Joe Biden believes to his core that there’s no greater economic engine in the world than the hard work and ingenuity of the American people. Nobody has more respect for the working women and men who get up every day to build and sustain this country, or more confidence that they can meet the challenges we face.
Make no mistake: America has been knocked down. The unemployment rate is higher than it was in the Great Recession. Millions have lost jobs, hours, pay, health care, or the small business they started, through no fault of their own.
The pandemic has also laid bare some unacceptable truths. Even before COVID-19, the Trump Administration was pursuing economic policies that rewarded wealth over work and corporations over working families. Too many families were struggling to make ends meet and too many parents were worried about the economic future for their children. And, Black and Latino Americans, Native Americans, immigrants, and women have never been welcomed as full participants in the economy.
Biden believes this is no time to just build back to the way things were before, with the old economy’s structural weaknesses and inequalities still in place. This is the moment to imagine and build a new American economy for our families and the next generation.
An economy where every American enjoys a fair return for their work and an equal chance to get ahead. An economy more vibrant and more powerful precisely because everybody will be cut in on the deal.
In this time of crisis, Joe Biden has a plan to create millions of good-paying jobs and to give America’s working families the tools, choices, and freedom they need to build back better.
That starts with a real strategy to deal with the pandemic. We can’t solve the jobs crisis until we solve the public health crisis. Trump may have forgotten about COVID, but COVID hasn’t forgotten about us. On March 12, April 27, and June 11, Biden laid out a comprehensive strategy to get the pandemic under control and effectively reopen the economy — an approach that will both protect the health and safety of our people and boost economic activity. He will start implementing that plan on Day One.
Biden will also provide further immediate relief to working families, small businesses, and communities. Biden will:
- Provide state, local, and tribal governments with the aid they need so educators, firefighters and other essential workers aren’t being laid off.
- Extend COVID crisis unemployment insurance to help those who are out of work.
- Provide a comeback package for Main Street businesses and entrepreneurs.
And, Biden will immediately put people to work by enlisting them to help fight the pandemic, including through a Public Health Jobs Corps.
But that’s just the start. The Biden economic recovery plan for working families will build our economy back better. Whenever America has had its back against the wall, we have acted together to lay the foundation — through public investment and a strong social contract — for the American people to pull together and push forward.
The Biden plan will mobilize the American people in service of four bold, national efforts to address four great national challenges. As President, Biden will:
- Mobilize American manufacturing and innovation to ensure that the future is made in America, and in all of America. We’ve seen the importance of bringing home critical supply chains so that we aren’t dependent on other countries in future crises. But Biden believes we can’t stop there — he is releasing a plan today to build a strong industrial base and small-business-led supply chains to retain and create millions of good-paying union jobs in manufacturing and technology across the country.
- Mobilize American ingenuity to build a modern infrastructure and an equitable, clean energy future. We’ve seen the need for a more resilient economy for the long-term, and that means investing in a modern, sustainable infrastructure and sustainable engines of growth — from roads and bridges, to energy grids and schools, to universal broadband. Biden will soon release updated proposals to meet the climate crisis, build a clean energy economy, address environmental injustice, and create millions of good-paying union jobs.
- Mobilize American talent and heart to build a 21st century caregiving and education workforce which will help ease the burden of care for working parents, especially women. We’ve seen in this pandemic the immense burdens working parents, and especially women, carry in juggling their jobs and their caregiving responsibilities. We’ve learned anew how hard this work is, and how underappreciated those who do it are. Joe Biden will soon announce a plan to make it far easier to afford child care and to ensure aging relatives and people with disabilities have better access to home and community-based care; to elevate the pay, benefits, and professional opportunities for caregivers and educators; to create millions of good-paying new jobs in these areas with a choice to join a union; and to free up millions of people to join the labor force and grow a stronger economy in return.
- Mobilize across the board to advance racial equity in America. We’ve seen again this year the tragic costs of systemic racism. Biden believes that addressing those costs has to be core to every part of the economic agenda, and also a distinct priority in its own right. As President, he will pursue a dedicated agenda to close the racial wealth gap, to expand affordable housing, to invest in Black, Latino, and Native American entrepreneurs and communities, to advance policing and criminal justice reform, and to make real the promise of educational opportunity regardless of race or zip code.
