THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Friday, April 19, 2019

News from the Network, Vol. 12, No. 16

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:

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.
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.
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.
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.
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  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.