Health Care – Alternative Proposal

Senate Republicans plan to vote on a health care bill this week. It is not clear which bill—repeal and replace or just repeal. Sen. Bernie Sanders is offering his Third Party Payer alternative. Here is another viable option.

Let’s suppose you were to catch a dreaded disease, develop cancer, or have a debilitating injury. At that point, you would want the best medical care you could get. You may even feel as if you deserve the best medical care. The question is, however, if some one else is sick, suffering from cancer, or seriously injured, do they deserve the best medical care they can get too?

Now, what qualifications do you wish to place on others getting the best medical care possible? I submit that if you believe in the founding documents of this nation any answer other than ‘none’ is inconsistent with the “right to life, liberty and the pursuit of happiness” in which you profess to believe.

Indeed the freedom Americans so ardently hold to are seriously curtailed by medical issues: diseases, cancers, and injuries to name a few. Accordingly to have freedom one must be healthy. Toward that end, both health care providers and health care insurers should be nationalized and run to benefit all Americans.

Arguing that the USA cannot afford such an approach belies the evidence of our overall costs of medical care, the profits are taken by insurers, the statistics of the rest of the developed world and little things like infant mortality, deaths from opioids to name but a few. It is time for America to begin to embrace both equality and freedom for All.

The alternative is to condemn the vast majority of Americans to economic slavery to a set of for profit health care businesses.

T. Edward Westen

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Democrats Need to Propose Specific Policies for Health Care and Everything Under the Sun.

 

Over the past year, Donald J. Trump’s drama queen behavior has sucked the political air out of this country. That means the focus is always on him. Those who did not vote for him spend a lot of energy decrying the madness that his Presidency represents. But in so doing the focus is still on Donald J. Trump. Decry him all you want. However, in not putting forward policy alternatives, you, Democrats in particular and those who voted against him yield all of the political attention in American on him and the Republicans, acting like a congress (Look it up, what is a group of Baboons called, inappropriately it is called a congress, thank goodness it is not a congregation, Wrong as this is, it should be the case they are called a congress). So, rather than focusing on Donald J. Trump’s failures, which his base has turned into wins, and the Republican fiasco of repealing and replacing a program that is working, despite the uncertainty created by Donald J. Trump and the Republicans in Congress, but needs some fine tuning or outright fixing, Democrats need to make noise about what they would do if they were in power—without referencing the failure of Donald J. Trump and the Republicans in Congress. While I will admit, I turn on the news to see what the chief idiot has done today (and his minions in two Republican Caucuses in Congress), I too need to supply policy that the American People can attribute to the Democrats and other reasonable People.

Stay tuned and make proposals in the meantime.

T. Edward Westen

Three Newspaper Articles Today — Why we don’t seem to understand money

This morning I read an article about Ted Cruz’s plan to use seized drug money to build Trump’s Wall. I read an article about Trumps cutting taxes to businesses. Then I read another article about Trump imposing a 20% tariff on Canadian softwood imports.  Taken together they would not seem to warrant treatment in one place, but both articles report a common phenomenon—public policy proposals that represent a complete misunderstanding of money.

Before I get into money aspects, just a bit of a background is in order for these two issues. Tax cuts for business is a way to give businesses an incentive to hire more workers.  This happens in a strange way, it is largely invisible workers who will not actually show up on the shop floor. Tax cuts do not create jobs, demand for goods and services create jobs.  But, Trump is convinced of the opposite just as he in convinced little green men bugged his bedroom.  A former Obama Administration Trade Negotiator reports that Canadian Trade Negotiators chose to not make a deal over softwood thinking they would fare better under a Trump administration since he is a builder.   Ted Cruz must see the writing on the wall when it comes to positive support by US Taxpayers for paying for the wall and is attempting an end run in an effort, I guess, to curry favor with Trump.   Enough background.

A fictional story should illustrate one of the articles.  A bunch of lumber folks in Canada got together and set up a softwood lumber association.  They pooled some money and made donations to Canadian politicians to get them elected to Parliament.  Once in Parliament, the elected representatives realized that there were jobs in the lumber industry in their districts.  The softwood lumber association lobbyist came around with information about how the politicians could structure the tax or subsidy or employment laws to make it cheaper for the lumber folks to make money and hence hire more people.  Since their tax bills were lower, or their subsidy from the government was higher, or their labor costs were cheaper, they hired more people, cut down more trees and exported to the US more softwood.  In essence, in this fictional story, the price of softwood coming out of Canada and used in Canada is cheaper because of at least one kind of government support than it would be if only free market forces were determining the price of softwood.

Now, I say this is a fictional story because I do not know how the Canadian system works.  If it works like the US system, I could, with some hours of research, put capital letters on the associations and lobbyists and identify chapter and verse the parts of the tax code, labor laws or outright grants of some kind or other to the softwood folks.  What the fictional story illustrates is how moneyed interests determine public policy in a democracy.

