It’s time again for our annual news
roundup, the first part of which we posted last week, and the second part today. Again, there is such a volume of material
that for once we decided to forgo illustrations:
• (July) Gene Gordon. Gene Gordon, a
CESJ member and founder of Descendants of American Slaves for Economic and
Social Justice (DAS/ESJ) based in North St. Louis, Missouri, reports that he is
making headway reaching out to millennial leaders in his community. On
Saturday, June 29, 2019, Gene organized and manned an informational booth at
the Black Wall Street Festival hosted by Young Voices With Action. Working with CESJ, Gene developed a banner,
posters and handouts that he used to present the ideas of the Citizens Land
Development Cooperative (CLDC) and the Capital Homestead Account. His booth drew in many different people,
including community and youth leaders. Braving high humidity and blazing
sunshine for nearly seven hours, Gene answered a lot of questions by the almost
constant stream of people visiting his booth. He especially stressed the need
to go beyond “programs” to deal with consequences of poverty, and to “repair
the system” in order to empower every person with capital ownership. Many people commented that they had never
heard about CESJ’s ideas of the Just Third Way and Capital Homesteading for
every citizen. Gene plans to follow-up with some of the people who showed
strong interest, and organize to build community councils with citizen
representatives of all ages. DAS/ESJ’s objective will be to build a base of
people power to demand an expanded capital ownership redevelopment strategy and
model CLDC. He also plans to set up his DAS/ESJ booth at other community gatherings
– except this time he’s going to bring a tent.
Those interested in helping Gene Gordon with his project in St. Louis
can contact him at geno_gordon@yahoo.com.
• (July) German Outreach. CESJ Australasia has shared information about
economic personalism with a representative of the SPD, Sozialdemokratische
Partei Deutschlands, the German Green Party. Two members of the Party are planning an
informational meeting and discussion for party youth groups. A member of the European Parliament from the
SPD has become a supporter of the Just Third Way. This is significant, because the SPD has made
tremendous gains in the last couple of years, becoming the single most powerful
party in Germany, largely in reaction against Angela Merkel’s Christlich Demokratische Union Deutschlands
(CDU), the interfaith successor of the old Catholic Center Party (Deutsche Zentrumspartei), which
destroyed itself by joining the coalition granting emergency dictatorial powers
to Hitler following the Reichstag fire.
(Hitler used his power to make the Nazi Party the only legal one in
Germany.)
• (July) Gold Standard Push.
Just Third Way proponents are, arguably, among the strongest advocates
for a stable reserve currency by means of which all economic values in an
economy can be measured. This could even
be on a global scale, simply by pegging every country’s national currency to a
single global reserve currency, and having all contracts specify that
consideration is measured in terms of the global reserve currency instead of,
or as well as, the relevant national currency.
This is all the easier because in a broad sense, “money” is a means of
measuring what goes on in a transaction, as Louis Kelso noted in Two-Factor
Theory (1967). That is why we have
antonymous feelings about the current push for a return to “the gold
standard.” Yes, measuring all values in
terms of gold would give a stable measure to a reserve currency. Keep in mind, however, that what is being
measured is value . . . and the value of gold can change relative to
everything else. It’s not like an inch
or an ounce, which once having been set stays the same forever. Yes, an ounce of gold is always an ounce of
gold, but an ounce of gold doesn’t always translate into the same value of
fourteen or fifteen ounces of silver (a burning question when an economy is on
a bimetallic standard). There is also
the problem in that some of the people tossing around the term “gold standard”
aren’t precisely clear on what they mean by it.
1) Do they mean that gold is the only “real money” and that nothing is
or could ever be money? 2) Do they mean
that gold is the only reserve currency, and that all other forms of money must
be convertible into gold on demand? 3) Or
do they simply mean that all money is valued in terms of gold? Historically, #1 has never been the case,
either for gold or any other standard.
Usually what has been meant by “gold standard” is a combination of #2
and #3, with all (other) values expressed in terms of gold, with occasional
convertibility. Thus, in order to
discuss a stable currency intelligently, whether the standard is gold, silver,
or anything else, two questions must be answered, neither one of which is being
addressed by either side in the debate: 1) What do you mean by “money”? and 2)
What do you mean by “standard”? First
answer those questions, then and only then will it be possible to decide on
what standard to use . . . and the best one may not be gold.
• (July) Reparations. In a Wall Street Journal
piece, there is a commentary comparing the latest demand for reparations for
slavery with Edmund Burke’s reflections on the French Revolution, the
two-hundred and thirtieth anniversary of which is coming up this weekend. In “Reparations and the Spirit of 1789”
(07/12/19, A-15), Liam Warner of the Wall Street Journal quotes Burke:
“To take the fiction of ancestry in a corporate succession, as a ground for
punishing men who have no relation to guilty acts, except in names and general
descriptions, is a sort of refinement in injustice belonging to the philosophy
of this enlightened age.” Interestingly,
Burke put his finger on the problem that still plagues us today, and not merely
in the demand for reparations. That is
the essential philosophy of two kinds of liberalism imposed over a third. European/French liberalism that assumes the
sovereignty only of the collective and was the philosophy of the French
Revolution, has combined with English liberalism that assumes the sovereignty
of an élite, to displace American liberalism that assumes the
sovereignty of the individual human person.