Building back better means an updated social contract that treats American workers and working families as essential at all times, not just times of crisis –– with higher wages, stronger benefits, and fair and safe workplaces. We’ve seen millions of American workers put their lives and health on the line to keep our country going. As Biden has said, let’s not just praise them, let’s pay them — a decent wage, at least $15 per hour, and ending the tipped minimum wage and sub-minimum wage for people with disabilities, and strong benefits so they can live a middle class life and provide opportunity for their kids. This starts with passing the Protecting the Right to Organize (PRO) Act, providing public service and federal government workers with bargaining rights, and taking other steps to make it easier for workers to organize unions and collectively bargain. Biden will also address discrimination and harassment in the workplace, and pass the Paycheck Fairness Act as the next step in efforts to ensure women are paid equally for equal work. He will pass universal paid sick days and 12 weeks of paid family and medical leave. And he has a plan to ensure that every American has access to quality, affordable health care, by providing a public option and lowering costs for care and for prescription drugs.
Building back better means helping small businesses and entrepreneurs come out the other side of this crisis strong, while demanding more from corporate America. We’ve seen the second bailout in 12 years for big corporations and Wall Street. And we’ve seen the Trump Administration provide all the tools necessary to help big businesses and well-connected cronies, while small businesses had to jump through hoops and many couldn’t access the relief they needed. Biden will ensure that corporate America finally pays their fair share in taxes, puts their workers and communities first rather than their shareholders, and respects their workers’ power and voice in the workplace. And Biden will help small businesses manage through the pandemic and recover, so that millions of entrepreneurs can get back on their feet and carry this economy forward.
To see this agenda through, Joe Biden will make new, bold investments and speed up the timetable for many of the 10-year investments he has already announced. He will pay for the ongoing costs of the plan by reversing some of Trump’s tax cuts for corporations and imposing common-sense tax reforms that finally make sure the wealthiest Americans pay their fair share.
Today’s elevated unemployment will mean lower demand, which will mean lower growth for our economy (which relies on consumption). A robust jobs agenda will increase demand. That is why many economists agree that if we fail to make far-reaching, productive investments, it will undermine not only our long-term growth potential, but also our long-term fiscal situation. Additionally, for communities of color that are experiencing disproportionate rates of unemployment, and for young people entering the workforce, getting to full employment as fast as possible is critical to their futures and all of America’s future. Those who argue we can’t afford these investments are the same people who doled out trillions in giveaways to the wealthy and corporations the past three years. Now they’re saying there’s no money left for working families? Joe Biden fundamentally rejects that notion.
Today, Biden is releasing details on the first part of his agenda, with a separate factsheet on his strategy for manufacturing and innovation to ensure the future is made in America, in all of America, by American workers.
Gary Reber Comments:
While Joe Biden covers significant points in this platform statement, he fails to address the situation in which the United States is lurching toward, that is a society in which power and money are increasingly concentrated and where upward mobility is constrained, amid shocking levels of poverty. He states that he wants to see “an economy where every American enjoys a fair return for their work and an equal chance to get ahead. An economy where every American enjoys a fair return for their work and an equal chance to get ahead. An economy more vibrant and more powerful precisely because everybody will be cut in on the deal.”
Biden’s plan is to “create millions of good-paying jobs and to give America’s working families the tools, choices, and freedom they need to build back better.”
Yet his entire focus for achieving this is couched in job creation and job advancement. NOWHERE does Biden address the situation of increasingly concentrated capital wealth, the non-human means owned by individuals, independently or in association with others, which represent the productive capital factor input to creating goods and services. In concentrated capital ownership terms, the estimates are roughly 1 percent own 50 percent of the corporate wealth with 10 percent owning 90 percent. This leaves 90 percent of the people scrambling for the last 10 percent, with them dependent on their labor worker wages to purchase capital assets and speculate on securities exchanges purchasing stock previously owned. Thus, we have the great bulk of the people providing a mere 10 percent or less of the productive input. Contrast that to the less than 5 percent who own all the productive capital providing 90 percent or more of the productive input, and who initiate and oversee most of the technological advances that replace labor “work” by workers with capital “work” by the owners of productive capital assets.
As a result, the trend has been to diminish the importance of employment with productive capital ownership concentrating faster than ever, while technological change makes physical capital ever more productive. Corporate decision makers know this, whether in the United States or Communist China, or anywhere organized assemblies of people engage in production. Technology is an easier and faster way to get a job done with quality consistency. Because technology increases the profitability of companies throughout the world, technology always has the advantage over human labor when the costs of them are the same. But because this is not well understood, what we as a society have been doing is to continually shift the work burden from people labor to real physical capital while distributing the earning capacity of physical capital’s “work” (via capital ownership of stock in corporations) to non-owners through government make-work job creation, minimum wage requirements, and welfare programs, all supported and advocated by Biden. Such policies do not function effectively.
