Towards an Ownership Society: Long term thinking today is key to a better tomorrow

When I speak to people about a need for reforming our political system, and shifting more power of corporations to the shareholder owners, the number one reason is the need for more long term thinking. All too often, our leaders (political or economic) can’t seem to look past the current quarter (for corporations) or the next election (for our political leaders).

Here is a sample idea that may be worth considering: Each child born in America have three funds created—an education fund, an ownership fund, and a retirement dignity fund.

Education Fund: This would be $10,000 at birth. Assuming average returns, and if not one more dime is added by the child’s family from birth until college years, the child would then have roughly $77,000 at age 18. This money could then be used to pay for college or another licensed training program (such as an apprenticeship). Any additional money they might want for college can be scholarships, loans and programs such as AmeriCorps, Peace Corps or military service.

The advantages of this idea: It would substantially reduce the amount of debt plaguing our college graduates, encourage more training and education, and increase the reliance of apprenticeships (which will help us rebuild our manufacturing base—a base that is partially being lost because of a reduction in qualified workers). Also, all of the money in the investments would help capitalize our economy and improve our national savings.

Cost: The live births in the US hovers back and forth between low 4,000,000 and high 3,000,000 each year. Using a birth rate of 4,000,000, this would cost us $40 Billion per year (or less than the cost of four months for military operations in Iraq and Afghanistan… note, this is not the cost of troops and military spending, this is just the cost of the actual fighting of the war).

If a child does not seek advanced training or higher education, their account is kept for a set number of years to see if they decide to use it, and if not, then it is returned to the general fund.

Ownership Fund: This would be another $10,000 at birth. Assuming average returns, and if not one more dime is added by the child’s family, this fund would be worth a little over $108,000 when the child reaches the age of 21. This money can be used to invest for ownership stakes in companies so that the child is able to participate in the ownership over the US (and global) economy. The person could choose to keep it in the diversified index fund, or invest the money in a small business, a house, etc… this fund would be an opportunity for the person to invest and have a sense of ownership.

Again, the cost of this would be roughly $40 Billion (again, less than four months of operational expenses in Iraq and Afghanistan).

This fund would be inheritable, as it would belong to the individual person for personal or family use.

Retirement Fund: This would also be another $10,000 and (assuming no additional savings are added to it) would be worth just over $15,818,700 dollars at age 65 (no more worrying about whether social security is there for you).

This helps ensure a retirement with dignity, without burdening our employers with high legacy costs. We also solve long term entitlement problems.

The Economics of these three funds: The consumption effect would be spread over a long period of time, which would allow for ramping up of production (the investment for which is capitalized by the savings in the actual funds themselves… in other words, these funds capitalize the economy to enable it to invest in ramped up production… more jobs are creating producing more goods and services, which can then be consumed by the increased wealth of our citizens). Wealth begets wealth… and we do not need to worry about “too many dollars chasing too few goods” (which would cause inflation), because of the time for the economy to easily adjust, and the capitalization to accomplish the increased investments.

In effect, this would be equivalent of a dramatic increase in our savings rate. Nations that have huge savings rates create enormous wealth (the US savings rate from 1790-1865 was 18%, and it set the stage for enormous prosperity… China is saving at 20% today, and it is the key to their growing prosperity).

The awesome power of compounding interest is being used to create more savings, increased investment, and personal wealth for a national economy that is starving for all three.

The Psychology of these funds: These funds are about empowering people… Enabling people to reduce the trap of debt, create ownership in the economy and enable them to make choices that can make the world better.

Why Does this not happen: This is just an example idea that can use basic economics and mathematics to bring about great long term solutions at a very low cost (these numbers were partially selected because it could be more than paid for simply be ending our destructive involvement in Iraq and Afghanistan, and how doing this can solve several long term problems our country faces)… if we can just develop a long term outlook.

I humbly suggest to you that that is why we need political reform, and reform of corporations that empower shareholders.

Respectfully,
William Andersen
June 20, 2011

It is time…

In early 2009, many economists (myself included) pointed out that knowing how to get out of the crisis is the easy part. There are two types of national economic problems: those that money can solve, and those that it can’t. This was one that money could solve (we had to increase liquidity and aggregate demand).
We knew from history that the government (as the ‘spender of last resort’ was the agent of such an action). However, it was also warned that the hard part would be to pull back when our economy crossed from ‘recovery’ to ‘growth’.

Starting too early would plunge us back into a bad recession, starting too late would risk unsustainable inflation (inflation being caused by “too many dollars chasing too few goods”).

The recent economic date makes it clear that we have crossed that threshold. It is time that we begin to pull back at a moderately gradual pace… if we wait too long, the pull back will have to be massive and sudden, and will risk “stagflation” (high unemployment and high inflation).