All three are “liberalism,” but the first two simply assume that
ordinary people don’t count; that their rights may be overridden at will or
that they never existed in the first place.
Burke was clearly of the American variety of liberal, but he was locking
horns not only with the French type liberals across the Channel, but the
English type liberals in his own country, and whose activities would lead to
the development and spread of socialism, modernism, and New Age thought.
• (July) Reparations, Part II. One possibility that no one seems to be considering as an acceptable
form of reparations for currently unjust social structures that affect everyone
adversely, is removing barriers that prevent full access to the common good by
everyone. This, as thoughtful people
throughout the ages have noted, requires capital ownership. That being the case, it makes sense that the
best and most effective form of reparations for current injustice is to figure
out a way to make everyone a capital owner — without taking anything away from
existing owners except a monopoly over future ownership opportunities. This can be done with a Capital Homesteading
program.
• (July) Retirement Strategy.
There has been a flurry of news articles in financial sections and
websites about how Americans
are not saving enough out of their paychecks to finance retirement. While these articles are no doubt
well-intentioned, they are approaching the problem from the wrong angle. The real problem is not that Americans are
not saving enough for retirement, but that they are not investing enough for
retirement. True, that is rather hard to
do when personal debt is at an all-time high, but the right investment strategy
— as opposed to saving strategy — can take care of that. Shifting from the savings to the investment
mentality means going from asking yourself, “How much money do I need to set
aside now to have enough after I can no longer earn?”, to “How much do I need
to invest now to generate a living income when I can no longer earn?” Yes, “savings = investment,” but it has to be
your investment and savings, not your savings and someone else’s investment,
and that means shifting from past savings to future savings to finance
investment, as outlined in CESJ’s Capital
Homesteading proposal.
• (August) Hudson Institute Event.
Yesterday, the Hudson Institute hosted an event, “Countering Emerging
Economic Threats.” The speaker, Anthony
Vinci, an adjunct senior fellow at the Center for a New American Security,
talked about the dangers represented by China, and proposed the formation of a
new government agency, the National Economic Defense Center. While interesting, the presentation was
clearly an example of the thinking that comes out of the existing economic
paradigm. An increasing role for the
State, money manipulation, reliance on past savings, and so on — the Just Third
Way has a better answer, and a more effective one in Capital Homesteading.
• (August) Brazilian Pension Deal.
In a rather surprise move, Brazil is trying to solve some of its fiscal
problems by reducing public pensions.
(“Big Pension Deal Signals Power Shift in Brazil,” Wall Street
Journal, 08/02/19, A-16) This is a
step in the right direction, but only a step.
To solve the immediate problem, it is not simply enough to cut
costs. There must be a program to
replace the lost income — and something along the lines of a Capital Homestead
Act would supplement or replace the income from a pension, and at the same time
encourage people to be productive in a way that also builds consumption
power. Both widespread productive power
and widespread consumption power are essential for a sound economy.
• (August) The Increase of Debt Slavery. Although the burden of
consumer debt is nothing new, the bill is starting to come due at a time when
wage income levels are remaining static or actually falling in real terms. (“Record Debt Swamps Middle-Class Families,” Wall
Street Journal, 08/02/19, A-1, A-9.)
The idea that static or declining wage income can be supplemented or
replaced by ownership income simply doesn’t seem to occur to the
powers-that-be, despite the fact that Louis Kelso and Mortimer Adler published
their two books outlining an alternative more than half a century ago, The Capitalist Manifesto (1958) and The New Capitalists (1961).
• (August) More on the Debt Crisis. In ancient Rome, it was
illegal to sell yourself into slavery for debt or to be sold to satisfy a
debt. That was all well and good, but it
didn’t address the underlying problem of inadequate income. That is why the move to restrict consumers’
ability to tap into their home equity for cash is another move in the right
direction, but it does nothing to solve the problem of inadequate income. (“Tapping Homes for Cash Gets New FHA
Limitations,” Wall Street Journal, 08/02/19, A-9.) Not to keep playing the same tune, but a
Capital Homestead Act would help . . . as would something along the lines of a Homeowners Equity Corporation, one of the features of which
would allow shareholders/homeowners to cash out some of their shares without
risking losing their homes.
• (August) Understanding of Private Property. Although we’ve known for some time that many people have an
inadequate understanding of property, it was made especially evident this past
week when we ran Mr.
Geoff Gneuhs’s rebuttal of an article that appeared in America magazine,
a Jesuit publication. Geoff, a founding
member of CESJ, was Chaplain to Dorothy Day and the New York Catholic Worker,
and gave the homily at Dorothy Day’s funeral.
Geoff’s letter startled many people who assumed that Dorothy Day was
against private property and in favor of massive government welfare often
erroneously referred to as “social justice.”
She was also opposed to the wage system, minimum wage legislation, and
many of the things so many people today take for granted as integral to
Catholic social teaching. She actually
sometimes seemed to go too far in the opposite direction, taking positions that
some think are libertarian, emphasizing the role of individual virtue and —
like many people with an intense focus on their particular mission in life — seeming
to relegate institutions, essential tools to help people realize their
political nature, to a secondary or non-essential role. That, however, takes nothing away from
Dorothy Day’s tremendous work in awakening people’s individual (as opposed to
social) conscience. Geoff’s letter made
it evident that the Catholic Worker movement and the Just Third Way are not
opposed, but are complementary, one individual, one social. To do as some do and claim that they are in
conflict is to misunderstand both Dorothy Day and CESJ.