What Biden should be advocating and committed to implement is a democratic growth economy in which the ownership of productive capital assets would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the existing corporate capital asset wealth (until death). As a result, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen (all children, women and men), including the traditionally disenfranchised poor and working and middle class –– all inclusive prosperity. EVERY citizen, including those working for for-profit corporations, would become a full-voting capital asset owner in the corporations growing the economy, effectively enabling operating decisions to be made from the bottom up, eliminating the lopsided distribution of profits, and creating democratic control.
Thus, productive capital income, from full corporate earnings dividend payouts, would be distributed more broadly and the demand for goods, products, and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote and support environmentally responsible economic growth and more profitable and responsible enterprise. That also means that society can profitably employ unused productive capacity and invest in more “green,” environmentally productive and enhanced productive capacity to service the demands of an environmentally responsible growth economy.
As a result, our business corporations would be enabled to operate more efficiency and competitively, and greener, while broadening wealth-creating, income-producing capital ownership participation, creating new capital owners and jobs resulting from the green growth spiral, and “customers with money” to support the green goods, products, and services being responsibly produced by the added technology, renewable and “green” energy systems, manufactories, rentable space for entrepreneurial endeavor and infrastructure, both repaired and new, added to the economy.
Technological change and our peoples’ secure financial ability to support responsible green production is the way to renew and enhance our environment and address the climate crisis.
Technological change makes 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). Industries are always changing, evolving and innovating. 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.
Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians, including Joe Biden, formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment –– thus the political focus on job creation and redistribution of wealth rather than on equal opportunity to produce under conditions of full green and responsible production and broader capital ownership accumulation. This is manifested in the myth that labor work is the ONLY way to participate in production and earn income, and that individual talent and effort are what distinguish the wealthy from the non-wealthy. Long ago that was once true because labor provided 95 percent of the input into the production of products and services. But today that is not true. Physical capital provides not less than 90 to 95 percent of the input. Full employment as the means to distribute income is not achievable, except while building a future economy that can support secure financial health, a green enhanced environment, and general affluence for EVERY citizen. And then, that eventually will cease to result in full employment, as the vast majority of those eligible and willing to work will not be needed once general affluence is achieved. When the “tools” of capital owners replace labor workers (non-capital owners) as the principal suppliers of goods and services, labor employment alone becomes inadequate. Thus, under the present unjust system, we are left with government policies that redistribute income in one form or another.
Biden is essentially promoting a disguised trickle-down, which is really just pretend as the system perpetuates concentrated capital ownership as the economy grows.
Instead, in a democratic growth economy, one’s live starts at the time of birth as a capital owner and then when one “enters the economic world as a labor worker, to become increasingly a capital worker as you go along, and at some point to retire as a labor worker and continue to participate in production and to earn income as a capital worker until the day you die.
Biden, as most Americans, still believes full employment will solve our income distribution problems. He is not alone as this is what major political figures have always maintained. One can substitute for “full employment” with boosts in the minimum wage and a “guaranteed” universal basic income and other “safety net” entitlements as solutions to our income distribution problems, without ever addressing how to democratize wealth and prevent the further accumulation of concentrated capital wealth among those people who already OWN America.
Joe Biden should head the wisdom of binary economist and author Louis Kelso who was quoted as saying, “Conventional wisdom says there is only one way to earn a living, and that’s to work. Conventional wisdom effectively treats capital as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”
Joe Biden wants to “Mobilize American manufacturing and innovation to ensure that the future is made in America, and in all of America. Biden wants to “build a strong industrial base and small-business-led supply chains to retain and create millions of good-paying union jobs in manufacturing and technology across the country.”
This, I concur with.
Unfortunately, our political leaders, including Joe Biden with his support of America-damaging trade agreements, over the past five decades have paved the way for an exodus of our manufacturing, led by the controlling owners of American corporations and industries, and their political allies, resulting in direct investment in the development and execution of manufacturing in slave-wage countries. Aided by years of massive tax cuts and incentives they built manufactories and offices around the world, shutting down manufactories and jobs in our homeland. This investment and exodus have enabled those countries to build their productive and technological capabilities, and in the case of Communist China become the world’s manufactory, while thousands of factories were shut down and millions of jobs were eliminated in the United States. Restoring manufacturing in the United States no doubt will prove a rough transition, as just in the past two decades since free trade was opened, China has dominated the production of goods previously manufactured in our homeland.