I know that part of strategy is to inflate our way out of debt. Since our debt is denominated in US Dollars, and we control the value of US Dollars, there is a good argument to be made for making US dollars worth less (so when we pay the money back it is worth a lot less than it was when we borrowed it). We may need to follow that strategy eventually, but now is not the time…

To pull back, we need to phase out QE 2 (“Quantity Easing 2″, the Fed’s policy of releasing more money into the economy by buying up treasuries).

We also need to start to reduce spending and raise revenue on the fiscal side. For the long term, I would like to see PayGo amended into our Constitution, but we have a statutory PayGo law now that needs to extend to ALL government discretionary spending (not just the very small amount that it is now).

While I prefer a modified consumption tax (modified to make it progressive), tax reform that eliminates all but the personal exemption, and significantly lowers rates to make our taxes easier, and reduces the cost of compliance would be some improvement over what we have now. Phasing out the ‘empire’ by reducing our military deployments overseas, to include permanent station of American troops in areas that are no longer in need of such deployments (such as much of Western Europe).

These are just a few examples that will not only improve our budget outlook, but begin to phase out the oversupply of government money that was put into the economy when it we were buying our way out of crisis.

William

Fixing the simple ones…

There are some public policy problems that are mystifying puzzles, but some are simple (note: simple is not ‘easy’, it can be quite difficult… but the answer is simple). The sooner we can take care of the simple ones the better. For examples:
Social security: If we raise the cap on the income that is subject to social security tax, means test social security (which we do for many programs, and nobody making a million dollars per year on their investments needs social security li…ke the people barely making ends meet), and begin another gradual round of raising the retirement age (everyone over 50 would be exempt… those under 50 would have their retirement age raised by one month every year up to 70… that very gradual change would not be a significant change for most people, and would ensure the viability of social security.

If we wait too much longer to do this, then more radical change will be required. Following this simple plan gets us:

1. Social Security will be fully funded thru the baby boomer retirement.

2. We will get to the point where the ‘Echo Boom’ (third largest generation in US history) is fully in the workforce and contributing to the system.

Social security is SAVED for the foreseeable future…

This one is not complicated… perhaps hard, but much easier than the alternative of it going bust while people are still dependent upon it.

Public pensions at the state level: This has become a crisis impacting states across the US… and it does not have to be that way. State and local governments (as well as corporations, so do not think this is a government thing), have ma…de promises to their workers with ‘Defined Benefit Programs” that were based upon unreasonable expectations for the market. When the market collapsed, these pension funds were unable to get the returns necessary for the defined benefits they promised.

A ‘defined benefit’ says that someone is going to get X number of dollars (adjusted for inflation each year) for the rest of their life.

People, not even Warren Buffett can guarantee such returns… and if he can’t do it, the average money manager working for pension funds surely can’t.

We need to reform the system to be a ‘defined CONTRIBUTION’ program.

The employer (whether the state/local government, or a corporation if they want to make their retirement plans more viable) should contribute a percentage of the worker’s salary into an ORP–like a 401, that the employee owns. We should then give many more options in how the employee invests the money (not limited to some of the bad options currently offered).

The contribution was NEVER the problem… the problem is that the market is volatile, and the state’s managers could not have predictable returns.

This makes the budget work, the employees are then in charge of their own choices (which they can simply put into a low cost index fund if they know nothing about the market–sound advice endorsed by Warren Buffett for passive investors)…

And, we finally put this issue to rest.

Minimum wage: This is one that both parties have known the solution to for YEARS… neither wants to solve it (Dems because they want to get worker votes by promising to increase the minimum wage after years of no increase… and Republica…ns so they can scare small business into believing that the Dems will bankrupt them).

Solution:

1. Split the minimum wage into two: One for adults and one for kids.
2. Set a minimum wage appropriate for each group
3. Index the minimum wage to inflation/cost of living (We do need to fix how we calculate inflation in this country… it is shameful!)

Problem solved… the purchasing parity remains constant (as does the burden on business, and the benefit to workers).

Indexing to inflation is how we adjust pay for other programs within the federal government, so it is not like they haven’t thought of this idea… again, we need to fix inflation so it is a true number (the current system was based upon a measure that does not reflect modern America, and seriously understates the true cost of living changes).

The budget: This has got to be the easiest one to fix in structure…

Step one is to STOP the political games of ‘spending freezes’ on 12% of the budget (that will do nothing, but it lulls us into believing we are doing something). We als…o need to avoid the simpleton idea of ‘across the board cuts’ (treating important programs the same as terrible waste is a lazy politician’s excuse to avoid actually thinking).

