On November 17, 2019, Robert Reich writes on The Guardian:
On Thursday, the New York Times reported on a study showing that Elizabeth Warren’s proposed wealth tax (and presumably Bernie Sanders’ even more ambitious version) would reduce economic growth by nearly 0.2% a year, over the course of a decade.
Under the headline “Warren Wealth Tax Could Slow the Economy, Early Analysis Finds”, the Timestrumpeted the analysis, from the Wharton School of the University of Pennsylvania, as “the first attempt by an independent budget group to forecast the economic effects” of a centerpiece of the Warren and Sanders campaigns.
It sounded like a game-changer. The super rich obviously don’t like a wealth tax, but if it also slows the economy, it could harm everyone.
But wait. In order to arrive at their conclusion, the authors of the study make two bizarre leaps of economic logic. They assume, first, that wealthy Americans would save and invest less in order to avoid accumulating wealth that would be subject to the tax, and that this drop in investment would retard economic growth.
Baloney. If we’ve learned anything over the last 40 years it’s that the savings and investments of wealthy Americans do not necessarily trickle down in ways that grow the economy or benefit most Americans.
The investments of the wealthy are parked all over the world in everything from exotic tax shelters to real estate and works of art. Rather than generate social benefits, they are more likely to keep legions of investment bankers, money managers, wealth advisers and tax lawyers busily employed, gaming the system.
The study also assumes the revenue raised by a wealth tax will go toward reducing the federal debt. It totally disregards what the wealth tax would finance, such as Warren’s proposals for universal childcare, increased education funding, student loan forgiveness, green manufacturing and infrastructure.
This is no minor oversight. Warren has repeatedly argued that taxing the super rich is the fairest and most efficient way to pay for these critical needs.
Such spending, not incidentally, would spur growth. Enabling more parents to work, young people to become better educated, green technologies to take root, more access to healthcare, and the nation’s infrastructure to be upgraded, would improve productivity.
How can an analysis of the wealth tax focus only on its trickle-down effects and not consider these crucial bottom-up consequences? Just as peculiarly, why would the New York Timesprominently report this one-sided study?
The answers to both questions, I fear, have less to do with economics than with where power is located in the American system.
The denizens of corporate board rooms, C-suites and Wall Street do not regard Bernie Sanders as a threat because they do not believe he has a chance of being nominated. But they are panicked by Elizabeth Warren.
Financier Leon Cooperman accuses Warren of “trying to demonize wealthy people because there are more poor people than wealthy people”. Facebook’s Mark Zuckerberg calls Warren an “existential” threat. Billionaire and possible presidential candidate Mike Bloomberg describes her tax plan as anti-capitalistic.
These billionaires have such an obvious stake in preventing a wealth tax that their charges carry little weight. If anything, they have given Warren political ammunition: this week she launched an ad, “Elizabeth Warren Stands Up to Billionaires”, that targets several of her super-rich critics.
But more insidious attacks on the tax plan are now emerging from sources that do not bear the direct imprimatur of the wealthy, including some presumably liberal enclaves such as a thinktank at the University of Pennsylvania and the New York Times, which chose to highlight its questionable study.
Recently Steven Rattner, a former Wall Street executive, official in the Obama administration and contributing opinion writer for the Times, called a Warren presidency a “terrifying prospect” that would abandon “the limited-government model that has mostly served us well” and “turn America’s uniquely successful public-private relationship into a dirigiste, European-style system”.
I know Rattner as a thoughtful man who is typically more measured, as is the Timesop-ed page. But the establishment’s panic has apparently enflamed even its usually restrained surrogates and platforms.
This is no orchestrated conspiracy. It is more a matter of affiliation and class, revealing once again that biggest divide in America isn’t between Republicans and Democrats, conservatives and liberals or right and left. It’s between the establishment and the anti-establishment, the oligarchy and the rest.
Warren and Sanders have stirred up a hornet’s nest. Beware. Bipartisan stingers are out.
Gary Reber Comments:
While most would agree that super wealth solidifies political power as with money to pay for governmental elected representatives, and they probably would agree that the solution to paying for “universal childcare, increased education funding, student loan forgiveness, green manufacturing and infrastructure” is to tax the super rich––the fairest and most efficient way to pay for these critical needs.
If you follow the proposals of ALL the candidates for the 2020 presidential election what stands out to me is a glaring omission. While they all believe in fair and measured free markets with operational rules, none have a plan for achieving this goal. Most glaring is the omission of a discussion and policy proposals that speak to the necessity to broaden the ownership of productive capital assets to be formed in the future. While collecting money via redistribution of current wealth certainly can be a most efficient way to pay for critical needs, it is critical that we exact and implement polities to make EVERY citizen productive through owning productive capital asset –– the non-human means of production.
Elizabeth Warren speaks wealth redistribution and breaking up monopolies but does not speak of the concentration of capital asset ownership.
If Elizabeth Warren wants to win the presidency she needs to advocate for empowering EVERY child, woman, and man to become a productive capital asset owner.