The offshoring of production is the reason the United States is deficient in critical medical equipment, medicines, and supplies as Americans face widespread shortages in the midst of the COVID-19 pandemic. We have put ourselves at unnecessary peril.
For the controlling owners of American corporations, it was cheaper to relocate production offshore, invest and manufacture goods offshore, and import back the products to the United States. Expanded free trade was supported with tax breaks to corporations offshoring production. Thus, production and importing back for American consumption was made even cheaper and thus more profitable still.
While intermediate supply chain and final goods exported from Communist China to the United States have been halted in some industries, we have yet to rebuild and expand our own homegrown manufacturing capabilities, and, as a result, we remain dependent on foreign supply chain and finished goods production. Not only are we still dependent on China, but even products in Japan’s and South Korea’s supply chains are essentially made in China and other parts of Asia, with materials and goods delivered to those countries, and then exported to the United States. The same situation is true for goods shipped to Mexico from Asian sources and then exported as final goods to the United States –– or from Asia to Europe, and then to the United States.
The actions that got the United States where we are today include the failure to take United Auto Workers Walter Reuther’s advice to keep wages where they are and help workers get their increases from the bottom line. Reuther warned that higher wages would destroy entire industries by lowering their competitiveness in international trade. Had we taken Reuther’s advice, businesses would not have set up shop in slave-wage countries like China.
Why is broadening ownership so important? Ownership entails reaping the fruits of all contributions that one makes proportionately to the productive process, whether via the productive capital one owns or one’s labor, or both. A person’s labor is compensated either by wages or by a share of what the enterprise produces that is attributable to their labor contribution. It is important for ALL the employees to own shares of the companies that employ them to build a productivity culture throughout the organization. Owning thereby entitles workers to the rewards of their own labor as well as that produced by their proportionate share of the physical capital.
No one knows how much disruption our interconnected and service-oriented economy can endure, especially since the past few decades have seen a debilitating decline in and rapid exodus of our manufacturing capabilities. We should have instead been in constant retooling mode with restoration of our manufacturing capabilities and constant technological improvement through research and development. As a result, we no longer manufacture the clothing, appliances, electronics, furniture, cars, infrastructure materials, lifesaving medical equipment, medicines and all manner of supply chain production, necessary to live and consume in today’s world.
Such dependency is now painfully evident, as administrations over time have allowed us to become dangerously reliant on medical equipment and supplies, and drug production from Communist China.
While our production of critical medical equipment and supplies is woefully inadequate, China produces a reported 115 million N95 and surgical face masks a day, with a surplus so great that China can supply to countries in need.
If we hadn’t outsourced nearly all of our manufacturing with job-killing free-trade agreements, we would have had the capacity to manufacture testing kits for the COVID-19 disease and not been waiting on Communist China to send them to us (the lack of test kits, rapid testing and investigative contact tracing is the reason we lost the ability to spot and contain the virus). We also would have the ability to manufacture the N95 face masks, shields, gowns, gloves, lifesaving ventilators and other equipment the medical community is in a panic to have to meet the life-threatening challenges of the crisis. While we are supposedly among the world’s leading manufacturers of specialized lifesaving ventilators, supply levels are woefully inadequate and must be urgently ramped up to meet demand and for preparedness in the future.
The net effect has been a significant drop in our homeland production and our growing dependency on foreign production. Regrettably, producer-corporations have unnecessarily extended their supply chains and finished goods manufacturing to all parts of the globe and invested in lower-cost foreign production in order to boost short-run profits and share prices for their owners. As a result, the American economy is exceedingly vulnerable to external shocks to our supply chains as the world’s supply chains are fixing to buckle and freeze-up, thereby causing production and incomes to fall abruptly. In turn, shrunken incomes and cash flows will collapse the edifice of non-productive debt and speculation that has been piled atop the American economy.
This crisis should finally make everybody realize that there needs to be self-sufficiency for EVERY individual and the country. We must decouple our manufacturing reliance on other countries, to the greatest extent possible, and fully develop our economic infrastructure to produce in our homeland, ensuring universal citizen capital ownership, as individuals.