On the other side of the story, Trump tweets how badly our politicians have been beaten by the Canadians over the years on these trade issues.  Never mind that the US gives an energy subsidy to every energy user (it starts with the tax write-offs for oil companies and continues all the way down to the pump in one form or another) so that no one, despite cries of expensive gas and diesel, pays the real cost of moving their goods (the US subsidizes all transportation in this fashion).  This includes the failure of the governments to charge heavy trucks for the cost of the damage they do to the highways in contrast to passenger cars.  So, the US unfairly competes on the world market by making transportation cheap.  Then too, US industry uses of unemployment insurance to maintain a labor pool, is a form of providing cheap labor to give our seasonal workers an income in the offseason.  So, while we cry foul when the Canadians use some form of subsidy to increase profits for one of their industries we do the same thing, often on a larger scale.

The bottom line is any tax, subsidy, or regulatory advantage that gives a firm greater profit is an unfair trade practice.  To wit, all such are unfair trade practices.  Yet, they are written into the US and state tax codes by, indirectly, campaign donors to legislators.

It is interesting that the businesses that reap a profit from government tax cuts, subsidies and regulations are the first to cry when they have to cut pollution (which is a cost they impose on others), hire indiscriminately, or just plain pay fair.

Now, the tax cuts for business.  While Trump imposes a 20% import tax on Canadian softwood, he creates an unlevel playing field for US firms by helping them make goods and services below cost.  He will loudly argue it is the American Way.  Actually, it is the way he and other rich guys keep getting richer.  Watch the employment statistics and the national debt as a result of his lining his pockets.

So, how is this not understanding money?  Simple, it does not matter where a dollar comes from it is a dollar.  So it if it is seized funds from a drug lord or money you sent in with your tax returns (or didn’t get back) it is the same.  It is a dollar just like any other that you have provided in one way or another (yes even the seized funds of a drug lord are there because of the laws that make it American money).  It is not Mexico paying for the wall.  A better idea is seizing Trump’s fortune and let that pay for the wall.

Giving rich guys money to create jobs, doesn’t cut it.  If you do the analysis, less than 00.1% of such gifts to the rich make it to the job creation end of things and that is only because they can’t find a way to hang on to that 00.1%.  You and I don’t know this, but the real kicker is we have let the rich guys pick the candidates we elect and make the laws to keep them rich.  What if we were to find out?

Introduction: Hey, That Worked

At this late date, this post is an introduction to the articles in this blog: democratizemoney.wordpress

Introduction:  Hey, That Worked

By T. Edward Westen, 2017

(My apologies to all the Economists I malign and misrepresent)

We live in the age of belief.  Entire structures are supported by millions of people believing in those structures.  Without enumerating those structures and embarrassing a lot of well entrenched shaman, I will illustrate what I mean by choosing the most arcane and esoteric of all the structures supported only by belief and only potentially expose one group of shaman—the economy and economists.

Before I start, we need to be on the same page about what a shaman is.  So let’s go to an authoritative source- https://www.merriam-webster.com/dictionary/shaman The authoritative source gives this: Definition of shaman for English Language Learners

  • : someone who is believed in some cultures to be able to use magic to cure people who are sick, to control future events, etc.

Now, clearly economists would object on the basis of “we don’t pretend to cure people.”  However, if we expand the notion of people to collections of people, economists do deal with curing economies (or at least attempting to cure sick economies).  And their objection continues “and we don’t use magic.”  It seems to me the phrase “voodoo economics” from a bygone era would suggest someone once thought they used magic.  However, more to the point, real magic uses unfathomable (not to be understood) words and a lot of waving of hands to work. Have you ever listened to an economist?  Question, if you tied an economist’s hands to the arms of a chair could he or she still be able to talk?  Now if the magic is only illusionary, then the economist fits the bill again—distract folks with numbers and tell an incomprehensible story about them while you pull stings behind the scenes to raise of lower this or that rate and make the patient, er, economy better.  But finally, we get to the real substance of the economic shamans’ tool kit.  Predicting the future to control the present.  “If we increase interest rates now, we will keep a lid on inflation in the future.”  Notice the sleight of hand with words.  They tell you what to do to make a specific outcome in the future happen.  But what they are really doing is getting some to change present behavior with the promise of something better in the future.  Do their predictions come to be?  I leave that to you.  However, we believe in economics.  One last parting shot at the economist’s ability to solve problems.  Ask and economist “If you were stranded on a deserted island in the middle of an ocean, how would you get back to civilization?”  9 times out of 9, the answer will be “Assume a boat.”  Yet, we still believe.