Step two: Amend the US Constitution mandating PayGo. This would require that EVERY piece of legislation that will cost money (either with more spending, or tax cuts) MUST pay for the cost of the bill in the SAME piece of legislation. That way, if you want to vote for something that is going to cost 1 billion dollars, you have to AT THE SAME TIME vote for a way to get that billion dollars (either more taxes or cutting something else).

We did this last time we had our largest budget deficits in history… back in the 1990s, and it brought us to the largest budget surpluses in history (paying down the national debt for four consecutive years… had we continued it, we would be DEBT FREE as a nation in 2006 or 2008 depending upon implementation). That would save us about 4 Billion dollars PER DAY today for spending or tax cuts. We would be able to cover EVERY American with health care each year for 25 days worth of those savings on interest… we could fully fund the entire Mars space mission for 7 and a half days of the savings. We could give us all a HUGE tax cut. Okay… I think we get the point.

Step Three: Reform our tax system. I prefer that we stop taxing income (why discourage people from working)… and shift to a modified consumption tax (VAT with a modification to make it more progressive, either with a rebate system, or progressive rates on the taxation), and a carbon tax (to tax pollution). This can help encourage conservation and saving.

Imagine never having to do taxes again… EVER.

If those would not be agreeable, then we need to change the income tax system. End most of the tax breaks (with the exception of the personal deduction so that we can keep things progressive), and possibly the mortgage interest deduction (although I would rather give that up to make marginal rates even lower). If we only go to the personal deduction, then the 10% tax bracket and part of the 15% can be lowered to 6%. NICE!

Then, we can get income tax rates way down. This prevents companies like GE from making billions of dollars in profits, not paying any taxes, and getting a 1.1 billion dollar refund.

We broaden the tax base by eliminating special tax breaks that are given to specific companies that allow them to make enormous amounts of money without paying any taxes.

While we are talking about the budget… two more things:

1. End the empire: We spend an outrageous amount of money maintaining and supporting an empire we do not need and can’t afford. It is time we return to being a republic… Where th…e government does not have “interests” separate from those of the people. The average American is paying to keep US troops in Germany… you are not benefited from that soldier being there. Bring them home…:) We are paying a lot of money to forcefully occupy Iraq and Afghanistan… you are not helped by this occupation… but your family is paying for it (especially your children when they get older and have to pay China, with interest, for this). Lets bring our troops home… and make this Fourth of July another Day of Independence from an Empire…:)

2. Lets have a ‘corporate tax holiday’… American corporations have over 1 trillion dollars overseas that we could use for stimulus in our economy. Much of this money would come home today if it would not be taxed at 35%. Lets give a tax holiday, and then evaluate what the tax rate should be in the future. This would be a good economic stimulus that is not funded by national debt…:)

Again, not all problems are this simple… but, some are…:)

Okay, one more for now… I have talked about this one before: Any foreign student that graduates in the US should be allowed to stay if they wish (provided, of course, they are not committing crimes while here). Our colleges and universi…ties are the envy of the world… attracting some of the best and brightest from around the world. They come here and become educated… many wish to return, and should certainly be allowed to (I am NOT in ANY way suggesting that staying be a condition to getting their education here), but there are many that would like to stay… these educated young people is something we need to be here, and they want to be here… this is not complicated!

Let them stay.. and earn a path toward becoming citizens.

Simple…:)

A Republic VS An Empire Defined

Hi all,

In 1898, the United States won a war with Spain and claimed its empire. In 1945, the United States became an empire. This post will be about the difference…

Before I begin with the difference, I want to offer that this post is not an argument in favor or against having an empire. There are compelling arguments for each position in that debate. Supporters of empire can point to the enormous economic (markets, trade routes, sea/air port access, resource access via UNCLOS, etc), political (sovereignty) and military (bases, testing grounds, etc) benefits that come from having an empire. Opponents of empire can point to several economic (defense and administrative costs, transfer payments, reciprocal market access, etc), political (moral judgments of an ‘empire’, ethical/moral contradictions of a ‘free society’ dominating others, etc) and military (limited military resources being required to protect an ever larger area of land and waters) costs of holding an empire.

My post here is limited to the difference between “a Republic that has an empire” (1898-1945) and “an imperial government having an empire” (1945-Present).

A Republic is a representative democracy… whereby the people select leaders thru elections, and those leaders use the powers of government to *pursue the interests of the people*.

The source of all government power is from the people (“the consent of the governed”). The interests of the government are defined by the interests of the people (not any one individual, but rather the combined interests of the class known as ‘the people’). The leaders selected to represent the interests of the people in the exercise of this power are answerable only to the people (thru elections).

So, in a Republic, the government is nothing more than a derivative of the people (source of power, interests, and governance).

In a Republic, the purpose of an empire is no different than the purpose of anything from the government… to serve the interests of the people. If an empire contradicts those interests, it would naturally be shed.