• (August) • The Good of International Trade. On Thursday, the day after the latest stock
market plunge, Alan Blinder in the Wall Street Journal (“Three Political
Truths the Democrats Can’t Handle,” 08/15/19, A-15) declared that the Democrats
(and Republicans) don’t see that international trade is a good thing. Blinder is half right. International trade is a good thing . . . as
long as it is actual trade, viz. production for production, not U.S.
cash backed by government debt (which you would call counterfeit if it wasn’t
the government issuing it), for production.
It’s only a trade if both parties actually trade something, not if one
of them just promises something it may or may not be able to deliver. That’s what government debt is, after all, a
promise the government makes that it hopes somebody else down the road will be
able to make good on.
• (August) Anti-Collectivism is Anti-Socialism? Evidently,
according to the English writer G.K. Chesterton, who expressed his distaste for
socialism once or twice, and made a declaration published in the Bismarck
Tribune of August 3, 1921 (page four).
Although the push to equate having a social conscience with being a
socialist is still in full force, it is evident from the evidence that at least
two icons of the
“Well-There-Is-Good-Socialism-And-There-Is-Bad-Socialism-And-Good-Socialism-Is-Good-Socialism-And-Bad-Socialism-Is-Bad-Socialism”
school of thought — Dorothy Day and G.K. Chesterton — turn out not to support
any kind of socialism, and are definitely against the intrusion of the State
into people’s lives more than is absolutely necessary. Hopefully, this will cause some rethinking of
positions and reevaluations of some rather equivocal modern idols, such as R.H.
Tawney (England’s greatest modern socialist, according to his biographers, and a
leader of the Fabian Society from 1920 to 1933), and Tawney’s Fellow Fabian,
E.F. Schumacher, whose “New Age Guide to Economics,” Small Is Beautiful
(1973) has supplanted the Bible for some people.
• (August) Century Treasury
Bonds. Evidently under the
impression that government debt is an investment, today’s Wall Street
Journal opined that 100-year Treasuries might be a good idea. There are so many problems with the idea that
it is hard to know where to begin. The
idea is just a twist on the idea of “consols,” short for “consolidated annuities,”
which are perpetual debt instruments redeemable only at the option of the
government that issued them. Both the
British government and the United States government have issued consols, and
they have never been a good idea, as they aggravate the all-too-common belief
that “money” is a non-redeemable debt the nation owes itself, and it is somehow
acceptable to back currency with government debt that has nothing but the
government’s power to tax other people’s wealth behind it.
• (August) Democratic Wealth Taxes.
A number of the Democratic contenders for the U.S. presidency have
suggested several forms of a wealth tax intended to confiscate some of the
trillions of dollars held by the rich for the benefit of the non-rich . . . or,
at least, that is the theory. These
range from taxing unrealized gains on assets of all kinds to taxing the wealth
itself over a certain amount. At the
heart of the proposals is the fixed belief that the rich have the stuff in
sackfulls just lying around. People
forget that most of the wealth owned by the wealthy is in the form of
productive assets. In order to pay a
wealth tax, it usually involves liquidating (“selling”) all or a portion of the
wealth to have enough cash to do so.
Forced sales of that sort tend to drive down the values of assets, and
almost never generate the anticipated revenue.
Plus, liquidating capital assets means finding a buyer, and today that
usually means (you guessed it) China, which is buying up foreign capital by
overleveraging debt instead of increasing domestic capacity. A wealth tax would not generate enough
revenue to justify it in the first place, and would lead to further shifts of
capital ownership overseas, with probable job loss as the Chinese begin cutting
costs to make the new capital recoup its purchase price. It would be a much better idea to stop using
the tax system for anything except raising revenue, and turn from trying to get
more taxes out of fewer people, to getting fewer taxes out of more people, as
proposed in CESJ’s Capital
Homesteading reforms.
• (September) Puerto Rico
Recovery Financing.
Illustrating the problems associated with using outdated assumptions
about money and development to guide thinking, Puerto Rico’s recovery is being
put on a back burner due to funds being diverted to the wall to keep out
illegal immigrants. This is a triple
tragedy, because, one, Puerto Rico occupies a position that gives it ready
access to North, Central, and South America, and it could easily become a
financial and economic hub of two continents.
Two, development and recovery can be financed with the expansion of bank
credit in ways that creates new owners instead of being a cash drain on
existing money. Three, by showing how to
revive an economy in a way that benefits everyone, Puerto Rico could lead the
way and make staying in your own country far more attractive than making a dangerous
trip to the United States.
• (September) Concentrating Ownership Further. Companies like Disney, Apple, and Deere and
Co. are financing expansion with cheap capital credit. This, of course, ensures that ownership of
these and other companies using the same financing technique will become even
more concentrated than before. Of
course, if they wanted to make certain they had a customer base in the future
to purchase their products, they would finance by issuing new shares, and pay
out all earnings as dividends. New
shareholders could then have shares that paid for themselves with future
dividends and thereafter yield consumption income.