To be fair, the economists are trying to make sense of human activity both individual and collective human activity.  So, since they have tackled a job of understanding more difficult than rocket science (where everything works or goes boom) we really shouldn’t pick on them.  However, the economist’s activities in making sense out of what we humans do in exchanges of goods and services, hoarding and other similar things, tends to perpetuate what we have done in the past.  This is not always a problem until one understands that what we have done in the past in exchanging goods and services has been to, for example, invent money.  Now once out of the box, money takes on the quality of “say that is a neat trick—I give you money and you give me a good or service and I don’t have to give you a good or service in return.” “HEY, THAT WORKED.”   That morphs into “I want to give you fewer monies for that same good or service the next time.”  But, for that to happen, there has to be less money available the nest time so it has higher relative value to the goods or services exchanged for it.  “Yup,” the economist says, “now you are getting into the nitty gritty of what we do.  We figured out that stuff about relative value.”  No, you sold us a belief in relative value.  It turns out money had more value not only when it is more scarce, it has value when one increases the supply of it.  “Wrong,” the economist says, “When the supply of money increases inflation kicks off.”  OK, then why did the economy not blast into hyperinflation when you guys increased the money supply, without printing more bills, I might add, with Quantitative Easing? “Oh, that is easy to explain,” the economist will reply waving his or her hands about.  I am still waiting for that explanation.  But essentially “HEY, THAT WORKED.” 

What really happens is someone tries something, to whit the King of Lydia, had some electrum stamped with his portrait on discs of it and someone said, “HEY, THAT WORKED.”  So, that King and others kept on stamping out coins until coinage was believed by everyone.  Everyone believed gold and silver coins, although silver and copper were poor seconds to gold, was the only way to go.  But gold coins had a problem.  They are heavy.  If you wanted to have a good night out on the town, you could carry enough gold coins to pull it off (unless you got mugged.  Then the thief would be slowed down by the weight, but I digress and that is another, and probably more interesting story).  But if you wanted to buy a boat load of olives from “Oliviania,” you had to have a wheelbarrow or perhaps a donkey or camel to carry them.  One day, a fellow dropped a wheelbarrow full of gold off at his local gold smith and the smith game him a receipt.  As he was walking along feeling foolish pushing an empty wheelbarrow he went past a stall with the tastiest spice he had ever encountered. The stall had a barrel of it.  He enquired and found it was for the amount of gold he had just dropped off at the gold smith.  Holding his receipt up, he told the spice seller “I’ll just take my wheel barrow back to the goldsmith and get the gold.”  The spice seller stopped him. “Say, can anyone turn that in for gold?”  The fellow with the empty wheelbarrow said, “Sure.”  The exchange was made—a barrel of the tastiest spice in the world (and the rest of us have been trying to figure out which one it was ever since) for a gold receipt.  Someone said “HEY, THAT WORKED.” And goldsmiths instantly (OK, maybe a bit slower) became bankers.

Moving around all that gold gets expensive.  So, someone thought to leave it wherever it was stored and just put property tags on it: “France,” “USA” and the like. And, “HEY, THAT WORKED.”  However, people wanted gold in bad times. That posed the problem for the US depository.  If people cashed in their gold certificates for gold, the depository would not have enough gold to cover international transactions.  So, the Congress made owing gold illegal, except as jewelry and collectibles.  The US government called in all the gold.  So domestically, the US was off redeeming the then modern equivalents of former goldsmith receipts for gold.  “HEY, THAT WORKED.”  Then Nixon stopped redeeming foreign government obligations in gold.  “HEY, THAT WORKED.”  Currently the Federal Reserve creates money by purchasing debt, mostly US Treasuries on the secondary market.  “HEY, THAT WORKED.”  To be fair fractional reserves (having actually been invented by those early goldsmiths) has been around a long time.  Indeed, banks use it to create temporary money.  However, the Fed’s open market operations take it to a new level by purchasing securities on the open market with money the Fed orders printed or by making entries on their books against which banks can draw.  “HEY, THAT WORKED.”  Indeed, all monetary authorities around the world produce (create) money this selfsame way.  “HEY, THAT WORKED.” That left only fiat currency as money.  Fiat currency is money because the government says it is.  Read a dollar bill or any bill: $5. $10, $20, $50, and $100.  They all have the same statement: “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE.”  “HEY, THAT WORKED.”

From the King of Lydia having some electrum discs stamped with his portrait  to the  printing “THIS NOTE IS LEGAL TENDER FOR ALL DEBTS, PUBLIC AND PRIVATE.” Each transition  probably involved a line of thinking something this:  if it works this way now, wouldn’t it be better if . . .  None of those logical transitions had a theoretical base such as exist in physics, chemistry or the other hard sciences.  All those transitions had was someone trying a change based upon “if it works this way, and it seems to, why wouldn’t if work if we changed this just a tad bit to make it easier.   Sure, there were issues of control and who benefits along the way, but largely the changes were pragmatic to solve one kind of problem or another with making transactions with money. Just think how much gold Spain would not have lost, if the films are correct, to pirates or ship wrecks if they could have left it in a depository in South America and simply moved passion tags around when needed.  But, sadly for Spain, that change had not been made in the 16th Century.

So, what will be the next change.  I propose that the next change be to democratize money creation.  Presently new money is supplied to the economy through a limited number of “dealers” and financial institutions who sell debt instruments to the Federal Reserve.  Those dealers then buy other debt instruments resulting in some of that money financing of buildings, factories, inventories and thing that generate economic activity.  Eventually some of the new dollars end up in paychecks and get spent by consumers who are workers.  One would not be far off by asserting that new money goes to people who already have money.  Indeed, one would not be far off by asserting that is the same issued that William Jennings Bryan addressed in his 1896 Cross of Gold speech is present today—conflict between the rich and the rest of us (I read somewhere that tight money is good for the rich, but I can neither confirm nor make sense of that.  Regardless the rich seem to be for tight money and the rest of us for a more generous supply). Since the current money creation system is money in at the top of the economic pyramid with some making it down to some of the rest of us, it could be characterized as a trickle-down money creation system.

