Sunday, August 1, 2021

Toward A Fairer Distribution of Wealth



Toward A Fairer Distribution of Wealth
After 50 Years of Backsliding, the Opportunity for Americans to Share the Wealth of our Economy Lies within Reach.

Some days as I ramble the fields and hills of the White Mountains I find myself pondering all the mistakes we have made as a nation in what we have always hoped would be the path to a “more perfect union”. It can be a most discouraging exercise. Slavery, genocide, religious intolerance and exclusion, all of these tragedies, and more, have made the path to the Founder’s dreams of a land where talent, ambition and ideas allow any citizen to rise - to succeed - more daunting.

Let’s face it, we can never truly make up for the wrongs that have been done monetarily.

Two thirds or more of the landmass of the United States alone was in the “possession” of Native American people for millennia before and during the 200 years following Columbus’ wrong turn. That’s a lot of real estate.

We can never fully atone for the grievous wrongs against African Americans perpetrated by Slave Traders and internecine kidnapping by warring tribes and factions on the African continent or the years of slavery that followed as well as the Jim Crow era, and the overt and institutional racism that has characterized the years since.

The mistreatment of generations of immigrants, the Irish of course, but particularly those from outside of Northern Europe, set back their advancement within the American Dreamscape by decades, if not centuries.

The treatment of Japanese Americans during the second world war and the confiscation of much of their existing wealth as well as ongoing racism that impacts those of asian descent.

The marginalization of women since the beginning of it all.

All of these and more original - and ongoing sins - of the Republic amount to far more money than we could possibly account for - no less tax for or pay out.

Add to all this the - now fifty year - downward spiral of incomes of the majority of Americans and you have a problem so daunting that no one quite believes we can truly address it.

But we can begin and, at least as a start, we could do so relatively painlessly with some real and sustainable benefits to all our citizens.

First the why…

1973. That is the year that many economists and historians point to as the turning point of the (modern) wealth disparity in this nation. In 1900 the gilded age of robber barons, was beginning to pass. Reforms by Republican Teddy Roosevelt’s administration began to reverse an earlier wealth disparity. The Progressive era brought more reforms driven by a golden age of journalism that helped expose the dark underbelly of the previous wealth disparity brought on largely by the Railroad interests, the oil and timber interests and other industrial age monopolies that had dominated the economic landscape of the country in the latter half of the 19th century.

With the obvious exception of the Great Depression, much of the 20th century - and especially the mid-century - was a time when the great middle class began to flourish. Even the wages and wealth of the sub-middle classes (sometimes referred to today as the “Precariat”) saw gains.

But in 1973 those gains hit a wall.

It was the first year when American wages declined in what would become a long pattern of decline; fifty years long as of today.

Until that time many of the reforms of the New Deal including tax policy and changes in the law to encourage the growth of labor unions had kept wages for the middle class, the working class and poor on an upward trajectory. In other words, their percentage of the wealth generated in the country was growing.

1973 was also the beginning of another phenomenon that is rarely noticed or mentioned by economists and historians and certainly not by politicians at any place on the political spectrum . . . a declining personal and economic freedom among these very same people.

As declining wealth and growing disparity began their slow rending of the American fabric, efforts were made to plug the holes in the dike of American prosperity. Put simplistically, these efforts were intended to deal with social and economic problems created by the growing disparity of wealth. These problems were widely acknowledged. Eisenhower, a moderate by today’s standards, acknowledged that the welfare system was “necessary to reconcile the masses with the capitalist system.” But there were wildly different interpretations of the solutions that created an uncomfortable alliance between those who would prefer to ignore the problems, or, worse, punish those who were lower income Americans, and those who saw their role as “protecting” them. That alliance came in the form of more and more onerous restrictions on those who received any form of “welfare” transfer payments. This made the “protectors” complicit in the denial of freedoms, particularly economic freedoms. It was during these years that America saw the construction of the welfare bureaucracy.