• (September) U.S. Bishops Statement on Ownership. In commemoration of the 1919 U.S. Bishops
program for social reconstruction, the
United States Conference of Catholic Bishops issued a statement on Labor Day
that mentioned ownership in a positive manner, notably ESOPs. While this is a nod in the right direction,
neglected was any mention of the qualifications and cautious nature of the
rather mild endorsement in the 1919 program as well as the 1986 Pastoral Letter
on the Economy, Economic Justice for All. Of the 1919 program, Dr. Franz Mueller, a
student of Fr. Heinrich Pesch, S.J., had this to say: “It is hard to understand
why neither [Monsignor John A.] Ryan nor the Catholic War Council realized, or so it seems, the ‘corporatist’ [i.e., Fascist] implications of this statement.” (Franz H. Mueller, The Church and the Social Question.
Washington, DC: American Enterprise Institute for Policy Research, 1984, 107.) Expanded ownership is all very well, and a
desirable goal, but not if ownership is redefined in such a way as to turn it
into de facto socialism. As
Mueller noted, Ryan trivialized concerns about his program that the bishops
adopted by sneering that anyone who questioned him was not worthy even to be
spoken to. (Ibid., 106.).
• (September) Warren’s Social
Security Solution. Elizabeth
Warren wants to raise the Social Security tax and increase the wage income
subject to the tax. This, she believes,
will make the program solvent for a few decades and permit an increase of $200
per month in benefits. A few problems,
however. It would be better to merge the
separate Social Security tax into the general tax rate, thereby exempting the
very poor and automatically taxing the rich at a higher rate. As it is, the
poor pay Social Security tax from the first dollar they earn with no exemption
and only on wage income. The income of most wealthy people is not in the form
of wages anyway, which exempts them from Social Security tax regardless how
high the rate is. It's a stupid system and badly needs reform in the form of
Capital Homesteading.
• (September) Backwards Money Problems.
Lack of understanding about money can result in some very odd
conclusions, such as the idea that “money” should have a cancellation date, as described
in this article. Anyone who
understands money will instantly respond, “What? Money DOES have a cancellation date: the date
the obligation backing the money matures and must be redeemed!” All money has this feature whether the money
is backed by government debt (not a good thing) or private sector assets
(preferred in a rational system). The
problem is that many people confuse money and currency, and don’t realize that
currency is fungible, that is, one unit is legally the same as all other units
of the same currency. A debt may be
cancelled, but the currency used to cancel the debt is not. It keeps getting reused so that new currency
doesn’t have to be issued for each transaction.
That can be done, of course.
Before the invention of currency, every single transaction was designed
to create money when initiated and cancel money when completed. Once in a while the money created would be
“negotiable,” that is, used in other transactions, but by and large, most
transactions before the invention of currency and even today use “one-use
money” that does not involve currency, but are measured in terms of the
monetary unit. Money with a cancellation
date would only hurt people whose wealth was held in the form of cash, which
most rich people don’t do: cash doesn’t make money, while cash used to purchase
capital assets makes lots of money. The
little saver would work all his life to save a tiny bit of money, only to have
all his savings wiped out by cancellation, while the rich man sits in his
mansion with his stocks and bonds making more money for him every day that he
doesn’t save, but spends or reinvests in more capital. The problem is that people who talk about
money that gets cancelled get everything backwards: production of marketable
goods and services does not come from money.
Money comes from producing marketable goods and services.
• (September) Misunderstanding Social Justice. Some
years ago CESJ was referred to the late Father Gerry Creedon as the individual
with whom CESJ should be in touch on matters of Catholic social teaching. After making some follow-up efforts, the
attempt was dropped as Fr. Creedon expressed no interest in CESJ’s work. Recently, friends and follows of Fr. Creedon
established the “Gospel
Advocacy and Leadership Foundation” (GALF) to continue his work, which
they characterize as “social justice.” While the work the foundation is doing
is good and necessary, however, it is not social justice as defined by Pope
Pius XI and analyzed by CESJ co-founder.
Fr. Creedon’s concept of social justice was to meet individuals wants
and needs directly, while Pius XI’s concept of social justice as a particular
virtue (based on Father Aloysius Taparelli’s principle of social justice) is to
direct organized efforts to the institutions of the common good to restore the
functioning of individual justice and charity.
This is the understanding of social justice found in CESJ co-founder
Father William J. Ferree’s doctoral thesis, The Act
of Social Justice (1942, © 1943), and pamphlet, Introduction
to Social Justice (1948).
Assuming that social justice pertains to the individual order is to turn
Catholic social teaching into a rather vapid and flabby variety of Fabian
socialism.
• (September) Questions on
Credit. Many people today are
still confused about the different kinds of credit. Capital credit and consumer credit are two
very different things. Capital credit is credit used to purchase productive
assets that pay for themselves out of their own future earnings and then yield
income for consumption. Consumer credit (credit cards) is credit used to
purchase goods that are consumed, and that do not pay for themselves. Consumer
credit must be paid for out of other income, not income generated by what was
purchased.
• (October) Article Newman.
