar projects could be developed on Native American reservations. A major objective would be to evaluate ownership mechanisms, advanced concepts of worker participation in decision-making, and servant leadership developments like Justice-Based Management.
Encourage State and local governments and other countries to promote widespread capital ownership as a basic “Just Third Way” framework for building a sound market economy.
Study the feasibility a national and global citizen-owners “land and Natural Resources Bank” to plan development of Nature’s resources, receive rentals for use of land and natural resources, and distribute citizen dividends among the populations. With the leadership of the United States, urge the United Nations and other international agencies to encourage the sue of such economic development vehicles in order to bring about “peace through justice” in such conflict-torn countries as Iraq, Afghanistan, Pakistan, the Sudan, Kashmir, the Democratic Republic of Congo, Somalia, Burma, Sri Lanka, etc. Such an approach could provide a model “Abraham Federation” solution for resolving the conflict between the Palestinians and Israelis.
• Initiate New Challenges for Multinationals. Provide special encouragement to U.S.-based multinational corporations and global financial institutions to become instruments of peach and a more just world economic order, by broadening access to their ownership base to all citizens of the world community. Encourage businesses to open up future ownership opportunities as they begin harnessing the resources of the sea, the airways and other planets.
• Promote a New Global Monetary System. Encourage the convening of a second “Bretton Woods Conference” to consider the implications of the Kelsonian binary economic model on global currency standards, the feasibility of a signal currency, and more just foreign exchange rates.
The new policy should seek to reform financial markets to address the challenge of global poverty and sustainable development, as well as leveling the playing field among nations for global free and open trade.
Obviously Capital Homesteading is only a proposal. Most of its component parts have been tested and work, at least under present law in the U.S. But the proposal have not yet been adopted by any country as a single blueprint to cover all citizens and to remove the complexity of the current system.
We, of course, remain open to improvements and suggestions. As it stands, as already mentioned, U.S. President Ronald Reagan endorsed the concept when he was governor of the State of California in the 1970s. He also appointed the president of CESJ as deputy chairman of the politically diverse Presidential Task Force on Project Economic Justice.
In 1986 the Task Force produced a unanimous report, High Road to Economic Justice. The Task Force advocated the spread of worker ownership initiatives through Kelsonian ESOPs throughout Central America and the Caribbean. This would counter the growing communist threat in that region. Pope John Paul II encouraged CESJ in its work on the principles on which the proposal is based in two meetings at the Vatican, one with members of Polish Solidarity.
Most critical and timely, we hope that Pope Francis will request that an interfaith team of scholars study and debate binary economic theory, the Kelso-Adler principles of economic justice and the proposed reforms to current monetary, tax, inheritance, labor, welfare and other key economic institutions of the global social order. The goal will be to encourage reforms to provide universal personal access to equal capital ownership opportunities in the future.
This is based on private property rights, as expressed in Article 17 of the Universal Declaration of Human Rights. The pope can then determine whether or not an encyclical should be issues to tach all citizens and leaders the triad of principles of Economic Justice to guide them, in the words of the world design science visionary R. Buckminster Fuller, on how to “make the world work for 100 percent of humanity in the shortest possible time with spontaneous cooperation and without ecological offense or the disadvantage of anyone.”
http://www.nationofchange.org/we-need-new-deal-millennials-1371565781