Arguments for the trickle-down money creation system are: investments in factories create jobs, whne workers have those jobs they spend money causing economic growth.  An interesting fact is that 70% of economic activity in the United States of America is attributed to consumers.  Now think, if 70% of the economy is due to consumer spending why do we spend so much effort to put money in the top that only trickles down and not all of it gets to consumers to spend?  Consumer spending varies wildly due to things like consumer worries about the future, the economy, and sick family members.  When consumers feel relatively confident about “stuff” they spend. When they feel uncomfortable the don’t spend.  They also don’t spend when they don’t have money.  So, if we give new money, regular as clock work, to consumers, they will have a basis for feeling rather comfortable about the future of the economy, their security and being able to care for their sick relatives.

So, if the economy works as well as it does putting money in where less than 30% of economic activity takes place (at the top of the economic pyramid), just think how much more stable it will be if we put it in where 70% of economic activity in the economy takes place.  Not only that, think how much more secure people will be.  This plan, will not increase taxes, will not increase entitlements, will not pit one segment of society against another it will be almost as if “all people are created equal.”

Now it is time to name a name and fairly assign blame for what comes next.   I, T. Edward Westen, (AKA Theodore Edward Westen, but no one ever called me Theodore, so Ed stuck and I became T. Edward as a result)  wrote this.

A Note on Inflation

A Note on Inflation

The Federal Reserve holds about $300,000,000,000,000 in assets, most of it in debt instruments.  Let’s say the voting population of the US is 300,000,000 (It isn’t, it is much smaller).  So, that means, if the Federal Reserve sells off its assets when it starts making cash payments to US Voters, it could offset $10,000/citizen of its newly created money in the first year. Indeed, The Federal Reserve could create a situation where it pulls money out of circulation faster than it makes cash payments to citizens.  So, the Federal Reserve has the tools to make a transition to a democratized money supply seamless in terms of inflation/deflation measures.

Liberty

“I pledge allegiance to the flag of the United States America, and to the Republic for which it stands, one nation under God, with the liberty and justice for all.”

Every American knows the words to the pledge.  We learned them in school, public or private, sacred or secular.  Even home schooled children learn the words to the pledge.  We recite the pledge at many public gatherings.  Moreover,  we recite the pledge with conviction.  We really mean it when we utter every word.  Yet.

Yet, there are considerable differences as to what those words mean to different citizens.  What, for instance does “library . . . for all” mean?  At base, liberty means living or acting  with out constraints such as shackles, bars or other physical restraints.  But what about non physical constraints such as skin color, type of clothing—from shabby and dirty to burka –sexual preference, choice of manner of worship—Quaker to Catholic to Hebrew to Islam to Shinto and beyond—manner of speech and language and, not exhausting the non-physical restraints, gender.

Liberty means being able to do what one wishes or what one pleases.  Yet doing what one wishes requires resources and fundamentally one resource, money.  So, poverty is one of the most insidious restraints on people that prevents them being able to experience liberty.  If one wishes to enslave a people, first impoverished them.  For when they are poor they have no options save to do your bidding or die.  It is not by accident that Patrick Henry said “Give me liberty or give me death.”  For the opposite of liberty is slavery.

Today Americans seem to subscribe to the idea that a person in poverty is there because he or she is lazy, morally corrupt, or the like.  In short we Americans blame the poor for being poor.  Interestingly, poor people had poor parents.  So, in part blaming the poor for their poverty is blaming them for choosing the wrong parents.  Yes, children often move to a different economic strata then their parents—up a bit or down a bit—but not far.  Children of the poor do not have the luxury of moving down in economic status.  They start down.

If one were to look at the distribution of the difference in income or economic status between children and their Parents one would find something akin to a bell shaped curve for all classes save the poor.  Children of the poor on this difference variable will show a steep one sided curve.  What this means is the poor are disproportionately “stuck” in their parents socioeconomic situation—poverty.  They are stuck because getting out of poverty requires a dependable resource base—an income or someone to provide resources for training or education and support during that period of learning.  The poor do not have money.  This is not a question of an economic  choice, affording it.  They simply do not have the money.  It takes money to provide for that boost all the other socioeconomic groups routinely supply for their children.

Therefore I conclude liberty requires an income to have any reasonable chance of becoming extant and “for all.”  So, how is that income to become a reality?

We have tried everything every thing from income transfers, charity to work fare.  Everything we have tried in the war on poverty has conditions—restraints on how the poor can use what we grudgingly doll out.  Funny, we want to get the poor out of poverty, but we don’t give them the liberty to do it without severe constraints, nay draconian restraints.  We want to judge what is “good” for them.  We want to prevent  the poor from making bad choices.  We want the poor to use resources the way we want them to use “what we give them.”  I am sorry that is not liberty, that is a form of imprisonment.