Dr. Robert A. Gervasi, President of Ohio Dominican University in
Columbus, Ohio, has published an article on the upcoming canonization of John
Henry Cardinal Newman. The article, “The Idea
of a University,” appeared in the September 8, 2019 issue of The
Catholic Times, “The Diocese of Columbus’ News Source.” In addition to explaining a little about
Newman’s importance (necessarily very little, as conveying the true import of
Newman and his career is virtually impossible in a one-page article, even one
with small print), the article points out a small problem in Catholic Academia,
that also seems to afflict other Catholic institutions including parishes and
social clubs (and which we suspect other denominations and organizations deal
with as well): the belief that anyone who deviates from a particular party
line, or even fails to express sufficient enthusiasm for the party line, is not
a Real Catholic™. Self-appointed
inquisitors on both sides of the socio-political aisle somewhat misleading
labeled “liberal” and “conservative” are fond of making lists or declarations
that, e.g., “90% — or even 99.9999999999999% — of ‘Catholic’ (‘people’
who ‘disagree’ with ‘you’ are ‘always’ put in ‘quotes’) Colleges and
Universities Are No Longer Catholic, and What’s More Never Were.” Somewhere along the way the question of
whether or not something is true got misplaced.
• (October) “Cancel Billionaires”?
The Atlantic recently ran an article in which the author, Annie
Lowrey” (a Staff Writer), bemoaned the fact that a miniscule number of people
own vast wealth, while others subsist on a pittance or not at all. As Lowrey argued in “Cancel
Billionaires: Wealth Inequality Hurts Society,” great disparities in wealth and
income are bad for society, therefore wealth should be taken from the wealthy
and redistributed to the poor. She does
not claim that people like Jeff Bezos or Bill Gates, both of whom are “worth”
(in dollar terms, not human) in excess of $100 billion, got their wealth
illegally or immorally. Rather, that
being wealthy is in and of itself wrong, and they must be punished (although
she carefully refrains from using that or similar terms) by having their wealth
confiscated for the greater good; “[I]t is expedient for us, that one
man should die for the people, and that the whole nation perish not.” (John
11:50.) The problem, of course, is that
simply confiscating every cent of Bezos’s and Gates’s wealth and redistributing
it would only make the situation worse.
It also sounds a bit like a Mafia Don suggesting to his minions that a
rival be “cancelled.” Redistributing
Bezos’s and Gates’s wealth would give each person in the world around $25, which
is hardly the solution to anything other than how to pay for tonight’s
dinner. The problem is not that Bezos
and Gates are wealthy, but that other people are not productive. The only real solution to poverty and
disparities in wealth is not redistribution, but to make non-productive people
productive, and that can be done by helping them become owners of the capital
that displaced their labor and made people like Bezos and Gates wealthy. One possibility is Capital Homesteading.
• (October) Federal Reserve Changes to Crystal Balls. Shifting from Tarot Card readings to a
crystal ball, the Federal Reserve announced it will be relying less on
confusing existing data and trying to
force results via other means, such as risk assessment . . .
based on confusing existing data. . . . In other words, instead of trying to interpret
data, the Federal Reserve is shifting to risk management . . . which relies on
interpreting data. . . . Of course, all
this would be moot if money creation were carried out only in response to feasible
projects being monetized, and the whole Keynesian money manipulation strategy
abandoned, but that would require governments to give up control of the money
supply, which might mean prying it out of their cold, dead hands, as the saying
goes. Or, there could be a program of
expanded capital ownership that takes power out of the hands of the politicians
and puts it in the hands of the rest of us, letting the currently wealthy
retain their current wealth, and politicians can start doing their jobs instead
of ending up swinging from lamp posts.
• (October) Negative Interest
Rate Frenzy. Greece has become the
latest country to fall for the illusion that “negative interest rates” will
force commercial banks to start lending to businesses and stimulate economic
growth. The idea is that charging a fee
to commercial banks for reserves will make loans to businesses more
attractive. Unfortunately, it doesn’t
work that way. First, of course, loans
aren’t made out of reserves. That cash
is called “reserves” because it is, well, “reserved,” i.e., set aside to meet outstanding
obligations of the bank that are presented for payment. Commercial banks don’t lend existing money,
they create new money by accepting bills and notes for businesses purposes. When a bank has “excess reserves,” it used to
be restricted to making more, less secure loans. These days, with the repeal of legislation
prohibiting commercial banks from owning any securities other than government
bonds and their own stock (and that only in treasury), commercial banks will
invest their “excess reserves” in speculative securities, driving up the price
of shares on the secondary market, and still leaving business starving for
credit. It’s not merely a bad strategy
to charge negative interest rates, it’s actually destructive of economic
growth.
• (October) Saving Social Security.
Yet another proposal has been put forth to “save” the Social Security
system, again without considering the underlying flaws in the system itself. In “How to
Save Social Security? Some Candidates
are Looking at Your Capital Gains,” Yahoo Finance takes a look at attempts
to bolster Social Security revenue by broadening the base of people paying in
and the types of income subject to the tax.
The problem is that if the number of people paying in is increased, then
the number of people eligible for benefits also increases, and the same problem
remains: how to meet increasing demands on the system? We, of course, advocate returning the Social
Security system to its original purpose: a pay-as-you-go safety net, not a
retirement savings plan (which it legally is not; no one owns what is in his or
her account; what is paid in is a tax, not a contribution). We advocate merging the Social Security tax
into the general tax rate (thereby automatically broadening the tax base),
keeping current promises, but making future qualification for benefits
need-based, and instituting an intensive program of widespread capital
ownership, such as Capital Homesteading.