Capital Homestead Act
As a matter of national policy, Joe Biden should immediately advocate for the enactment of the Capital Homestead Act (aka Economic Democracy Act and Economic Empowerment Act) proposed by the Center for Economic and Social Justice. The act would establish citizen tax-sheltered Capital Homestead Accounts (CHAs) for each citizen (see http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/).
The Act provides for the post-pandemic response to reform the system for inclusive growth and prosperity, broadening capital ownership simultaneously. The financial instruments and tools provided in the Act would empower EVERY citizen to transition from a non-owning wage or welfare slave, beholden to those who are owners or the government, into an economically independent owner of wealth-creating, income-generating productive capital.
To build a future economy, self-liquidating zero percent interest capital credit loans, collateralized by capital credit insurance, would be equally allocated, on an annual basis based on the projected capital needs of businesses, to EVERY citizen (children, women and men, from birth to death) exclusively for the purpose of investing in the new growth and transferred capital of the economy. These loans would cover all costs of purchasing voting, full-dividend payout shares of corporations and cooperatives that produce goods and services for potential national and global consumers.
The access to insured, self-liquidating zero percent interest capital credit loans would have to be truly universal to remove the stigma attached to means-tested programs such as food stamps. An equal amount of annual capital credit would go to everyone, whether they’re employed or not. No strings attached. No means test. No politicians demanding that you seek out even a menial job before getting the loans.
Each citizen’s capital acquisition loans would be wholly repayable with the full pre-tax stream of future profits earned on the shares, without any requirement to pledge past personal savings or reduce salaries, wages or benefits to invest.
The new monies would be used to invest in responsible and sustainable, environmentally sound growth projects and infrastructure, including alternative energy expansion and other climate crisis mitigation. These new development projects would hire workers in addition to creating new owners. This will be necessary since the current crisis will mean conventional private business investment will collapse across the board and such much needed investment will no longer be forthcoming from the private sector to revive the economy and create general affluence for EVERY citizen.
With the new monies, all manner of environmentally enhanced and sustainable projects can be planned and executed such as clean energy expansion, carbon pollution elimination, public transit development, robust infrastructure construction, smart grid expansion, green building, new “smart” cities, urban redevelopment, housing developments, homeland manufacturing capabilities, etc.
Capital Credit And Government Loan Guarantees
We need to use the powerful and proper function of commercial banks to create money by making loans and canceling money once loans are repaid. For this, commercial banks charge a one-time service fee (not interest) to cover administrative costs. Therefore, creating money can be entirely interest free (but not cost free). In addition to the principal to be repaid on interest-free capital credit loans to citizens, there would be a one-time premium to cover the risk of loan default as well as reasonable charges for the services of the Federal Reserve and commercial bank lenders.
Instead of printing trillions of dollars and giving it away, we need to make the money available as commercial loans with repayment guaranteed by the federal government.
In the immediate short term while the pandemic has the economy locked down, any corporation that receives an interest-free capital credit loan from a commercial bank “sold” to the Federal Reserve through the Discount Window with a federal government loan guarantee (loan default insurance via a Capital Diffusion Reinsurance Corporation or CDRC) would be required to issue full-dividend payout, voting shares in the amount of the proceeds of the loan and allocate the shares equally to each employee. The shares would be put into an escrow account until such time the capital credit loan is repaid. For the duration of the emergency, all debt service payments would be suspended.
Throughout the pandemic, the corporation benefiting from the federal government-backed grants, loans and loan guarantees would pay EVERY one of its employees an equal amount of emergency wage income sufficient to meet subsistence needs. These subsistence wages could not be used for acquiring capital. Payments for consumption needs should be in the form of grants that are passed through dollar for dollar to employees during the duration of the crisis to support purchase demand and enable the economy to keep functioning. The emergency capital credit loans would be used to finance broadly owned new productive capital investment to restart production and expand productive capacity.
Once the interest-free (but not cost free) working capital and new long-term capital loans are repaid with a reasonable capital cost recovery period, the money that was created to operate and purchase the capital and then repaid would be cancelled, avoiding both inflation and deflation. The capital itself would continue to produce wealth and generate consumption income for its new owners from ongoing full-dividend payouts from profits distributed as dividends tax deductible by the corporation but treated as regular income by the recipients. The capital would produce income indefinitely with proper maintenance and with restoration in the technical sense through research and development.
When normal operations resume, the corporation would cease emergency subsistence payments, with employees paid at market-determined rates, with any increases coming from profits instead of increasing fixed wages and benefits.
