Last year (we thought we'd better start work right away getting used to it), on December 27, 2012, George F. Will wrote a column in the Washington Post. There is nothing unusual in that, of course. Mr. Will is a columnist, and columnists write columns. What is of interest to the Just Third Way is that his column was on Abraham Lincoln's 1862 Homestead Act.
Surprisingly for someone who was so closely connected with Ronald Reagan, Will apparently didn't realize that Reagan, too, wanted a Homestead Act — but extended to industrial and commercial assets instead of being limited to land. That being the case, we sent a letter to George:
Dear Mr. Will:
In a July 1974 speech to the Young Americans for Freedom, then-governor of California Ronald Reagan stated that what this country needs is an industrial homestead act to promote democratic ownership of America's expanding industrial and commercial frontier. Later, in August 1987, President Reagan gave a speech endorsing the work of the Presidential Task Force on Project Economic Justice.
The Task Force developed a plan to counter the spread of Marxism in Central America and the Caribbean Basin through an aggressive program of expanded capital ownership based on the ideas presented by Louis O. Kelso and Mortimer J. Adler in their two collaborations, The Capitalist Manifesto (1958) and The New Capitalists (1961). The Task Force did not receive one cent of taxpayer money, but was funded entirely with private donations.
Significantly, the proposal itself did not require the government to increase taxes, inflate the currency, or redistribute existing wealth. Instead of monetizing the present value of the government's ability to collect future taxes out of production that might never take place, democratic access to the annual "growth ring" of new capital formation would be gained by monetizing the present value of future increases in the production of marketable goods and services.
The backing of the money supply would thereby shift from government debt (bills of credit), to private sector assets (bills of exchange). This, as the subtitle of Kelso and Adler's The New Capitalists has it, constituted "A Proposal to Free Economic Growth from the Slavery of [Past] Savings."
Building on the work of Kelso and Adler, our Center for Economic and Social Justice (CESJ) under the leadership of Dr. Norman G. Kurland, has developed a proposal we call the "Capital Homestead Act." Dr. Kurland (with whom you met at the time) served as Deputy Chairman of the Presidential Task Force. In 2004 we published Capital Homesteading for Every Citizen. We addressed the growing problem of Social Security by presenting the book as "A Free Market Solution for Saving Social Security."
Very briefly, the idea of "Capital Homesteading" is for each person to establish a "Capital Homestead Account." This is possibly best described as a high-powered IRA to accumulate newly issued shares financed on credit instead of reductions in consumption income, and paid for out of dividends received in the future on the new shares issued by corporations and purchased by the Capital Homesteader. By financing corporate growth with new equity paid for with "future savings" instead of debt or retained earnings, the need for businesses to retain earnings would be eliminated.
Special Capital Homesteading "full payout" shares would give the owners of the newly issued shares access to the full stream of income attributable to their ownership share. Tax deductibility of all dividends at the corporate level would encourage corporations to issue new shares to finance growth, while full payout of earnings would stimulate the economy naturally instead of through inflation. Corporations could avoid income taxes by paying out all earnings. Dividends would be taxed as regular income at the personal level unless used to make tax-deferred payments on shares held in a Capital Homestead Account.
If these ideas interest you, you might want to talk to Dr. Kurland again. He can be reached using the contact information on the CESJ website.
Thank you. We look forward to a most interesting and fruitful discussion.
Yours, etc., etc.