There were - in fact - plenty of transfer payments to the wealthy and the upper middle class that were not accompanied by such punitive action - for example the mortgage tax deduction and the deductibility of real estate taxes from the Federal income tax. Capital gains are taxed at a lower rate than income derived from work, a completely absurd notion. But few politicians batted an eye when it came to those transfers of wealth.

Later critics would, cynically, refer to this as the “welfare state” or, more derogatorily, the “nanny state” where every low income family found themselves being micromanaged by both the right and the left. The irony of course is that these same critics were equally complicit in creating this state.

So for fifty years not only have incomes diminished as well as the share of wealth within the overall economy, but personal and economic freedoms have diminished as well. A single mother might take a second job but often she would run headlong into a provision in the law that required another payment to be decreased because of her added income, creating not only an economic disincentive to improve her economic standing but effectively diminishing that standing. Ironically, this “welfare” system not only treated those among the Precariate classes as second class citizens with respect to their personal and economic freedoms, it also became a bureaucratic monster consuming vast amounts of wealth to “police” the punitive restrictions on the economic gains of lower income Americans.

Efforts made to try and correct the inequities were subject to a “wrinkle in the rug” reality in this new welfare system. Addressing one wrinkle would simply create a new one that popped up in response to the onerous penalties assessed on the Precariat classes for the mere act of attempting to improve their economic condition.

The sad fact was, and remains, that those earning the most were encouraged and rewarded for seeking ways to enhance their prosperity while those earning the least were punished and disincentivized for doing the very same thing. Over time the gap has widened and today even the vaunted middle class is shrinking, sliding inexorably into the precariat at its lower margins.

Aside from the obvious moral and ethical reasons we should be concerned about this there is a very practical, political reason that lies at the heart of our current political woes. The strength and stability of a democratic political system - we have learned over time - is tied to the strength and vibrancy of its middle class. When Americans (or any people) are invested in their future - when they see their place in that future and feel that they can count on the system to give them a fair shake - they will support, defend, and sustain it. When they begin to doubt that system all bets are off.

Additionally, from an economic point of view, the real engine of economic growth was being choked off. Despite the dogma of the right that businesses create jobs and wealth, the fact is that people, and specifically consumers, create jobs and wealth. As middle class and precariate consumers see their income dwindle they are able to spend less of their wealth on anything except necessities.

For 50 years now we have seen the glue holding us together slowly dissolve. To the ranks of the already-marginalized we have added untold millions of Americans of every color, creed, religion. From coal miners to pensioners who have seen their retirement disappear in a blue haze of bankruptcies, mergers and acquisitions; from homeowners caught up in Wall Street’s sub-prime mortgage fiasco to families bankrupted by crippling healthcare costs; each with a different story, each subject to their own unique sadness and vulnerable to the swirling miasma of finger-pointing, retribution, blame, and conspiracy theories. Caught up in the same general whirlpool we have divided into a tribal morass, each with its own boogiemen and culprits further dividing us at the very moment when we should be coming together.

I have to admit to being totally caught off-guard by the QAnon conspiracy theories. After all, they are so nutty as to completely strain credulity but they are a sure measure of how far we have fallen. Only the Salem witch trials provide some historical context but even now we realize how insane they were.

The How

Over the course of our history Americans have paid taxes that have created and maintained our roads, bridges, air and seaports. We have funded the cost of education - producing a ready made workforce. We have funded research that has produced untold innovations and staggering wealth. The US Department of Defense spends more annually on R&D than any other entity on the planet.

Every time you open your smartphone you see examples of the fruits of that research. Many of those applications represent companies that have turned that government-funded research into billions of dollars of private wealth, all thanks to the research efforts funded by EVERY AMERICAN.

In effect making the American people the large investors in their success. Yet when the dividends are paid out John and Jane Q Public are not among the shareholders receiving a check.