If you want a free people, free them of the shackles of poverty,  give them liberty; give them money.

The relative stake different socioeconomic groups have in both the economy and the political system.

In the US voter turnout rates varies directly by income.  This is not a two-variable causal relationship as many other variables, mostly associated with income, come into play.   The 2008 election demonstrates the relationship.  Here is a link  to see it on Wikipedia: https://en.wikipedia.org/wiki/Voter_turnout_in_the_United_States_presidential_elections#/media/File:Voter_Turnout_by_Income,_2008_US_Presidential_Election.png  I chose this diagram as it broke the income groups into 10 rather than two or a few categories.

Overall I would argue that the underlying explanation, while complex, involves the relative stake different socioeconomic groups have in both the economy and the political system.   That is the more affluent a person is the more he or she is able both to benefit from public policy and perceive that he or she can have a marginal, small to be sure, impact on public policies in the future by voting.  Perceived benefits and costs from public policies that the affluent recognize along with civic responsibilities such as voting provide a more coherent picture of being part of the body politic.   The less affluent, in contrast, are more likely to perceive they are at the mercy of public policy.  I should think the less affluent would be less likely to perceive their concerns and needs are considered when policy is made; and, the less affluent are less likely to expect their votes matter.

This contrast across the continuum of economic groups and their levels of participation is likely exacerbated by the issue content of elections in the last half century:  welfare reform, lower taxes, drug tests for public housing residents, stop and frisk, public health funding to name just a few.  The lower one’s income the more recent changes in social welfare programs have caused financial challenges to one’s daily life and existence.   To a very real extent the concerns by taxpayers over funding social welfare policies is a direct attack on those who rely on those programs.  How could a public welfare recipient feel part of a political and economic system that publicly declares they are, at best, a drag on growth and prosperity?

One of the prevailing “stories” about America is that if a person works hard that person will become a success.  That belief belies that well over 99.99% of those of us who judge ourselves successful had a lot of help from family, neighbors, public servants, pastors/priests/rabbis just to name a few.  However, the further one’s parents are down the income ladder the less assistance one will receive from anyone to be success.  Indeed, the farther down the income ladder the more obstacles and impediments to becoming successful one will encounter.

It is no accident that there is a strong positive correlation between an individual’s income grouping and one’s parent’s income grouping.  I am not arguing that hard work doesn’t pay.  However, if you are doing a menial task for a living you receive a menial wage.  It is difficult to amass a fortune on a menial wage no matter how hard one works.  Things like housing, transportation, clothing, medical care/insurance, can quickly become unaffordable on a menial wage.  Then people earning a menial wage, like everyone else, have children or parents or both who are in some fashion at least partially dependent on one for their housing, transportation, clothing, and/or medical care/insurance.  Just because one does a necessary task that folks who had more support can avoid should not condemn one to being on the socioeconomic and political margins.  But it does.

Having a wide spectrum of needs based programs, we call them entitlements, that a significant proportion of our citizens rely upon with another significant number of our citizens decry and do not want to pay taxes to fund creates all the necessary ingredients for civil strife–potentially a class based civil war.    Yet, this potential conflict is not necessary.  Rather it is an artifact of how we create money and how we redistribute money through government taxing and spending policies.  Our approaches to both monetary and fiscal policy are the basis of a big share of our political conflict.

If we did not maintain income transfers through government we could mitigate some of the core conflicts in the American Society, Economy, and Polity.  If you look closely at the proposal for creating new money through all the sovereign citizens and giving the government’s a stipend in lieu of a tax base you will find it obviates the need for the lion’s share of entitlements and the resentments those entitlements engender from those paying for the entitlements with taxes they pay.   You will also find it largely removes the largest reason for the differentiation among givers and receivers from public policy.  Finally, if you stop the incentives for lawmakers to play favorites based on campaign contributions, you begin to equalize the playing field for all.

A more equalized playing field will not automatically and quickly create more successful people.  But it will make it possible to prove that success can be attained without such a strong correlation to one’s parent’s income levels.  For example, the voting age is 18.  So, when a person reaches the age of participatory citizenship that person will have resources that are not dependent upon his or her parents for support for job training or a formal education.  Or, an 18-year-old could approach self-sufficiency.  That could prove a break on crime, hopelessness, veterans’ adjustments to separation, again to name a few.

One policy issues that will need to be addressed is the practice of withdrawal of civil rights from ex-convicts.  I should think it would facilitate their reintegration into society if they were finished with their rehabilitation and punishment when released from incarceration and their rights restored at that point.

Another policy issues that will need to be addressed is the content of educational curriculum.  It would be expeditious if all citizens had some personal finance training and a firm grasp of how governments and the political processes operates.

Turnout will increase across all income groups.  While paying citizens to do their civic duties of voting, jury duty and educating their children and the like is not quite the same as requiring citizens to vote, the financial penalty for not voting largely obviates any difference between the system I propose and compulsory voting.  Hence, we need to examine the impact of compulsory voting in the 22 nations that have it.