No president has done so since Abraham Lincoln with his Homestead Act, which created the opportunity for Americans to own land –– at the time, the most valuable capital asset.
It should be obvious. Even Donald Trump brags about his capital wealth. 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 by 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, who Warren endorsed and supported, 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, or for that matter none of the present crop of presidential candidates, with the exception of Senator Bernie Sanders, have EVER advocated for workers to OWN the corporations that employ them or more significantly, for EVERY child, woman and man to be a capital OWNER in the viable corporations, both established and start-ups, growing the economy. As is the usual case with their economic policies, their focus is on redistribution via taxation and JOB creation or, as in Elizabeth Warren’s case, a focus on rebuilding the middle class, which, reading her policy plans, does not mean capital asset ownership creation for the vast majority of Americans. In the case of Warren, she, as with Bernie Sanders and all the other Democratic Party candidates for the presidency, 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 through constant re-investment in new productive assets.
Warren is advocating for guaranteeing workers 40 percent of seats on corporate boards of directors and requiring them to serve goals beyond profit maximization. She is also an advocate for an additional non-escapable 7 percent tax on corporations
Warren has yet to acknowledges the importance of workers owning the corporations that employ them, nor has she expressed any understanding of how an ownership concept can be extended to empower EVERY child, woman, and man to become a productive capital asset owner along with the responsible growth of the economy.
Warren 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 ownership concentrated among the top .1 percent of the American population.
What Warren 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 already successful businesses growing our economy. I believe that if Warren fully embraces this policy direction, as she should have an underlying understanding of concentrated capital asset ownership and its corresponding political power as the cause of economic inequality, she will win the primaries and the presidency, while more effectively realizing the political revolution that is long overdue to put all Americans on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice.
Warren needs to stretch her thinking much farther, to think in terms of empowering workers to become owners of the business corporations they are employed by, using the proven financial mechanism known as the Employee Stock Ownership Plan (ESOP), which provides a pre-tax pay-back mechanism to finance worker ownership (as individuals) without ANY loss of wages or benefits or requirement of past savings, and with the newly issued stock purchase-financing paid for with the full earnings of the investments in a corporation’s growth. (See http://www.cesj.org/learn/capital-homesteading/ch-vehicles/employee-stock-ownership-plans-esops/)
But we must not limit broadening capital asset ownership to employees of corporations as there are tens of millions of Americans who do not work for for-profit business corporations, such as workers in small businesses or government positions, teachers, or who are unemployed, under-employed or unproductive, on welfare or who are senior citizens with only meager Social Security income, which effectively reduces their life to a struggle to meet day-to-day, week-to-week, and month-to-month demands.
Instead of the OWN the FUTURE or BE OWNED issue being presented, all one hears from both sides of the political spectrum is: “We will provide JOBS and put Americans back to work and raise the minimum wage!, and redistribute the earnings of the rich.” While that sounds good, it is, in fact, terribly shortsighted. With the U.S. population continuing to climb and the rate of job-devouring automation and robotics exponentially skyrocketing, along with the job-destroying and wage-devaluation forces of globalization due to American businesses outsourcing or off-shoring their parts and finished products manufacturing, an individual’s or family’s 100 percent reliance on “JOBS” for subsistence will soon be totally outmoded. This means that your children and their children will be faced with unimaginable economic insecurity in the FUTURE, regardless of educational achievement, if the system is not reformed to empower them to become productive capital owners, and prevent those who already hoard the capital asset ownership of America from monopolizing ALL FUTURE ownership of America’s capital asset growth.
This is not to say that education, and tuition-free public colleges, universities and trade schools is not an important mission, but except for a relative few, the majority of the population, no matter how well educated, will not be able to find a job that pays sufficient wages or salaries to support a family and purchase a home or prevent a lifestyle which is gradually being crippled by near poverty or poverty earnings. Thus, education is not the panacea, though it is critical for our future societal development to innovate and invent future technologies of production. Furthermore, younger, as well as older people, will increasingly find it harder and harder to secure a well-paying job — for most, their ONLY source of income — and will find themselves dependent on taxpayer-supported government welfare, open or disguised, or concealed.
Our visionary politicians would best serve us by devising plans that involve ownership of the capital asset producing corporations of the United States economy, in particular the large corporations responsible for producing the bulk of the goods, products, and services bought by Americans, without penalizing the wealthy class to do so.
The Center for Economic and Social Justice (www.cesj.org) has solutions that make sense and which cross party lines quite easily. One of CESJ’s core policy proposals is to enact the Capital Homestead Act, also known as the Economic Democracy Act and adopt the Unite America Platform. This will empower EVERY child, woman and man to acquire personal ownership stakes in the FUTURE capital asset wealth of the American economy, without the requirement of past savings or ANY reduction in wage earnings or benefits or reliance on the already wealthy, using insured, “” interest-free capital credit, repayable solely with the FUTURE full earnings of the investments in the viable corporations growing the economy. (See http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/). Also see the Unite America Platform, published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/platform-of-the-unite-ame_b_5474077.html.