• (October) A Nod in the Right Direction.
Bernie Sanders has announced a proposal to broaden the base of worker
ownership in the United States. As
reported on the NCEO
blog and in the mid-monthly bulletin of the National Center for Employee
Ownership, Sanders wants workers to have up to 20% ownership of the companies
that employ them. When we first heard of
this, there was no mention of paying for the shares, just a distribution to
some kind of trust of newly issued shares that would grant beneficial (not
direct) ownership. As fleshed out in the
NCEO blog, there is mention of a fund to assist workers in purchasing shares,
so we are not talking direct redistribution, just veiled redistribution
through the tax system. Sanders gets
points for supporting worker ownership and not forcing direct
redistribution. That being said, here in
no particular order are the major problems with his proposal from the Just
Third Way perspective: 1) It is still “past savings based.” That is, the proposal covers only existing
wealth, not future wealth. 2) Only workers are affected. What about people who don’t work for private
sector companies, can’t work, or don’t work?
Don’t they also have the right to own capital? 3) Why
only 20% Why not 100%? 4) Why not direct ownership with the full
rights of control and enjoyment of the fruits, i.e., full dividend
payout, voting of shares, and right of free sale? There are doubtless more, but we think that
is enough to suggest to Sanders that he might want to modify his proposal to be
more just and democratic.
• (November) Have Ye Seen the Great White?
Much to our surprise, the
posting we put up this past Wednesday to mark the 3,000th blog
posting was one of the more commented on, liked, and shared for quite some
time. This is surprising, for it was
presented as a way of tying in the development of the idea of social justice
with what was happening in the early nineteenth century in the United States
and its portrayal in semi-fictional form in one of the contenders for the Great
American Novel, Herman Melville’s Moby Dick, or, The Whale (1851). It turns out that, considered as a satiric
social commentary, Moby Dick just might give a better “feel” for the
period than more modern and popular treatments.
It is at least something to think about.
• (November) CESJ International Fellows.
As a result of attending an event for Hubert Humphrey Fellows at
American University a short time ago, CESJ has been talking to a number of
individuals interested in becoming Fellows at CESJ. In particular, three people from Morocco,
Afghanistan, and Pakistan who expressed interest in Just Third Way monetary and
financial reform along the lines recommended in CESJ’s Capital Homesteading
proposal are currently exploring the possibility of doing “distance Fellowships”
(i.e., over the internet), thereby carrying out a project as a team
without having to be physically in the same location.
• (November) Fight for $15.
Although they are working very hard to muffle the downside, the New York
Times has come very close to admitting that the push to
raise the minimum wage to $15.00 nationwide might not be such a good
thing. While in the short term border
businesses in New York state, especially the Pennsylvania border area, are not
seeing too much of a downturn in restaurants and other businesses in the
service industry (and some claim business is booming), those engaged in
production are reporting decreased profits and loss of business in response to
the higher cost of doing business, and business owners overall are certain that
in the mid- to long-term they will see a flight of businesses and jobs to
places like Pennsylvania and North Carolina.
What the whole movement to increase the minimum wage to increase real
income does not take into account is that the people most hurt by rising costs
of wages are the people it is intended to help.
No one appears to appreciate what the labor statesman Walter Reuther
stated in his testimony before Congress, that raising fixed costs like wages
hurts everyone, but that taking increases out of profits as owners increases
real income without increasing costs.
• (November) Social Security COLA. While the usual rhetoric about Social
Security almost always includes the mantra, “It’s my money, I paid it in,” the
fact is that in 1960 in Fleming v. Nestor the Supreme Court of the
United States upheld the original Social Security Act of 1935 as passed by
Congress that gives Congress the right to adjust benefits at any time. The Supreme Court specifically ruled that participants
in the Social Security system do not, repeat, do not have
ownership of what is credited to their accounts. If you look closely, you will also notice
that the money you pay into the system is a tax and not a “contribution.” You do not continue to own the taxes you pay
to government. You do own any
contributions you pay into a qualified retirement plan. The reason for bringing this up is that many
people are becoming upset that Congress might not increase Social Security
benefits to adjust for the rising cost of living, the now-expected “Cost Of
Living Adjustment” or COLA, and they are irate.
It’s “their money,” they argue, and Congress is a thief for withholding
it . . . forgetting that in many cases most people receive more out of Social
Security than they paid in. The only
real solution, of course, is to return Social Security to its original purpose
of a social safety net — after keeping all current promises — but make
the proposed Capital
Homestead Act the core around which to build individual savings
and investment, not only for retirement, but for everyday consumption income.
• (November) EWTN Interview. CESJ’s Director of Research has been
invited to appear on EWTN Live with
Father Mitch Pacwa, S.J., to talk about his book, Ten
Battles Every Catholic Should Know (2018).
The next day a segment of EWTN’s Bookmark with host Doug
Keck will be taped. EWTN — “Eternal
Word Television Network” — is international in scope, and reaches 70 million
households in the United States. It is the largest religious media network in
the world, and it claims to reach 250 million people in almost 150 countries. The show — which is, of course, filmed live —
is scheduled for January 8, 2020.
