On April 9, 2020, Gary Reber writes:
Joe Biden will have to show himself as a real leader to overcome the COVID-19 coronavirus pandemic threatening our lives and our economy. This will require extraordinary leadership, resolve, scientific knowledge and resources. Through a new 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.
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 of Earth.
Revisiting Donald Trump’s rallies and press conferences following his primary wins in 2016, he stressed that he OWNS this and that business or real estate property, and that these productive capital assets are debt-free. Of course, anyone with a sense of how businesses operate knows that this is an attribute of a successful business. Trump has not and does not use his own money savings to finance his ever-expanding business interests (the accumulation of productive, wealth-creating, income-producing capital assets), but instead uses capital credit loans, which are paid back with the earnings produced by the investments, or if not, he files for bankruptcy protection for any particular failed business venture. If his past savings are used at all it is as collateral to guarantee the bank loans, should an investment fail to produce the anticipated earnings to be used to pay off the loans. As such, in the event of failure, his assets can be confiscated. This is the logic of corporate finance, in which investments must pay for themselves — by earning profits, which are first pledged to pay off a capital credit loan, and once paid off to produce an income stream to the owner(s). This is how people in business get richer and richer and how the already wealthy capital ownership class continues to monopolize the ownership of virtually ALL FUTURE wealth-creating, income-producing capital asset expansion.
In the same 2016 election period, Hillary Clinton was increasingly advocating for companies to “profit share” with their workers. This is not actual ownership but a tax credit carrot to encourage corporations to share their profits with their workers. Of course, because the workers do not actually gain ownership of the companies that employ them under this approach, the profit sharing can be arbitrarily suspended at any time and the workers still have no legal or effective say in the management of the companies that employ them.
Neither Trump nor Clinton, nor Biden or for that matter none of the presidential candidates present to the electorate, have EVER advocated for workers to OWN the corporations that employ them (an exemption is Senator Bernie Sanders with respect to employee ownership) or more significantly, for every child, woman and man to be a capital OWNER in the corporations, both established and start-ups, that are growing our economy with viable new projects. As is the usual case, their focus is on JOB creation not capital asset ownership creation. In the case of Sanders, even with his statement that “the top 1 percent of people own more wealth than the bottom 92 percent,” he has not come to the realization that what makes the top 1 percent wealthy is because they OWN productive capital assets, the result of progress in the technologies of production.
The reality is that all government economic policies are argued or justified in the context of how many JOBS will be created or saved, completely ignoring that those who already OWN the corporations receiving tax breaks and incentives are empowered by the system to continually enrich their personal ownership of capital asset wealth.
This does not mean jobs creation is not important but with responsible growth jobs creation will follow.
Unlike Bernie Sanders, who in the past, has made it clear he is an advocate for employee ownership of the companies that employ them and for so-called worker cooperatives in which the workers own and operate a business, Joe Biden has never utter a word about broadening capital ownership.
Biden, should he care at all about reforming the system so that ownership and power concentration can be reversed, should realize that the core reason the top 1 percent receives virtually ALL FUTURE income gains is because the top 1 percent are the very people that OWN America, with the bulk of the capital asset owenrship concentrated among the top .1 percent of the American population.
What Biden needs to do is to aggressively advocate for unrigging the system with reforms that will empower EVERY child, woman, and man to acquire personal ownership stakes in the FUTURE productive capital assets that will propel our economy’s growth. I am not referring to unproven small business or entrepreneurial endeavors, which, however would be significantly strengthened as the overall economy produces an expansion of “customers with money” to create demand. The primary focus needs to be on the successful businesses growing our economy. I believe that ONLY if Joe Biden fully embraces this policy direction and targets concentrated capital asset ownership and its corresponding political power as the cause of economic inequality, he will be able to defeat Trump in November.
As a matter of national policy, Biden needs to immediately advocate for and oversee the enactment of the proposed Capital Homestead Act (aka Economic Democracy Act and Economic Empowerment Act) and established citizen tax-sheltered CHA trust accounts (see http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/.
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 taxpayers, 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, to EVERY citizen (children, women and men) exclusively for the purpose of financing the growth of the economy, solely repayable with the full pre-tax future earnings of the investments, without any requirement to pledge past personal savings or reduce salaries, wages or benefits.
The new monies would be used to invest in responsible growth projects and infrastructure, including alternative energy expansion and other climate crisis mitigation, which 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.
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 service fee (not interest) to cover administrative costs. Therefore, creating money can be entirely interest-free.
