On July 20, 2012, Robert Sobel writes on the Examiner.com that for over thirty years, the growing gap between the rich and poor in the United States has widened at an alarming rate. The once proud and strong middle class has deteriorated over the last three decades and if the American dream is to be achieved again, the country needs to drastically change.
Unfortunately, Sobel does not have the solution that will solve the economy’s woes and actually create a strong middle class. He concludes with:
If the tax rate is increased on the highest earners, including the capital gains rate, the United States will have the revenue to truly get back on track. What conservative voters don’t seem to understand is that the best way to chop-away at the debt is to put Americans back to work. Creating an economic agenda that enhances the workforce and increases wages, in the long run, will get the national debt down to a manageable number.
Sobel presents the scarino that tax rates under Reagan and Bush have dramatically been reduced. In particular, capital gains is the non-wage or non-salary income from employment that one derives from ownership of productive capital assets and value appreciation. As part of the Bush tax cuts, he lowered the top income tax rate from employment down to 35 percent, but took the capital gains rate down to its lowest level since the start of the Great Depression, taxing investment income at only 15 percent.
As Sobel notes, the Republican reasoning is that if you give the wealthy the tax breaks, they will then create jobs, which in turn, will strengthen the economy. But that is not what ends up occurring. Instead, the wealthy look for investment opportunities globally that promise pay-back and continued earning streams, always looking for business investments wherein the operational costs are lowest in relation to the profit gains. The trend has been to globally outsource manufacturing and service operations to maximize profit. Because they already are wealthy due to their concentrated ownership stakes in business corporations, their need for the products and services that can be produced are already satisfied and they function poorly as consumers, except for luxury products and services, which ordinary American cannot afford. The result is that the wealthy use their non-consumption earnings to further invest to own more and more productive power that they cannot or won’t use for consumption. When this happens they are beggaring their neighbor––the equivalency of mass murder––the impact of concentrated capital ownership.
Unbelievably, under the current tax code, many companies actually get tax breaks for creating jobs in other countries, something the president is tying to end. Sorbel notes that in President Obama‘s American Jobs Act, the President had called for an end to corporate loopholes and an increase in the top tax rates. Even the “Buffett Rule” targets capital gains in the attempt to even the playing field between employment income and dividend income in the tax game. Unlike the cuts offered by Republicans, Obama’s tax cuts and credits are aimed at people who will invest and create jobs, the middle class and small businesses.
But there is a flaw in this approach because without stipulations to broaden private, individual ownership of new productive capital assets, further concentration of productive capital ownership will result and fuel the troubling economic and social trends (global capitalism, free-trade doctrine, tectonic shifts in the technologies of production and the steady off-loading of American manufacturing and jobs).
Fundamentally, over the past century there has been an ever-accelerating shift to non-human productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase. Yet the nation’s focus continues to be on job creation, because people do not see and understand the ownership aspect and the earnings generated by productive capital investment.
Thus, while the American Recovery and Reinvestment Act of 2009, or the stimulus package, stalled off a sinking economy, it didn’t fix the problem and cannot fix the problem until broaden private, individual ownership accompanies economic growth. Even then this is a long-term approach to benefit ALL Americans and provide a quality and reasonable affluent livelihood.
While tax and investment stimulus incentives are excellent tools to strengthen economic growth, without the requirement that productive capital ownership is broadened simultaneously, the result will continue to further concentrate productive capital ownership among those who already own, and further create dependency on redistribution and expanded debt policies and programs to sustain purchasing power on the part of the 99 percent of the population who are dependent on their labor worker earnings or welfare to sustain their livelihood. By stimulating economic growth tied to broadened productive capital ownership the benefits are two-fold: one is that over time the 99 percenters will be enabled to acquire productive capital assets that are paid for out of the future earnings of the investments and two gain greater access to “real” job opportunities that a growth economy generates, not the “make-work boondoggle” job creation now occurring.
As Robert Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley, states (see http://foreconomicjustice.org/3767/the-problem-isnt-outsourcing-its-that-the-prosperity-of-big-business-has-become-disconnected-from-the-well-being-of-most-americans/) : “The problem isn’t outsourcing. It’s that the prosperity of big business has become disconnected from the well-being of most Americans.”
What Romney and Obama both fail to address is the exponential concentration of ownership among a minority, while at the same time destroy American jobs or degrading them and outsourcing jobs in other countries. While new jobs can be created by new technology applications, by the year 2050 most products and services will be provided by digital computerized superautomated machines, and non-human intelligent-based operations. Thus far, economic growth in past decades has disguised the destruction of jobs and degradation of jobs that have occurred as a result of technological innovation and invention. As such technological advancements push forward, this will present a serious problem for the masses who remain solely dependent on a job for income.
