Maybe it’s the season, but the criticisms
of the Just Third Way have been particularly weak lately, with critics
repeating themselves more than usual and saying things that have been refuted
repeatedly. On the other hand, it might
be that the ideas are starting to get into the right quarters and people are starting
to pay attention. You decide:
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| South Bend Lathe Company products |
• Mayor of South Bend Bid for Presidency. The Hon. Peter Buttigieg, mayor of South
Bend, Indiana, has announced his candidacy for the presidency of the United
States. Probably by pure coincidence, he
made the announcement in the building that once housed South Bend Lathe. The South Bend Lathe ESOP (you knew there had
to be some reason we brought this up) was the first 100% leveraged ESOP, using
a combination of public and private sector financing. The ESOP “failed” (for want of a better word)
for reasons
having nothing to do with using the ESOP as a method of corporate finance,
but due to corporate governance issues: management controlled the voting for
the unallocated shares, giving them control over the Board of Directors. In plain English, management controlled the
Board of Directors that hires management . . . which upset the other
worker-owners, so they went out on strike.
As usual, it was a power issue, not something fundamentally wrong with
the ESOP, just the way it was applied.
If Buttigieg really wants to
make his candidacy unique in a unique way, maybe he ought to consider the Platform of the Unite
America Party.
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| The Federal Reserve is still pretending to control the economy. |
• Federal Reserve and the Discount Rate. It comes as no surprise that the
Federal Reserve is listening to politicians and academics (the wrong sort of
academics, anyway, and definitely the wrong politicians) in deciding its
interest rate policy . . . which is an interesting concept to begin
with. After all, if interest is the
price of money (yet another interesting concept), and the United States is
supposed to be a free market economy, what is the Federal Reserve doing setting
prices? Even more interesting, what the
Federal Reserve is manipulating isn’t even an interest rate! It’s the discount rate, which is something
entirely different. Interest is the
return to the lender of existing funds and thus applies to mortgages. A discount is applied to bills of exchange
that involve future funds. The first
rule of finance is to know the difference between mortgages ([ast savings
instruments) and bills of exchange (future savings instruments), and the
Federal Reserve makes no distinction between the two, or between bills of
exchange and bills of credit. Of course,
the real problem here is that the Federal Reserve is supposed to be ensuring
there is sufficient liquidity for the private sector, not government, which is
at the root of the situation in the first place.
• Section 1042 Treatment for S-Corp ESOPs? According to the bulletin of the National
Center for Employee Ownership in Oakland, California, “U.S. Representatives Ron
Kind (D-WI) and Jason Smith (R-MO) introduced the Promotion and Expansion of
Private Employee Ownership Act, which will encourage the formation of
employee-owned businesses and promote retirement savings through employee stock
ownership plans in S corporations. The
bill would extend the deferral of capital gains to qualifying sales to an ESOP
of shares in an S corporation, provide technical assistance, clarify that S
corporation ESOPs retain their small business status with the SBA, and take
other steps to encourage the creation of ESOPs in S corporations.” What that means in English is that owners who
sell their shares to an S-Corp ESOP can get the same tax deferral available to
owners who sell their shares to a C-Corp ESOP. The great advantage to an S-Corp ESOP is that a company that is organized under Subchapter S that is 100% owned by the workers through an ESOP trust pays no corporate income tax. Only workers who receive distributions from the ESOP are taxed on what they receive as regular income.
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| Nest eggs may be a little safer. |
• Delay in Mandatory Retirement Distributions? Also according to the NCEO Bulletin, “The ‘Setting
Every Community Up for Retirement Enhancement (SECURE) Act of 2019’ passed the
Senate in April and is expected to pass in the House. It makes many changes to
retirement law, but only one is likely to affect ESOPs. The carefully named
bill would delay the start date for required minimum distributions from 70½ to
72.” Translation: someone who does not
want to start taking retirement distributions could potentially delay the start
of mandatory distributions for up to 30 months longer than now as the current
law specifies the year in which someone turns age 70½, not when someone turns
age 70½.
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| Should the money be used to help the poor instead? |
• Notre Dame du Paris Restoration.
A number of critics are claiming that the money being pledged to restore
Paris’s famous cathedral would be better spent helping the poor. One cannot help calling to mind the passage
in John’s Gospel where Judas complained about the money spent on perfume to
anoint the feet of Jesus, not because Judas cared about the poor, but because
(according to John) he wanted to steal some of it. That is probably not the case with today’s
complainers, but the Wall Street Journal
noted that the poor could be helped, and
Notre Dame restored. Of course, the Journal claimed that The Wonders of
Capitalism would do the trick, which is not entirely conceivable. The Just Third Way would do it, as there is
going to be a need for things on which the rich can spend their accumulations
once all new capital formation is financed out of future savings. The bottom line is that you can both help the
poor and advance civilization and culture.
The two are not mutually explusive, except in a past savings world.
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| Time to buy books. And read them. |
• Shop online and support CESJ’s work! Did you know that by making
your purchases through the Amazon Smile
program, Amazon will make a contribution to CESJ? Here’s how: First, go to https://smile.amazon.com/. Next, sign in to your Amazon account. (If you don’t have an account with Amazon,
you can create one by clicking on the tiny little link below the “Sign in using
our secure server” button.) Once you
have signed into your account, you need to select CESJ as your charity — and
you have to be careful to do it exactly this way: in the
space provided for “Or select your own charitable organization” type “Center for Economic and Social Justice
Arlington.” If you type anything
else, you will either get no results or more than you want to sift through. Once you’ve typed (or copied and pasted) “Center for Economic and Social Justice
Arlington” into the space provided, hit “Select” — and you will be taken to
the Amazon shopping site, all ready to go.
• Blog Readership. We have had visitors from 39 different
countries and by coincidence 39 states and provinces in the United States and
Canada to this blog over the past week. Most visitors are from the United
States, South Africa, Canada, Brazil, and Jamaica. The most popular postings this past week in
descending order were “The
Purpose of Production,” “A
Little Background Information,” “Things
Are Seldom What They Seem,” “Thomas
Hobbes on Private Property,” and “News
from the Network, Vol. 12, No. 15.”
Those are the happenings for this
week, at least those that we know about.
If you have an accomplishment that you think should be listed, send us a
note about it at mgreaney [at] cesj [dot] org, and we’ll see that it gets into
the next “issue.” If you have a short
(250-400 word) comment on a specific posting, please enter your comments in the
blog — do not send them to us to post for you.
All comments are moderated, so we’ll see it before it goes up.
#30#