Under this proposal, when a corporation becomes profitable, pre-tax profits paid out as dividends (tax-deductible to the corporation) would be paid through tax-sheltered employee ownership accounts to the loan-issuing commercial bank, thus canceling the corporation’s indebtedness. As the loans are repaid, shares would be released from escrow and put into each employee’s individual Employee Capital Homestead Account (ECHA), a vehicle similar to today’s tax-sheltered Employee Stock Ownership Plan (ESOP) accounts. (ECHAs could later transition to full CHAs when the Capital Homestead Act for all citizens is passed and implemented.) Full-dividend payouts would be passed through (after reasonable deductions for bank administration costs) to each employee to use for consumption.
A politically practical alternative to creating a new legal vehicle (the ECHA) would be to channel government-guaranteed loans made through local banks to a company’s Employee Stock Ownership Plan Trust. ESOPs, which are tax-advantaged corporate finance vehicles, are already recognized under United States law, and thus would not require additional Congressional approval. ESOPs can be used by any company incorporated as a C-Corporation or an S-Corporation. For purposes of receiving government-guaranteed loans for working capital or long-term growth capital, ESOPs should be required to issue and allocate new, full-dividend, voting shares to all employees on an equal basis.
The law allows a company to deduct from its taxable income any future profits used by the ESOP to pay for shares or distributed to employees through the ESOP. Banks assess the feasibility of a company’s loan on the basis of the future stream of pre-tax profits, projected to be earned by the company within a reasonable period of years. The company’s cash contributions and dividend payments to the ESOP repay the acquisition loan. Participants sell their shares to the ESOP for cash when they leave the company.
In a worst case scenario, in the event of loan default on the part of the corporation, the federal government making the emergency loan guarantee would repay the balance of the loan to the issuing commercial bank, in which case the loan is extinguished and the proceeds are used to redeem the commercial bank’s paper (promissory note) from the Federal Reserve.
Since 1985 in the United States, commercial bank loans for industry, commerce, and agriculture that have gone bad typically have been between 1 and 5 percent (https://www.federalreserve.gov/releases/chargeoff/delallsa.htm). Assuming that 5 percent of all government-insured commercial bank loans may default, a $2 trillion+ loan guarantee package would cost the government a lot less –– $100 billion or more depending on the total trillions of dollars guaranteed. The government can waive an insurance premium or, for example, charge a 1 percent premium, in which case the government would collect $20 billion and reduce the loss by that amount.
To produce emergency medical and other supplies needed during the COVID-19 pandemic new “emergency money” can be channeled to private sector businesses. Such money should flow as loans through the ESOP financing mechanism. The ESOP can create equal capital ownership opportunities for every employee in the companies producing the emergency supplies. The government would serve as the guarantor of those loans, and as the customer that purchases and distributes the emergency goods where needed.
In immediate and future time frames, we must ensure that federal government grants and loans do not end up with corporations whose controlling owners would buy back their stock, in order to reduce the number of shares so the remaining shareholders can consolidate more ownership, and buy up the assets auctioned off by corporations that go out of business during the pandemic. Otherwise, without ownership-broadening stipulations tied to grants and loans, the result will be the ownership of our nation’s wealth will become even more concentrated than before the pandemic struck. Consequently, there will be more Americans poorer as poverty spreads while multi-millionaires and billionaires become wealthier.
Recovery Money Creation
As the economy recovers, all money backed by government debt should be gradually retired and replaced with money backed by private-sector productive capital assets.
After termination of emergency financing, EVERY citizen would be able to establish a Capital Homestead Account (CHA) that is legally advantaged to acquire new qualified full-dividend payout, voting shares of any corporation with fully insured, interest-free capital credit. A one-time premium to cover the risk of loan default as well as reasonable charges for the services of the central bank and bank lenders would be in addition to the principal to be repaid on capital credit loans to citizens. The corporations eligible would be both established and startups, and would use the money exclusively to fund viable projects to grow the economy. CHAs, as with the temporary ECHAs, would make the debt service payments with pre-tax dividends to Federal Reserve-backed commercial banks issuing the capital credit, and afterwards, upon liquidation, paid to citizen beneficiaries as regular taxable personal income.
As part of the normal money creation process, Federal Reserve policies should allow for covering reasonable and fair financing costs of the central bank and commercial banks providing interest-free capital credit loans annually and equally to EVERY citizen for the exclusive purpose of financing future capital expansion via corporations. If a corporation rejects citizen financing, they would not qualify for interest-free capital credit through the Federal Reserve/commercial banking system. Political and media pressure will help to persuade corporations to do the right thing and have ALL citizens share in our collective prosperity.