The focus of the government’s attention is internal… its activities on the outside (foreign policy) is to work with other nations to promote the interests of the domestic population (operating on the theory that we all benefit when we help create a better world).

An Imperial Government with an Empire:

An Imperial government is divorced from the people. The source of its power is derived from the power of the empire (the money it brings in from the empire, and the power it can exert as a result of having an empire). An Imperial government uses the power it gains from the empire to strengthen the empire (build more military, take control of more territory directly or indirectly, oppose its international rivals for imperial power, etc).

So, in an Imperial government, the government is not derivative of the people… it is divorced from the people. Its power is not dependent upon the people (money, military power, international alliances give the power… elections are no longer the primary source of power), its interests are separate from the people (international, not domestic).

In short:

Republic with an empire: The government serves the people, and the empire is a means to that end.

Imperial government with an empire: The government serves itself, and the empire is more than a means… it is the end.

Later, I will talk a little about how an Imperial government keeps the “domestic tranquility” while its focus is on its empire… you might be surprised at how familiar the path sounds…:)

As always, please feel free to comment…:)

Respectfully,
William

A brief walk thru the history of social evolution…

Greetings all!

When I have had the privilege of teaching social sciences, and in visiting with politically conscious individuals, I find myself surprised at how many oppose ‘global action’.

I understand that many fear a ‘global government’, and have heard some argue that it is “not natural”.  That belief inspires me to talk for a moment about social evolution… and don’t worry, there is a point…:)

The only natural unit of political autonomy (natural sovereignty if you will) is the individual.  No other political authority is natural… because all other political authority can be overruled by the individual (you can choose to disregard the laws of your family, city, state or nation… but your hand can’t choose to disregard a command from the brain).

Starting with the individual, we can then see how the social evolution brought us to here:

• For economic need and security, the individual surrendered part of this sovereignty to a larger entity called “family”
• For economic need and security, the families realized that they should cooperate with one another and formed clans/tribes/small communities
• For economic need and security, these clans/tribes/small communities gave up still more sovereignty and formed cities.
• For economic need and security, these cities gave up more sovereignty and formed nations.

In our world today, the nation is seen as the supreme sovereign entity (on a voluntary basis, nations do transfer limited sovereignty to regional organizations and alliances… again, for economic need and security… but the nations still maintain supremacy of political sovereignty).

While some very compelling arguments can be made that smaller organization (going back to communities being primary) would have many benefits… it is difficult to argue against the fact that economics and security are not made better by the larger organization.  This leads to an important question:  If nations have economic and security advantages over cities… why didn’t we just go straight to the nation at first?  The answer:  Technology.

Our social evolution has always been held back from realizing the larger benefits because of the lack of technology for larger transportation and communication.  A limitation that is no longer with us…

Now, before I proceed, there are a few caveats and items worth mentioning:

• Global governance is only best for global problems… whenever possible, problems and issues should be dealt with closest to the people as possible… so, local problems/issues should be decided locally.  Some problems require global solutions, and we now have the ability (tech in both transport and communication) to address them.
• Devolution:  Some point to civil wars and conflicts from peoples’ merging as proof that devolution (getting smaller and breaking down the units of social organization) is the future.  However, the problems are natural growing pains that have occurred in nearly every step of social evolution to this point… each step has had growing pains followed by ‘devolution’… ultimately, we realize that the benefits outweigh the costs/harms, and we expose social “devolution” for what it is:  An evolutionary step in the wrong direction.
• I believe that the move toward more global organization.. addressing global problems with global solutions will ultimately happen… as a result, I am hopeful to engage you in a conversation about what constitutes a ‘global problem’?  In other words, what problems should a new global organization/government be equipped to address?

Thank you again for coming.. and I hope you will share your thoughts and comments…:)

Respectfully,

William

Introduction and test

Greetings and welcome to my new blog!

My journey toward better understanding the human condition and the world we all call home started when I was quite young and will continue until I die.

I find that the best ways to learn are:

1. Keep an open mind: This does not mean that one should not have an opinion (far from it) or believe in certain theoretical frameworks. It does, however, mean that we should value knowledge and understanding more than we do our commitment to those opinions and beliefs.

2. There are many sources of knowledge, and more than one path to wisdom. Religion/faith in previous beliefs, traditions, science, reasoning, observation, intuition and discourse are but a few of the paths to greater understanding. If our pursuit of wisdom is genuine, then the path we choose can only lead us to a better place. However, it is important that we take advantage of more than one path so our understanding can be holistic, multi-dimensional, and give us a greater chance of it being complete.

3. If you have questions, ask! If you have knowledge, share!

I hope you will take some time out of your busy life to join me on this journey… perhaps we can both explore together.

Respectfully,
William

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