• (November) Noriko Arai on a New Learning.
After seeing a short segment featuring Dr. Noriko Arai on Direct Talk (a
show on NHK World, the Japanese public television channel), we did an internet
search and found this “Ted
Talk” by her presenting her findings from her “Todai Robot” and her
concerns about current education. In
most countries today (although she was focusing primarily on Japan), students
memorize vast amounts of data — which any computer can do better, e.g.,
“Watson” on the “Jeopardy Challenge” — but often fail to understand meaning,
that is, they do not really comprehend what they “learn” in any meaningful
sense. Applying Dr. Arai’s findings to
the difficulties experienced with getting people to accept the Just Third Way
of Economic Personalism, we can suddenly understand why, when they are
presented with (for example) the principles of binary economics as explained by
Louis Kelso and Mortimer Adler, or the laws and characteristics of social
justice as explained by Pope Pius XI and CESJ co-founder Father William Ferree,
people either look blank, run away, or attack.
Confronted with something that is outside of their store of accumulated
“knowledge” of the way things are that they have memorized, they do not have
the intellectual tools they need to comprehend anything outside their current
frame of reference. It is not enough to
demand that they tell us what is wrong with what we are saying. “What’s wrong” as far as they are concerned
is that the Just Third Way is simply incomprehensible to them and they
necessarily react as they do to any other threat, triggering the “fight or
flight” mechanism. What needs to change
— and change soon, as Dr. Arai noted — is how young people (and anyone else)
are educated. Without a Justice
University to teach fundamental principles of reason and understanding from the
earliest years, beginning with parents teaching their infants, the world is
heading toward an intellectual Armageddon, not to exaggerate.
• (December) Rand Paul on Student Loans. Rand Paul has come out with a proposal
that people be allowed to pay off
their student loans by taking money out of retirement savings without
incurring the usual penalty for premature distributions. This makes a little bit of sense in one way,
for it hardly pays anyone to be saving on one hand while he or she has unpaid
debts bearing interest that keep getting larger and larger — and that can’t ordinarily
be discharged in a bankruptcy. Since
retirement savings are also ordinarily exempt in bankruptcies, it (sort of)
makes sense to get rid of one obligation that is only going to get bigger and
bigger with a more or less offsetting asset.
The problem is that as long as saving and investing for retirement is
based on past savings and reducing current consumption income, it is slanted
heavily in favor of early savers, whose tax-free earnings on the investments
are reinvested. Example: given a 10%
average ROI on mutual funds in an IRA, and a $5,000 annual contribution, take
twin brothers, one of which goes to work right after high school and the other
goes to college and graduate school. The
first brother immediately opens an IRA in a conservative mutual fund and puts
in $5,000 every year for ten years, then gets married and has children and
finds he can’t afford to contribute any more.
The second brother starts contributing to his identical IRA at the same
time his brother stops contributing to his.
Come retirement age and the time to start taking distributions, the
brothers are astounded to discover that even though he has not contributed for
decades, the first brother has more in his IRA than the second brother! Why?
Because after ten years the first brother’s IRA was generating more in
income that was reinvested than his brother was contributing each year! Everything else being equal, it’s better to
invest early than often. Thus, taking
money out of retirement investments to pay down debt can completely destroy a
retirement plan. The whole question
would be moot, of course, under Capital Homesteading, as a
Capital Homestead Account would generate income from the beginning that could
be used to pay for education, or to make payments on student loans without
touching the principal, leaving a retirement program intact.
• (December) Fulton Sheen and the Scandal.
As many people are aware, Abp. Fulton J. Sheen, the author of Freedom
Under God (1940) that CESJ has republished in a “Just Third
Way Edition,” has had his “cause” for canonization in process for a while. Canonization is an official declaration by
the Catholic Church that an individual is — according to Catholic belief — in
Heaven and may be officially termed a “saint.”
Canonization does not, contrary to popular belief, “make someone a
saint.” It simply recognizes what the
Catholic Church believes to be true.
Sheen’s “cause” has been subject to a measure of religious politicking
that need not concern us (except to note that having a recognized and popular
saint buried (or “enshrined”) in your town or church can be quite financially
rewarding. We only bring this up because
the Vatican announced last month that Sheen would be “beatified” — the next
step to canonization — in December.
Naturally, a large number of people were outraged when at the request of
some U.S. bishops the beatification was put on hold until a matter regarding
Sheen’s role in the reassignment of a priest identified as a sexual pervert is
settled. It does not appear that Sheen
did anything inappropriate or improper, especially since his tenure as Bishop
of Rochester, New York, was too brief to do anything except upset a lot of
people due to his lack of administrative experience (he all but admits in his
autobiography he was not a good administrator), but since Sheen was named in an
official investigation, it is clearly prudent that his beatification be held up
until the matter is completely resolved.
Had Catholic authorities acted with equal prudence in other instances,
finding out the truth before acting (or failing to act), much of the scandal
currently shaking that institution could probably have been avoided.
• (December) Jobs Report and Finance. What possible connection is there between how
many people are employed in wage system jobs and the prices of shares on the
stock market? None — unless the only way
most people gain their income is from wages and welfare. The employment rate then becomes a “leading
economic indicator,” for if people have “jobs,” they will have income, and with
income will have consumption power.
