On July 222, 2013, Mike Lux writes on The Huffington Post:
Here are two headlines from theWashington Post business pages the other day, lined up side by side on the page:
“Strong Earnings Send Stocks To New High” and “US Middle Class Still Suffering Amid Economic Recovery”
The first foundational thing we have to understand is that we are living in an era where not only is wealth concentrated, but entire industries are becoming so concentrated as to be near-monopolies. The pioneering work of Barry Lynn in his book Cornered: The New Monopoly Capitalism and the Economics of Destruction, and in numerous other articles written as a fellow at the New America Foundation, documents this trend — and its terrible impact on our entire economy and society — in industry after industry.
what Lynn’s work has documented is how this trend toward consolidation, concentration, and near-monopoly power has taken over industry after industry, and how this fact has been crushing entrepreneurialism and has warped our economy in a hundred different ways. The DOJ stopped enforcing most of the anti-trust laws during the Reagan administration, and no administration since has picked up the task since. We are all paying the price, and it is an incredibly steep one.
The second foundational thing we need to understand is how the financialization of the economy is weakening the entire middle class. The Too Big To Fail banks are 30 percent bigger than they were in 2008, and the industry takes a higher and higher share of both total corporate profits and the entire economy all the time. Financial services as a share of the economy has tripled since 1950. Compensation in the financial industry used to be about the same as that of other industries, but since 1980, it has skyrocketed and is now 70 percent more on average. Financial services now make up more than 40 percent of all corporate profits in this country. What all this means is that a very small number of bankers is now hoarding more and more of the money circulating in the economy. And it’s not like they are investing in mom-and-pop start-ups, either: more and more of the money is going into speculative trades and overseas investment, and less and less into entrepreneurs trying to start a new business.
The third foundational thing is that we are stuck in a low wage economy, and the “recovery” isn’t doing anything to make that better. After steady and consistent growth in the 40 years after the New Deal, average wages compared with inflation have been pretty flat in the 40 years since. This recovery is the worst we have ever seen in terms of wage growth, because the new jobs that are being created are mostly low wage jobs. Median earnings have actually fallen 4 percent since the recession ended (since it ended!) Labor unions no longer have the bargaining clout to make wage gains; the minimum wage hasn’t gone up in six years; decent paying manufacturing and construction jobs are very rare. And in the meantime, inflation in college tuition, health costs, groceries, and utility rates doesn’t seem to be slowing much at all. You want to know the worst insult of all? It is government contractorsthat are creating more low-wage jobs than any other company in America — just what we need, our own government tax dollars driving down wages.
These three factors are killing the 99 percent. They explain why even in the midst of a four-year economic recovery, we still have way too many people unemployed and even more on the edge hanging on for their dear lives.
See Financing Economic Growth With “FUTURE SAVINGS” –– Solutions To Protect America From Economic Decline at http://foreconomicjustice.org/?p=9206.
Also see “Second Income Plan” at http://www.huffingtonpost.com/gary-reber/second-income-plan_b_3625319.html
The reality of the economic state of affairs in the United States is that income inequality, unemployment, underemployment, and anemic GDP growth is rooted in the tectonic shift in the technologies of production and its concentrated ownership, which, as a practical matter, is destroying jobs and devaluing the worth of labor, widening the income gap between the rich and poor and struggling (each resentful and suspicious of the other), and resulting in our inability to achieve double-digit GDP growth.
The result is the consumer populous is not able to get the money to buy the products and services produced increasingly by the non-human factor—physical productive capital—as a result of substituting machines for people. And yet you can’t have mass production without mass human consumption. It is the exponential disassociation of production and consumption that is the problem in the United States economy and the reason that ordinary citizens must gain access to productive capital ownership to improve their economic well being.
The recommended solutions are founded on binary economics.1 Binary economics is a new way of approaching economic reality and as a new paradigm provides a new way of enhancing everyone’s economic well being. The binary or two-factor paradigm recognizes two independent factors of production—human and non-human. This new paradigm relates to the property right to productive capital acquisition and recognizes the essential requirement that universal, individual market participation in productive capital acquisition is essential to putting us on a path to prosperity, opportunity, economic justice, and sustainable growth for the economy as a whole. The tools to achieve universal ownership and enable those without viable productive capital holdings to become owners are the very same credit, insurance, and financial principles and techniques presently employed by existing owners to acquire productive capital with the earnings of capital.
Currently, the system is wedded to the “past savings” approach to capital credit and outdated Keynesian government-dependent solutions. The necessary solutions proposed would achieve broad-based citizen ownership, using asset-backed and insured capital credit made accessible from local banks and the Federal Reserve credit, with the loans repayable, as with 100 percent leveraged S-Corp ESOPs, with tax-free profits (“future savings”). This would automatically free future economic growth from the dictatorship of Wall Street controllers of money for capital assets or bureaucrats controlling debt-backed money from shrinking government loan programs.
