Following up on yesterday’s blog posting, today we take a look at some of the policy objectives of what we call “the Economic Democracy Act.” To meet Social Security and Medicare entitlements, and provide for their eventual phasing out as the mainstay of retirement income for most Americans, and to shift the Federal Government’s role from today’s income redistribution policies to the more limited and healthy role of encouraging economic justice through free enterprise growth, the Economic Democracy Act would:
Promote Sustainable Private Sector Growth Linked to Equal Capital Ownership Opportunity. Recreate in the 21st Century the conditions that resulted from the first Homestead Act of 1862, including full employment, declining prices, and widespread, individual and effective ownership of income generating assets. Set a realistic long-term target, based on the nation’s economic growth potential, to achieve a minimum Capital Ownership stake for every American citizen and family. As an initial measure, this could be geared conservatively toward a citizen’s equity accumulation of, for example, $150,000 over the next 20 years.
Stimulate Maximum Growth, with a Balanced Budget and Zero Inflation Rate. Remove barriers to maximum rates of sustainable and environmentally sound, private sector growth to achieve a balanced Federal budget and a zero inflation rate under the Economic Democracy Act.
Establish a Tax System That Stimulates Economic Growth and Jobs, and is More Accountable to Taxpayers. Re-write and radically simplify the existing Federal tax system to automatically balance the budget. Keep more money in the pockets of taxpayers from their initial earnings to cover their own health, education, housing and other basic household living expenses. Make Congress more directly accountable and responsive to all taxpayers. Eliminate all tax provisions, personal deductions, tax credits, and exemptions (except for the front-end exemptions for adults and dependents) that unjustly discriminate against or discourage property accumulations and investment incomes for poor and non-rich families.
For example, a single-rate tax on all sources of income (from labor, capital, gifts, gambling, etc.) over a “basic living income” exemption would be automatically set to meet all Federal entitlement and other programs, and to pay down past debt. To meet personal living costs, the basic incomes of all taxpayers up to $30,000 per adult and $20,000 per dependent (or $100,000 for a family of four) would be free from any income or payroll taxes. Corporations could escape from the double- or triple-tax on corporate incomes by deducting full dividend payouts, which would increase the taxable incomes of their shareholders.
Keep Social Security and Medicare Promises. Keep existing promises and reduce the unsustainable burden on the Social Security and Medicare Systems, by enabling every American to accumulate sufficient wealth-producing assets to provide each person with an adequate and secure taxable income from property, independent of Social Security and Medicare benefits and incomes from other sources. Based on conservative projections of U.S. growth potential, by age 65 a child born today could accumulate a capital estate of nearly $500,000, generating $1.6 million in after-tax dividends over that period.
Inheritance and Gift Tax
When capital accumulations start generating a level of income that far
outstrips the owner’s capacity to consume the goods and services of others, the
unconsumed income is subsequently reinvested in more capital acquisitions. This
eventually results in the monopolization of future capital ownership
opportunities by the already wealthy.
To create a more just and balanced free market economy and discourage the transfer of enormous accumulations from one generation to another, wealthy individuals should be encouraged to spread out their estates to many recipients — including family, friends, teachers, members of the military, public sector workers, and propertyless individuals in general. Gift and estate taxes would not be imposed on the donor or the estate. Rather, recipients of an inheritance above a tax-exempt amount (for example, over $1 million) would be subject to a one-time, single-rate income tax on every dollar received above the exempted amount.
Restructure the Credit and Tax Systems to Encourage Universal Health Care through the Private Sector. Capital Ownership reforms, supplemented by health care vouchers for the poor, would provide a sustainable way to finance the health care system. These reforms would empower each citizen and family with the means to enjoy and pay for affordable, quality health coverage of their choice. Through market-disciplined, comprehensive health care enterprises that are owned and controlled by health care providers and health care subscribers (patients), the doctor-patient relationship could be restored, while providing greater insurance portability, accountability and lower administrative overhead costs throughout the system.
Solve the Home Foreclosure Crisis and Make Home Ownership Accessible to all Citizens. Starting in communities with homes whose market values are deflated due to the subprime mortgage crisis, resident-owned Homeowners’ Equity Corporations (HECs) could receive interest-free credit to buy up the foreclosed properties. As occupants of the homes in default pay the HEC their monthly rents (which could be supplemented with housing vouchers for the poor), these would be applied toward debt service, using pre-tax dollars to pay off the loans that the HEC used to purchase the foreclosed properties. As they make their regular monthly lease payments, these renters would gradually become full owners of HEC shares representing the full value of their homes (or, if they so choose, they could take title to their dwellings).
Stop Federal Reserve Monetization of Government Debt. Terminate use of the Federal Reserve’s powers to create government debt-backed money, support foreign currencies, or buy and sell primary or secondary Treasury securities. This would reduce excessive Government spending and improve accountability. It would force Government, when its tax revenues are insufficient to cover all its legitimate costs, to borrow for deficits directly from savers in the open markets.
Stabilize the Value of the Currency. Require the Federal Reserve to create a stable, asset-backed currency measured in terms of a fixed monetary standard reflecting the needs of a technologically advanced, global economy. (Such a monetary standard could be, as some have proposed, the price of a kilowatt-hour.) This policy would avoid both inflation and deflation. It would balance supply and demand, matching future production with broad-based citizen purchasing power (increased by widespread capital incomes) needed to consume future goods and services.
Reduce Dependency on Past
Savings for Financing Growth. Require the Federal Reserve to distinguish between
“productive” and “non-productive” uses of money and credit. Non-productive uses
of money and credit, such as with the debt-backed money and speculative credit
that fueled subprime home mortgages and the global financial meltdown, would be
financed from the accumulations of those wealthy Americans and foreigners who
could afford the risks. By creating new, asset-backed money and providing an
equal allotment of interest-free, insured capital credit to every American to
become an owner of a viable accumulation of new income-producing assets,
America would reduce its dependency on past savings, corporate retained
earnings, or foreign government wealth funds advantaged by America’s growing
The Federal Reserve System would supply sufficient asset-backed money and productive credit through local banks to meet the liquidity and broadened ownership needs of an expanding market-disciplined economy. These “Fed-monetized” loans would be subject to appropriate feasibility standards administered by the banks and limited only by the goal of maintaining a stable value for the dollar.
We’ll look at some more policy objectives when we post again on this subject.