Since consumer demand drives the demand for new capital, then a “good”
jobs report within the past savings paradigm that restricts most people to
wages and welfare means that the economy should do well. Of course, if new capital were financed out
of future savings in ways that create new owners instead of increasing the
wealth of current owners, and most people got increases in income from
dividends of ownership instead of wages for labor, the Jobs Report would be
pretty much meaningless. What would
matter would be the “Ownership Report” that gave a breakdown of capital
ownership patterns, how many people had a level of capital ownership sufficient
to meet consumption needs and how many still had to rely on wages and welfare,
and so on. With income going to
consumption instead of reinvestment, an Ownership Report would be a much more
solid leading economic indicator than a jobs report could ever be.
• (December) Teacher Retirement Costs.
According to an article in the Wall Street Journal, advisors to
teachers for investing their retirement savings may be taking more than their
due — or at least more than the traffic can bear. Most teachers require additional savings to
supplement their pensions, many of which are local or state government run and
are chronically underfunded. The higher
the fees charged for investment services, the less there is for
retirement. This is a double whammy that
would not be seen in Capital Homesteading.
First, unlike savings programs like 401(k)s and IRAs, Capital
Homesteading would be funded using self-liquidating loans to purchase
pre-vetted, full payout shares. In other
words, a Capital Homesteading Account does not require the “Capital
Homesteader” to save by cutting consumption, but by increasing production. Not everyone can cut consumption, but by
participating in ownership of capital anyone can participate in increased
production. Second, instead of paying
someone an additional fee to advise on selection of investments for a Capital
Homesteading Account, that is covered by the lender’s fee up front, which also
covers risk (using capital credit insurance and reinsurance to satisfy the
demand for collateral) and a just profit.
Unique among retirement savings programs, Capital Homesteading is
designed and intended to pay out income from the first year of participation,
which can start at birth. In Capital
Homesteading what accumulates is not cash to be paid out in the future, but
assets that generate income that is paid out to the participant, after using
part of it to pay for the assets, i.e., the program is self-liquidating.
• (December) Federal Reserve and Interest Rates. Much to no one’s surprise, the Federal
Reserve is standing pat and leaving things as they are. After all, we’re in the middle of the
greatest economic recovery in history . . . judging from the level the stock
market has reached. On the other hand, a
more rational explanation is that we are actually in the middle of one of the
greatest gambling fevers in history, something on the order of the Dutch Tulip
Mania, the South Sea Bubble, the Mississippi Scheme, or any of the other
frenzies that seem periodically to grip the human race. The only thing that seems to stop the fever
is a crash or tragedy that demonstrates the obvious illogic of the obsession. Anyone who doubts this should take a glance
at Charles MacKay’s 1841 classic, Extraordinary Popular Delusions and the
Madness of Crowds.
• (December) The Xed-Mass Bonus. It all depends on how you look
at it. If you’re an investor, an
activist, or a politician running for office or in management, the economy is
booming. If you’re unemployed, don’t own
anything, an activist, or a politician running for office or on the shop floor,
the economy is on the skids. Nowhere is
this more evident than in the Christmas bonus game. According to the Wall Street Journal (“Rejoice!
It’s Christmas Bonus Season. Or, Uh, Not.” 12/13/19, B1, B5), the number of
companies giving Christmas bonuses is dropping, and those that still offer them
tend to give something along the lines of a fruit basket or the “Jelly of the
Month” that triggered Chevy Chase’s psychotic meltdown in National Lampoon’s
Christmas Vacation. So, if you’re in
the upper echelons of income and wealth already, the economy is doing
great. If not, well, tough luck. Of course, Capital Homesteading
would eliminate the problem by and large, but so far people aren’t listening as
they wait breathlessly for their Christmas bonus.
• (December) Shinzo Abe and Health Care.
Japan’s now longest-serving Prime Minister, Shinzo Abe, wrote an op-ed
piece that appeared in the Washington Post in favor of health care for
all (“All Nations Should Have Universal Health Care,” 12/13/19, A21). This is interesting, as Abe is considered
somewhat conservative, being president of Japan’s Liberal Democratic Party,
described as “a right-of-center conservative party.” Abe, however, has been facing fading
popularity for a number of his positions, and may be touting universal health
care in an effort to bolster his political position. How wise this might be is not clear, as it
contradicts his previously conservative economics. Frankly, Japan’s economy — nor any other economy
— might not be able to sustain universal health care, at least as long as the
existing Keynesian framework keeps the world in economic bondage. The only thing that has the potential to
deliver the wherewithal for universal health care or even general economic
sanity is Capital
Homesteading, which Japan needs at least as much as does the
United States.
• 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 70 different
countries and 52 states and provinces in the United States and Canada to this
blog over the past week. Most visitors are from the United States, United
Kingdom, India, Canada, and Thailand. The
most popular postings this past week in descending order were “Happy
Christmas Eve,” “Nothing
Is Impossible in Social Justice,” “Good
Upon ’Change,” “A
Tale of Two Machines, I: The Cotton Gin,” and “News
from the Network, Vol. 12, No. 51.”
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.” Due to imprudent
language on the part of some commentators, we removed temptation and disabled
comments.
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