On July 9 2013, Dean Baker writes on NationOfChange.org:
It is widely recognized that economists are not very good at economics. That is why we are looking at a decade of economic stagnation with tens of millions of people being unemployed or underemployed in Europe and the United States.
If economists were better at economics, central banks in the United States and Europe would have recognized the housing bubbles that were driving economies in the last decade. They would have taken steps to rein them in before they grew so large that their inevitable collapse would sink the world economy.
We have to realize all the sweet little things that the government does to make the rich even richer. Everyone’s favorite starts with the goodies we give to the boys and girls on Wall Street. It takes lots of taxpayer dollars to keep Jamie Dimon and Lloyd Blankfein in nice suits. According to an estimate from Bloomberg News, the implicit subsidy from the government’s too big to fail insurance policy is worth $83 billion a year, a bit more than the $76 billion annual cost of the food stamp program.
The wizards of Wall Street also benefit from the fact that the financial industry is exempt from many of the taxes that more pedestrian businesses face. The IMF suggested taxes on the order of 0.2-0.3 percent of GDP ($35-$50 billion a year) to level the playing field.
Then we have the massive redistributions that go to the holders of government-granted patents and copyright monopolies. The former easily cost the economy several hundred billion dollars a year. While patent monopolies can make drug companies and tech companies very rich, these monopolies are an enormous dragon the economy, slowing growth and reducing employment.
And we also have the high-end professionals such as doctors, dentists and lawyers who can often get very rich because they get to set the rules of the market. This means for example, that while trade pressure in general is designed to force down workers’ wages by putting them in competition with low-paid counterparts in the developing world, these professionals are largely protected from such competition. In addition, they get to restrict the number of people who can become members of their profession in the United States. And, they set rules that can make it illegal for other less highly compensated workers from doing tasks for which they are entirely qualified.
But even if we ignore these and other ways in which the rich use the government to redistribute income upward, we still get to the basic issue of macroeconomic policy. Currently the U.S. economy is close to 9 million jobs below its trend level of employment. This means that if we had competent people running the Fed back in 2002 when the housing bubble first became evident to people who follow the economy, and they had taken the necessary steps to stem the growth of the bubble, another 9 million people would have jobs today.
Of course the impact on the labor market is even larger than just 9 million people getting jobs. In addition, millions of people who could only find part-time jobs would instead have full-time jobs. In 2006 four million people fell into this involuntary part-time category. Currently the number is close to 8 million.
In addition, the tightness of the labor market directly affects the ability of large segments of the workforce to secure wage gains. In a forthcoming book with Jared Bernstein we show that the ability of the bottom half of the labor force to secure wage gains depends hugely on the level of unemployment. This means that the economic mismanagement of the last decade has not only denied tens of millions of workers jobs, it has forced down the wages of tens of millions more workers.
This op-ed argues for reverse redistribution to benefit the 99 percent rather than the massive redistribution that benefits the 1 percent. But no where does the economist author address the REAL culprit: CONCENTRATED OWNERSHIP of wealth-creating productive capital assets.
While we need to pay for increased social services such as safety net programs for individuals and families with children qualifying under federal poverty guidelines, redistribution through tax extraction and national debt is not the solution we should be seeking long-term. Instead we need to implement policies that provide opportunities for ALL American families to acquire a viable ownership stake in the FUTURE economy by financing FUTURE productive capital asset formation using Employee Stock Ownership Plans (ESOPs) and Capital Homestead Accounts (CHAs).
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.
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 the day you die.
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 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
Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm
http://www.nationofchange.org/one-percent-want-your-kidney-tales-redistribution-1373378192