Two Arguments to Democratize Money: Inclusion and Equality

In rereading Hamilton’s Introductory passage to the Federalist Papers, I am initially struck by two things.  First how much people have changed the way they use the written language over the past couple of hundred years; for a modern reader, Hamilton’s 18th Century, eloquent, and persuasive prose is heavy treading. And second, how accurately Hamilton’s description of the 18th Century political climate in America describes early 21st century American politics. Keep in mind that Hamilton and the others writing as Publius were advocating the adoption of the Constitution.  They saw entrenched interests as wanting to maintain the Articles of Confederation.  They called the opposition to ratification conservatives. What Hamilton and his coauthors realized was that the strongest opposition to change is always from those who benefit the most from the status quo.  Conservatives do not say “I think I will personally loose as you gain because of this change.”  Equally, they do not say “I think this change is bad for me.”  If either of those statements is true they can and do argue any of several, supposedly altruistic positions: the proposal is untried and thus vulnerable to causing harm the status quo is not causing; no other place does it that way; with a few minor  modifications the status quo can be made to work better; or they make personal attacks on those advocating the change and sine the person is bad so is the change the “bad” person advocates; but if all else fails they can utter the most dangerous statement in any language “We have always done it this way. “

Unless those opposed to change specifically present an evidence based argument their opposition is at best suspect.  However, that same logic must apply to the advocates for change.  Change advocates must present evidence based arguments as well.  That is precisely what Hamilton, Jay and Madison did as Publius in 85 newspaper articles in 1786 and 1787 (Independent Journal, New York Packet, McLEAN Edition, and Daily Advertiser).  Equally, it is incumbent upon this author to make an evidence based argument for the proposed changes in how money is created and eliminating private money from influencing the decisions made in governing (public policy) and who governs (elected and appointed officials and bureaucrats).

THE INCLUSION ARGUMENT

Even prior to the Declaration of Independence in 1776 the American states, while still colonies, had a broader base of citizen participation then did the Mother Country or any other nations at the time (and most today).  Indeed, the sovereignty vested in citizens and dependency upon their consent begins in the Constitution argued for by Publius and others: “We the people of the United States.  .  . Do ordain and establish this Constitution for the United States of America. “ (Preamble)

In 18th century America electors, citizens eligible to vote, were determined by the states.  Initially, states designated male, property owners who had attained their majority as electors.  Gradually in the early part of the 19th century  the several states increased the number of citizen electors by including all males.  In the post Civil War amendments black males were included as electors.  Following WWI, women became electors.  And later in the 20th century the poll tax was abolished and age of majority was  reduced to 18, both by Constitutional Amendment.   Both expanded the right of franchise to more Americans.

THE EQUALITY ARGUMENT

I argue that this history of franchise extension represents a systematic historical imperative to include all citizens as electors—participants in the government and governing of America.  Indeed, this imperative to include all citizens as electors is driven by the Creed expressed in the Declaration of Independence “We hold these truths to be self-evident, that all (people) are created equal.  .  .”  Neither the Constitution nor the Declaration of Independence provides any basis for granting any citizens or citizen electors a greater voice than any other citizens or citizen electors in choosing elected officials or determining public policy (laws).  Yet by allowing individuals or corporations to make unlimited campaign expenditures, our laws grant the supremacy of well healed citizen electors or corporations in America regardless of the citizenship of that corporation’s share holders or officers.  This supremacy is possible through a Supreme Court ruling, Citizens United v.  FEC in 2010.  For well over 120 years prior to the Citizens United decision, law makers at both the state and federal level had attempted to impose limits on how much money individual citizens and American corporations could contribute to candidates and political parties.  This even though both individuals with money and corporations maintained lobbyists and made regular and large campaign contributions to lawmakers who voted on campaign expenditures limits.

Political science texts on American government and politics contributed to the fiction that campaign contributions were not quid port quo arrangements.  Indeed, office holders explained in depth that campaign contributions did not and would not influence their votes in legislative bodies.  Yet there are curious correlations between the interests of campaign contributors and the committee assignments of legislators receiving those donations.  In the 1950s Anthony Downs published his Doctoral dissertation with Harper and Row under the title An Economic Theory of Democracy.  One of the deductions Downs deprives from a model of a representative democracy is that public policy in a democracy will have a producer bias.  I would Hazard to amend that to say public policy in a democracy will have a bias towards moneyed interests.

A producer or moneyed interest public policy bias does not smack of the equality of citizens in a representative democracy.