Our government recently announced, via Treasury Secretary Steven Mnuchin, it would take ownership stakes in airlines in exchange for grants. A better solution, similar to ECHA financing, would be for each citizen, as an individual, to have an equal ownership share in the particular airline as a result of the government’s billions of dollars in grants to the airlines or any other industry to be bailed out.
The grants or alternatively preferred government insured capital credit would finance the purchase of new or existing productive assets needed by businesses. Future earnings on the shares would pay off the grants or loans. Once the grants or loans are repaid, the money created to purchase the capital would be cancelled, avoiding both inflation and deflation. The capital itself would continue to be a source of wealth and generate consumption income for its new owners.
Capital Credit Insurance
A note about insurance: Once the economy has recovered, capital credit loans would be insured and guaranteed against loan default by private capital credit insurers, commercial risk insurers or a federal government reinsurance agency (á la the Federal Housing Administration mortgage insurance concept) –– the Capital Diffusion Reinsurance Corporation (CDRC) –– through which the loans would be guaranteed. The CDRC would reinsure any portion of any financing risk assessed as reasonable and insurable but not already insured by the commercial capital credit insurance underwriters. In establishing the CDRC, the federal government would not be undertaking a new responsibility but merely simplifying and rationalizing an existing one. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.
Such capital credit insurance would substitute for the security now demanded by lenders to cover the risk of non-payment, thus enabling the poor and others with no or few assets (the 99 percent) to overcome the collateralization barrier that excludes them from access to the means to finance their ownership of wealth-creating, income-generating productive capital. (A portion of their capital credit allotment will be used to cover the one-time cost of capital loan insurance and bank service charges.)
Before the loan is made, the lender, risk insurance company, and other entities will first determine the “feasibility” of each particular loan. (“Feasibility” means that the enterprise’s new capital investment is expected to generate enough profits to pay for itself within a reasonable capital cost recovery period. Such a feasibility analysis will judge the soundness of the enterprise that needs to purchase the new capital assets, including the quality of its management and workforce, its current and future markets, etc.)
Self-liquidating capital credit, collateralized by capital credit insurance, is critical for stimulating the economy’s recovery and responsible growth. Insured, interest-free capital credit should be made available annually on an equal basis to ALL citizens exclusively for investment, turning today’s non-owners into economically independent owners of productive capital simultaneously with the responsible growth of the economy. This credit would finance the purchase of new or existing productive capital assets needed by businesses. Future share earnings generated by the investments would pay off the acquisition loans –– in other words, past savings or reductions of current consumption income would not be necessary to finance capital formation.
Once the commercial bank loans are repaid, the money created to form the new productive capital would be cancelled, avoiding both inflation and deflation, and continue to generate consumption income for its new owners.
Every new productive capital increment added to the economy would generate future earnings to pay for its financing. Consequently, normal market forces would synchronize effective demand and supply for economic growth. This would continue as long as the new capital assets serve as an additional source of consumption income for today’s non-owning citizens, particularly the poor and others who do not have sufficient and secure incomes, thus reducing the need for government taxpayer redistribution and dependency on welfare, open and concealed. In this way, workers and other current non-owner citizens would help sustain economic growth and secure their own financial independence as they grow their wealth by becoming owners of the future increase in capital productiveness.
No Hoarding Or Injustice
The response to our nation’s health and economic crisis, during the epidemic and post-COVID-19, cannot be another money-making, hoarding, and capital ownership-concentrating opportunity for the already wealthy capital ownership class and Wall Street. We need honest, third-party oversight and strict protections to ensure equal opportunity of participation in the rebound and growth of our economy on the part of EVERY citizen. We need to impose strong regulation and accountability to ensure there are not no-strings-attached “stimulus” handouts for corporations and corporate executives, such as stock buybacks and executive bonuses, and stop such advantageous handouts from occurring and enhancing their personal wealth. Otherwise, millions of Americans will never escape financial peril.
Further, the insurance industry companies, who receive a federal government bailout, must not be permitted to raise premiums on Americans due to the effects of the COVID-19 outbreak on private employer-based healthcare plans.
We must stop the Federal Reserve from preemptively monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and billionaire private investors, and begin creating an asset-backed currency that could enable every child, woman, and man to establish a super-IRA or asset tax-sheltered Capital Homestead Account 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.