To solve this challenge, several policies must be implemented:
1. Tax reform is needed to incentivize broadened individual ownership of corporations by their employees. As an incentive, provide a tax deduction to corporations for dividend payouts, which would tighten-up the right of each owner to his or her full share of profits, a basic and historic right of private property. It would eliminate double and triple taxes on corporate profits, shifting the burden of taxation to personal incomes after exempting initial incomes that would allow low and middle class citizens not to pay taxes on incomes needed to cover basic living expenses. It will also encourage corporations to finance their growth through the issuance of new full voting, full dividend payout shares for financing their productive capital growth needs through Employee Stock Ownership Plans (ESOPs) and Capital Homestead Accounts (CHAs). Politically we need to insist that politicians lift barriers to the democratization of future ownership opportunity, based on sound principle, rather than redistributive taxation.
2. As increasingly more workers acquire ownership stakes in FUTURE corporate productive capital assets using ESOP financing mechanisms, workers will build second incomes to support their living expenses, which in turn means they will be better “customers with money” to support demand for the products and services that the economy is capable of producing. By reason of the higher marginal spending rate on the part of workers’ second incomes, more of the additional income earned by the new capitalists (who have many unsatisfied consumer needs and wants) will be spent on consumption than if the income had been earned by those capitalists who now have concentrated the ownership of productive capital exclusively, and who have few, if any, consumer needs and wants. Such broadened incremental consumption will fuel a demand for more consumer products and services, which in turn will provide incentive for greater productive capital investment.
3. For all Americans, the Federal Reverse needs to create an asset-backed currency that can enable every man, woman, and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. The CHA would process an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national, and global markets. The shares would be purchased using essentially interest-free credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable products and services produced by the newly added technology, renewable energy systems, plant, rentable space, and infrastructure added to the economy. Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and, if necessary, government reinsurance but would not require citizens to reduce their funds for consumption to purchase shares.
4. Reform the tax code such that the tax rate would be a single rate for all incomes from all sources above an established personal exemption level (for example, an exemption of $100,000 for a family of four to meet their ordinary living needs) so that the budget could be balanced automatically and even allow the government to pay off the growing unsustainable long-term debt. The poor would pay the first dollar over their exemption levels as would the stock fund operator and others now earning billions of dollars from capital gains, dividends, rents, and other property incomes.
5. As a substitute for inheritance and gift taxes, a transfer tax should be imposed on the recipients whose holdings exceeded $1 million, thus encouraging the super-rich to spread out their monopoly-sized estates to all members of their family, friends, servants, and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.
6. Eliminate all tax loopholes and subsidies.
These polices would result in rapid and substantial economic growth with the GDP rate in double digits. As a result of the stimulus effect, more REAL, decent paying job opportunities and further technological advancement would be created while simultaneously broadening private, individual ownership of FUTURE wealth-creating, income-generating productive capital assets, which would support second and primary incomes for ALL Americans.
In this new FUTURE economy, a citizen would start to benefit financially at the time he or she enters the economic world as a labor worker, to become increasingly a capital owner, whose productive capital assets contribute as a non-human worker earning a second income, and at some point to retire as a labor worker and continue to participate in production and to earn income as a capital owner until death.
As we ALL contribute to the building of a FUTURE economy that can support general affluence for EVERY man, woman, and child, at some point as the technologies of production further advance there will be far less need for human workers, and productive capital asset ownership, acquired using the self-financing earnings of capital, will become the primary income source for most people. As general affluence becomes more widespread, people will be free and economically secure to pursue their creative desires and pleasures, further contributing to the cultural and societal development of the country.
Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice
Capital Homesteading is a plan for getting ownership, income, and power to every citizen. Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm
1 In simple terms, binary economics recognizes that there are two factors of production: people (labor workers who contribute manual, intellectual, creative, and entrepreneurial work) and capital (land; structures; infrastructure; tools; machines; super-automation, robotics, digital computer processing and operations; certain intangibles that have the characteristics of property, such as patents and trade or firm names; and the like owned by people.) Essentially, capital is any non-human productive asset that is used to create and produce products and services and earn economic gain and income for its owners. Thus, fundamentally, economic value is created through human and non-human contributions. NOTE, real physical productive capital isn’t money; it is measured in money (financial capital), but it is really producing power and earning power through ownership of the non-human factor of production. Financial capital, such as stocks and bonds, is just an ownership claim on the productive power of real capital. In the law, property is the bundle of rights that determines one’s relationship to things.