Both Romney and Obama and their advisors fail to acknowledge that full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.
The non-human factor of production is the product of tectonic shifts in the technologies of production. Human-level artificial intelligent machines and digital computerized operations are and will continue to destroy jobs or degrade job opportunities because increasingly machines are providing skills and abilities previously unique to human workers. The advent of truly intelligent systems of production is effectively increasing the size of the work force beyond that provided by human workers. Thus, the idea of job creation for humans is a dead-end proposition and calls for big jobs programs such as WPA-type projects to rebuild America’s infrastructure are worthwhile but the resulting jobs, financed by borrowing or tax redistribution, are temporary and disappear once the project work has been completed. Corporations embracing technological innovation and invention in the form of the non-human factor of production understand that their profitability increases because machines work for nothing more than the cost of their manufacture and maintenance. When “cheap” labor becomes scarce, then corporations will pursue aggressively employing “machines” to replace human labor and the impact will be catastrophic for ordinary people dependent on jobs alone. As the cost of computer-controlled machines become less than the cost of human workers, and the job sills and productivity of the machines exceed those of human workers, intelligent “machines” will rapidly replace human workers. The increase will be exponential, and each generation of intelligent machines will be more powerful and less expansive than the one before.
It is the full utilization and application of technological innovation and invention in the form of intelligent machines that is the future and the economic engine that can result in growth of 15-plus percent of the GDP (Gross Domestic Product). But unless we restructure the mechanisms by which people acquire ownership in these “machines” the resulting levels of productivity growth via technology would be devastating to human workers whose income from wages and salaries would no longer exist or be limited, except for a minority of top-echelon educated individuals necessary to the design, engineering, and operation of the machines. As for the masses, the middle-class and poor, the current job-focused economic model relies on the sale of their labor as their primary source of income.
Ronney and Obama, as well as conventional wisdom thinking economists and public policy experts do not address the fact that the economic value of labor is being constrained by the rapidly increasing capabilities and falling cost of advanced digital computerized automation. Simply stated: if what labor can earn is based on supply and demand, and the supply of workers is rising due to growing world population, while the demand for workers if falling because of improved productivity, the market value of labor can only go down. Compound this with the exponential growth of job-destroying and degrading technology and the result will be the disastrous collapse of middle-class income.
What is needed is a modern-day Homestead Act, which I and others refer to as the Capital Homestead Act (see http://cesj.org/homestead/index.htm).
The policies and programs recommended (also see my article “Democratic Capitalism And Binary Economics: Solutions For A Troubled Nation and Economy” at http://foreconomicjustice.com/11/economic-justice/ or follow me on Facebook at http://www.facebook.com/pages/For-Economic-Justice/347893098576250 and http://www.facebook.com/editorgary) provide mechanisms for achieving rapid economic growth and widespread private, individual ownership of future productive capital investment in the form of intelligent machine technologies, robotics and superautomation in a manner such that everyone benefits and no one loses. Under this platform, those who are ambitious, hardworking, and successful wold continue to be rewarded for their achievements, with rapid growth providing opportunities for prosperity and affluence. Jobs, at least in the short term would be plentiful and due to rapid and sizable economic growth deficits would shrink. Financing for small businesses and opportunities for entrepreneurship would abound. And owner-consumers would have plenty of money for consumption so that market demand for the products and services produced would be strong and steady.
Our present scenario relies on jobs ONLY for the 99 percent. No jobs equals no income and thus no consumer demand. As businesses minimize labor costs, a further shortage of consumer-customers result. And with fewer customers, businesses need fewer workers, which leads to fewer jobs. The result is a downward spiral that can only be fixed by a upward spiral reversal of economic growth simultaneously with broadened private, individual ownership in future productive capital investment. By stimulating economic growth in this manner, in the short term, increased investment would create demand for labor workers to build new machines, factories, plants, and infrastructure to facilitate commerce. Thus, jobs would be created that generate income and market demand increases, and such investment would cause business corporations to hire and invest even more. As investment spending pays for itself, once paid for it creates income for investors from dividends, interest, or rent. Thus, ordinary Americans would benefit from dividends through investments made through Capital Homesteading, which would be used to buy the new products and services that their investments produce. Dividend income to every man, woman and child leads to more customers, which creates more profits, which creates more dividends, which creates more customers. The result is an upward spiral of economic growth putting ALL Americans on a path to prosperity, opportunity, and economic justice.
http://www.examiner.com/article/from-reagan-to-bush-how-the-gop-has-broken-the-american-dream