In the immediate short term while the pandemic has the economy locked down, any corporation who receives interest-free capital credit from a commercial bank funded by the issuance of new money backed by the Federal Reserve with a federal government loan guarantee (via the Capital Diffusion Reinsurance Corporation or CDRC) would be required to issue full-earnings payout, voting shares in the amount of the proceeds of the loan equally to each employee. The shares would be put into escrow custody until such time the capital credit loan is repaid. Throughout the pandemic the corporation benefiting from the federal government loan guarantee would pay EVERY one of its employees an equal amount sufficient to meet subsistence needs. For the duration of the emergency, all debt service payments would be suspended.
Once the interest-free acquisition loans are repaid, the money created to purchase the capital 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 on-going full-earnings dividend payouts.
When normal operations resume, the corporation would cease subsistence payments, with employees paid at former rates.
Under this proposal, when and as a corporation becomes profitable, pre-tax-earnings dividends would be paid through the escrow account to the loan-issuing commercial bank, thus canceling the corporation’s indebtedness. At such time, shares would be released from escrow and put into each employee’s Capital Homesteading Individual Retirement Account (CHIRA), a qualified IRA that meets required standards. Full-earnings dividends would be passed through (after reasonable deductions for bank administration costs) to each employee to use for consumption.
Of course, in a worst case scenario, in the event of loan default on the part of the corporation, the federal government repays 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 bank’s commercial paper (promissory note) from the Federal Reserve.
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 identical to a CHIRA but advantaged to acquire new shares of any corporation with insured, interest-free capital credit. The corporations eligible would be both established and startups, who will use the money to fund viable projects to grow the economy. CHAs, as with CHIRAs, would make the debt service payments with pre-tax dividends to Federal Reserve-backed commercial banks issuing the capital credit, afterwards paid to citizen beneficiaries as regular taxable personal income.
These proposals clearly demonstrate that most people are wrong to take for granted that the only way to finance new capital asset formation (not risky investment in already-owned stock speculation) — and thus widespread capital asset ownership and control — is through cutting consumption and accumulating money savings, thus assuring that ONLY the already rich can afford to finance new capital formation, and as a result the richer they will get. “Past savings” are by definition, the virtual monopoly of the rich. The solution is saving in the future to finance new capital asset formation now. In other words, we need to switch from financing with money withheld from consumption in the past, to financing with the present value of what is reasonably expected to produce in the future. That way, nothing is taken out of anyone’s pocket now, and anybody who comes up with a financially feasible project should be able to get financing for it.
We don’t need the rich to finance new capital formation. To finance new productive capital using “future savings,” it is only necessary to have a feasible capital project ready to start building. The present value of the project can be put into contract form (a “bill of exchange”) and either used directly as money to finance the new capital formation, or taken to a commercial bank and discounted, using newly created bank promissory notes as new money in the form of demand deposits (“checking accounts”). To make things less risky and ensure a uniform, stable, and elastic asset-backed reserve currency, the Federal Reserve Bank would rediscount such qualified paper, with the central bank’s promissory notes substituted for or backing the commercial bank’s promissory notes.
In other words, all that is necessary to finance new capital formation without the rich is feasible capital projects that can pay for themselves out of their own future earnings, and a banking system to provide media of exchange that are recognized as uniform and stable. Significantly, if new capital asset formation can be financed without using past savings, that means the rich are not needed in order to become an owner of productive capital…and that means that every child, woman, and man — regardless whether she, he, or it has savings now — can use “future savings” to become an owner without taking anything away from “the rich” or penalizing success, while at the same time becoming good “customers with money” to create demand for the responsible and “green” growth of the economy.
Using this method of finance is preferable to form new capital assets using the present value of the anticipated future stream of income and wealth embodied in a “bill of exchange” contract. Present value can be turned into “money” by contract, and this contract can be used to purchase new productive capital that repays its purchase price — “self-liquidating.” This will enable corporations with “feasible capital projects” (meaning they pay for themselves out of their own profits) to grow without having to retain earnings — instead, earnings can be fully paid out to the people to whom they belong: the shareholders. The new capital wealth creation, represented by new issues of stock (directly tied to ownership and control sharing) can be financed to benefit anyone (whether employed or not) without first having saved. This should be an equal opportunity right to interest-free capital credit.
The role of capital credit insurance facilitated with private insurance or a government reinsurance agency (ala the Federal Housing Administration concept) would serve as the replacement for past savings collateral to protect the commercial bank in the event of a failure of the capital project to produce the expected FUTURE earnings that would be used to pay off the capital credit loan. Thus, national capital credit insurance would replace the requirement for pledged security, allowing employees and non-employees (EVERY citizen within the system) to become new capital asset owners simultaneously with the growth of the economy, while eliminating the sole ownership of America by the few.
To win the presidency, Joe Biden needs to advocate for the enactment of this proposed legislation that will effectively empower EVERY citizen to become a productive capital OWNER without the requirement of past savings or ANY reduction in wage earnings or benefits.
For a more in-depth presentation of solutions see “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.