A Reintroduction

Things are awry; and no one seem to know why. However, it is how money is created hat is awry; and it is how money is used politically that is awry.  The way money is created and used politically fundamentally undermines the very equality of Americans.  First, in looking at how money is created, understand that there is nothing essentially wrong with the dollar except how it is created, or more properly to whom it is distributed.  “…[A] long habit of not thinking a thing wrong, gives it a superficial appearance of being right, and raises at first a formidable outcry in defence [sic]of custom. (Thomas Paine, Common Sense, Introduction, 1776).  The customary way dollars are created is by Federal Reserve Bank deposits into the accounts of banks or securities dealers in exchange for assets (normally, but not always, U. S. Treasury obligations) during what are called open market operations.  Banks then can loan more money since they now have currency (money or cash) rather than the assets they formally held.  So, new money is principally issued through banks.   Fundamentally, banks, by their very operation, are choke points in the flow of money.  Banks contribute less than 10% to GDP (https://en.wikipedia.org/wiki/Financialization [July 3, 2016]) where as consumers account for 65% of GDP. (Consumer spending accounts for a majority of spending in all advanced nations . . . In dollar terms, PCE’s share of GDP in the third quarters of 1977, 1987, 1997 and 2007 were 62.5, 65.9, 66.7 and 69.5 percent, respectively. https://www.stlouisfed.org/publications/regional-economist/january-2012/dont-expect-consumer-spending-to-be-the-engine-of-economic-growth-it-once-was [July 3, 2016]).  In effect that leaves 25% of GDP for all other sources of economic activity with the federal government accounting for most of that—20% of GDP. ( https://fred.stlouisfed.org/series/FYONGDA188S  [July 3, 2016]).

Strangely banks are one of the primary means of wealth accumulation and consumers are not primary focal points for wealth accumulation.  Quite the contrary, consumers tend to be creators of debt.  So, as side issue, we create money be depositing it into the accounts of wealth accumulation machines (banks) and not in the hands of people who tend to spend more than they have.  While the obvious conclusion is that creating money in the accounts of consumers will cause them to spend more, go into more debt.  Yes, I suppose so, however, notice that spending will create more economic activity (perhaps, growth) unlike putting money into wealth accumulation machines which tend to be very caution about what that wealth is used to purchase (fewer economic transactions, and then more transactions within the financial sector than anyplace else {note the financial sector accounts for 7% of GDP including banks and even some Treasury activities.  So wealth accumulation has only 11% of the impact on GDP compared to the impact of consumer spending on GDP. https://www.selectusa.gov/financial-services-industry-united-states  [July 3, 2016]}).  Essentially money is created by deposits in to the wrong sector’s accounts—banks’ and securities dealers’ accounts and not consumers’ accounts.  I will adjust “consumers” to “citizens” for reasons that will become obvious to the reader in the flow of this book.

Elsewhere in this book, the section entitled “Banks are Failures” I will argue that indeed deposits of new money into banks’ accounts is one of the reasons for the business cycle (boom and bust or inflation and contraction, or growth and recession/depression).  The reader will see at that point that depositing new money into consumers’ (citizens’) accounts will help to smooth, if not eradicate, the business cycle and replace it with a general upward trending growth line.

While not a normal part of U. S. History or U. S. Economic History, money creation and to whom it is distributed has been a central issue since before the beginning of the Republic.  The History of Money Creation in the US is treated sketchily in a later section of this book under than title.  Suffice it to say that the terms “not worth a Continental” and “a cross of gold” played a role in the history of money creation in the United States of America.

Secondly, the role money plays in politics is every bit as non-egalitarian as the way money is created.  To put it in a nutshell, money is necessary to run a campaign for office or for/against a proposition.  Money comes from donors.  Big donations come from moneyed interests: corporations, businesses, large associations, and even rich people.  Yes, the average citizen can and does donate money to political campaigns.  However, it takes hundreds or thousands of average citizens to match the amounts given by moneyed interests.  So to keep the big money donations coming, elected officials tend to be responsive to the interests of big money.  Big money donors use paid employees, called lobbyists, to keep the elected officials informed of their interests.  Elected officials are responsive or were predisposed to support those moneyed interests at the get go.  Indeed, only those candidates who seek office with a predisposition to support moneyed interests even get nominated or have a fighting chance. Bernie Sanders is an exception to the pattern.  Yes, there are other exceptions, but they don’t get much farther than local offices.  I am not charging that there is corruption.  There is, but that is not the issue.  The issue is moneyed interests are better represented in Congress and in the state legislatures than the voters are.  Former Boss Tweed is said to have said, “I don’t care who has the vote as long as I can choose the candidates.”  At the very least, the choice of candidates is made by moneyed interests early in the nomination process.  The upshot is American public policy has a bias in favor of producers, financers and other moneyed interests.

The US Constitution apportions representatives in Congress by population for the House and two representatives from each state in the Senate.  Nowhere are corporations, producers, labor unions, financiers, and other moneyed interests mentioned.  Yet, the non-mentioned are very well represented.   The simplest way to stop this bias is to make it illegal for anyone to donate to a candidate for office or to give any gift to a candidate for office and to fully insure the prohibition make it illegal for individuals to use their own money to run for office.   It is not a question of talking America back, for the people never had it.  It is a question of implementing the words in our founding documents – equality being prime among those words to implement.

So, this work presents a two pronged strategy for giving American Government to the people: making money creation deposits in citizen accounts and eliminating donations to candidates for office (which means some form of public financing).

To catch up on most of the book go to the earlier blog entries starting back in February. When I started this as a blog, I didn’t really understand the backwards nature of postings, the first come last in the list you see.