We must also ensure that any corporation that benefits from emergency aid does not lay off workers, pays workers a livable wage, finances growth by issuing and selling new shares and does not rip-off consumers.
Citizen-Owned Federal Reserve
One feasible way to significantly broaden capital ownership simultaneously with the responsible growth of the economy 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.
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 universal capital ownership opportunities for ALLl Americans.
The Federal Reserve, which has been largely responsible for the powerlessness of most American citizens, should set an example for all the central banks in the world. Members of the Federal Reserve need to wake up and implement Section 13, Paragraph 2, which directs the Federal Reserve to create credit for local banks to make loans to finance economic growth. We should not destroy the Federal Reserve or make it a political extension of the Treasury Department, but instead reform it. The Federal Reserve no longer should be controlled by government. Instead, the American citizens in each of the 12 Federal Reserve Regions should become the owners and regulate the monetization process. The result will be that money power will flow from the bottom up, not from the top down, not for consumer credit, not for credit that doesn’t pay for itself or non-productive uses of credit, but for credit for productive uses to expand the economy’s rate of socially responsible and environmentally enhanced growth.
By implementing Section 13 of the Federal Reserve Act the central bank can be used as a means to make every American a productive capital owner, serving as the only alternative to the two twin oligarchies of capitalism and socialism.
Further Economic Measures
Further economic measures will be needed to address the recession and recovery.
To meet the full costs of the government and start paying down its debt, a single tax rate should be imposed for all incomes from all sources above personal and family exemption levels so that the budget could be balanced automatically and even allow the government to pay off the growing unsustainable long-term national debt. The exemption should be sufficient to meet each citizen’s or family’s common domestic needs. The poor would pay the first dollar over their exemption levels as would the hedge fund operator and others now earning billions of dollars from capital gains, dividends, rents and other property incomes which under some tax proposals would be exempted from any taxes. Other personal taxes, such as payroll taxes, should be phased out. Remove all tax loopholes to eliminate corporate and personal tax avoidance, and business subsidies. Pay out of general revenues for all promises for Social Security, Medicare, government pensions, health, education, rent and subsistence vouchers for the poor until their new jobs and ownership accumulations provide new incomes to substitute for the taxpayer dollars to fill these needs.
To encourage full payout of corporate pre-tax earnings and finance new capital formation through the issuance and sale of new shares, dividends should be tax-deductible at the corporate level, enabling corporations to reduce their tax liability to zero. Dividends should be taxed as personal consumption incomes, except when used to pay for “qualified” shares (i.e., shares meeting required standards) held within each citizen’s tax-sheltered trust account. To pressure corporations to finance their growth, other than with retained earnings and corporation debt (neither of which creates any new owners), and pay out their full earnings as dividends to their actual owners, the corporate tax rate should be raised to at least 90 percent.
Leadership And Resolve
To overcome the COVID-19 coronavirus pandemic threatening our lives and our economy will require leadership, resolve, scientific knowledge, planning and resources. We must adopt laws promoting major reforms in monetary policy, central banking, tax and other laws for establishing a sustainable, resilient and just economy. Through a new visionary political and economic paradigm, we can build for EVERY person a more environmentally sound and sustainable economy that secures and enhances our personal futures, with preparedness to deal with future crises.
Whether it is Joe Biden or Donald Trump, the weight of the challenge will rest on their shoulders and the shoulders of the women and men in our representative Congress. We are at a critical juncture –– either it is a JUST third WAY of economic personalism or fascist oligarchy.
America has tried the Republican “cut spending, cut taxes, and cut ‘entitlements,’ eliminate government dependency and shift to private individual responsibility” and the Democrat “protect ‘entitlements,’ provide tax-payer supported stimulus, lower middle and working class taxes, tax the rich and redistribute” through government brands of economic policy, as well as a mixture of both. Republican ideology aims to revive hard-nosed laissez-faire appeals to hard-core conservatives but ignores the relevancy of healing the economy and halting the steady disintegration of the middle class and working poor.
One sign of hope is the pandemic has turned millions of people into good neighbors with a sense of realization that we are all interdependent on each other. Hopefully that can translate to reforming the system so that ownership and power concentration can be reversed with EVERY child, woman, and man having the right to property and equal opportunity access to the means of acquiring and possessing property to enhance the economic security, safety, and well-being of ALL. This will ensure inclusive prosperity and economic justice as our nation progresses into the future in harmony with all the people on Earth.