Instead we watch as politicians play divide and conquer over meager tax revenues. Will we fund paid family leave or tax credits? Will we fund affordable day care or tuition assistance? Will we fund . . . The list goes on and on. Many of these programs are terrific ideas that would certainly serve to improve the quality of life for American citizens but often they benefit only a segment of the population. A system for allowing Americans to share in the wealth of an expanding economy while having the freedom to decide how their piece of the pie was used would make far more sense, especially if, at the same time, we were able to deconstruct the welfare bureaucracy and add those funds to offset its costs.

Call it what you want: A Freedom Dividend, a Sovereign Wealth Fund, an American Dividend. A mechanism for sharing the wealth of our economic growth is within our reach. It is not a lack of wealth that holds us back, it is a lack of will and imagination. Furthermore, it is an ideal that has currency across the political spectrum. Richard Nixon, for all his many faults, proposed just such a system during his presidency, conservative economists like Milton Friedman supported the idea. Many of America’s billionaires, recognizing the value of the R&D investments that undergird their company’s success, and fully cognizant of the dangers of the growing disparity of wealth, have expressed support and a willingness to see both taxes and research proceeds used to help fund such a system.

A Painless and Progressive Start

It is unlikely that this shift to some kind of Universal Basic Income could happen quickly. Developing the political will and the public support will take time and a concerted effort to educate the American people - helping them to understand that such a change would not represent a handout but the natural evolution of capitalism to reward every citizen for the economic growth in the American economy derived from the investments made by each of them.

Now is the ideal time to begin that process for several compelling reasons.

A serious body of research is now available and developing rapidly to determine how such a dividend might be calculated and paid for. This includes some ground-breaking research on using blockchain technology that might allow a UBI provided completely outside of any government bureaucracy.

Several current legislative initiatives present a way to test-drive both the idea of dividends as well as linking benefits of the economy from research and development to the distribution of wealth in our society.

The Carbon Fee and Dividend Act, (now the Energy Innovation and Carbon Dividend Act of 2021 HR 2307) initially proposed by Republican statesmen James Baker and George Schultz, and now supported by a broad coalition of Republican and Democratic legislators as well as environmental, and business leaders and their organizations and companies with the Citizen’s Climate Lobby leading the effort. HR 2307 holds the promise of lowering carbon levels and putting the revenues generated by the fees imposed directly into the pockets of all citizens. While this measure only addresses revenues from a fee on carbon it would provide a working model of such a dividend to the American people and at the same time help us to bring our economy into a net-zero carbon future by 2050.

President Biden has proposed more than 350 billion dollars in new research and development in the rescue and infrastructure packages. These research projects are sure to generate huge economic spinoffs. Biden should appoint a special commission to study potential spinoffs and ways in which those spinoffs might be shared with the American people who are - in fact - funding them. Research and development are essential components of sustaining a growing economy. If the United States is to maintain its economic dominance, and present a viable alternative to the efforts of China to dominate the world’s economic infrastructure. What better way could there be to build public support for ongoing investments in R&D and Infrastructure than to make the American people shareholders in the wealth that they generate?

Finally, there is a growing call for reigning in America’s “Tech Sector” from all points along the political spectrum. Recognizing that mechanisms for making every American citizen an “investor” in these tech sector businesses opens up a whole new set of possibilities for new ideas that allow us to address the issues that concern Americans while adding some nuance into the process. In other words, it adds a series of options that permit the problems to be addressed with a scalpel instead of the traditional all-or-nothing approaches that we have taken in the past. When the question facing us is more than simply “do we break up Google or Facebook or Amazon?” or whatever new mega-company emerges in the future; but, rather, how do we make changes that invest our citizens in the future of our economic growth and encourage entrepreneurial opportunities in a dynamic and competitive economy? The options for innovative ideas are endless, as are the opportunities for finding common ground between people of widely different viewpoints.

We could use a bit of common ground these days.



Links:


Welfare Programs Promote Bureaucracy Rather Than Self-Sufficiency
Damon Dunn: Pacific Research Institute.
https://www.pacificresearch.org/welfare-programs-promote-bureaucracy-rather-than-self-sufficiency



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