The Economy is a Non-Zero Sum Game

The Economy is a Non-Zero Sum Game

“The greater the proportion of a population that (fully) participate in the economy the stronger and more stable that economy will be.”  Aside from clarifying and defining some terms, I shall assert this is a testable hypothesis.

Clearly (full) participation is in need of clarification.   For example, is a person completely dependent on others for care a participant?  Is a retired person a participant?  I would argue that both can be participants.  Their level of participation is strictly a function of their abilities to engage in voluntary economic transactions.  This may well boil down to their access to money.  Indeed, it may be as simple as having an income stream.

The concept of “full” I have put in parentheses.   Here I conceive of a person’s participation not being limited because of a lack of resources, read money, because of, say, poverty.   I understand this is vague for in America we tend to blame a person if he or she is poor.  A lack of ambition, failure to stay in school, being lazy, addicted to drugs, lack of faith in God, or even moral turpitude are all reasons we use to blame someone for being poor.  We almost never ascribe a person’s poverty to the circumstances of birth.   By the same token we, in America, all assert our individual financial status is a function of our hard work.  Almost to a person we do not seem to give credit to our circumstance of birth.

While most people cannot point to a lump sum inheritance they can point to parents or family providing the support, education and a helping hand.  Shame on us for claiming we achieved what we have through our own efforts and not give credit to those whose shoulders upon whom we stand (built our success)

So, what then qualifies as a lack of resources?  First an undependable or unpredictable income stream is a lack of resources.  So, how much of an income qualifies a person to be considered a full participant in an economy?  Minimally a person needs sufficient income flow to afford a place to live (home), adequate nutrition, clothing, medical care, entertainment, and education.  That is the income needs to put them over the poverty level.   In the current American culture programs exist to “assist” “qualified” persons with some access to shelter, food, clothing and even education.  However, that assistance is normally provided in voucher form of some sort. Then the assistance is removed given even a minor change in his or her qualifications (read “income”).  Hence these programs do not provide a dependable income stream. The programs are predictable if the recipients don’t demonstrate initiative and earn money (engage in legitimate, productive economic transactions).  It seems we are afraid people will “misuse” what we give them.  Then too, we perceive what we give somehow comes out of our pockets; and, while we were taught to share in kindergarten we don’t really want to share.

Another indicator of a lack of resources is constraints on the individual’s existing resources that inhibit his or her use of them.  We have already addressed vouchers which at best are dedicated resources.   Dedicated resources are not economic transactions to which the holder of a voucher is a participant.  Leans and garnishments or tax judgements on income streams are not voluntary economic transactions.  While earlier economic transactions are in all likelihood through the reason. For if a person’s resources or income stream is eaten up by taxes and/or liens that person does not have the option to engage in voluntary economic transactions and should not be considered to have resources or an income stream.  Thus, uncomfortably,  people can place themselves in a position through  bad economic decisions.

It is not clear how to prevent or avoid people from making bad economic decisions such as excessive credit purchases or failure to pay taxes.  However, income received from the Federal Reserve for doing one’s civic duties-voting, jury duty and the like – will not be taxable as taxing that income would be a poll tax and not constitutionally permissible.  So while a stretch, placing a tax lien on that income should, by the same logic not be permissible.   Obviating credit and mechanic’s liens on that income can do two things.  First make the inclusion of income from the Federal Reserve for doing one’s civic duties not part of the income calculated in granting credit for financial responsibility.   Second, simply exempt income from doing one’s civic duties from income that can be attached.

While it is not clear that these approaches to keeping people from going clearly under will work.  It is clear that without some mechanism to insure that people can’t be put under water completely because of credit kinds of traps – unrealistic borrowing limits – that the financial flexibility afforded by income from performing civic duties is obviated.  Remember that purpose of financial flexibility is to include the greatest proportion of the population in the economy -that is involved in economic transactions.

Historically cash (gold, silver and all forms of convenient and portable money) has been manipulated by various actors in the creation and placing it in circulation.  For example, the Roman emperors systematically debased Roman coinage to try to avoid taxes.  Governments ranging from post WWI Germany to Zimbabwe have attempted to print money for paying their bills.  Indeed, when private banks in the US printed their own bank notes they took less than a conservative approach to the amount printed.

The forgoing examples are but a drop in the bucket.  However, they serve to start the dialogue.  Wealth tends to attract money.   The problem then is to attempt to insulate new money creation from doing one’s civic duty from manipulation by anyone, particularly those in charge and those with wealth.  Just as the proposal to have the Feds deposit new money in citizens and units of governments’ accounts can be viewed as a schema, some caution needs to be in place to avoid schemes to manipulate it.

Then there is the issue of inflation.  Regardless of the kind of money in circulation–gold, silver, fiat or commodities–excessive new money tends to cause inflation.  So the criticism of this proposal to regularly issue new money is that it will be inflationary.

Perhaps, however, an examination of the growth of the US money supply over the past 100 years or so demonstrates that, ceteris paribus, a growing money supply is not only needed but necessary for growth.  And as this set of essays has discussed elsewhere a predictable and steady supply of new money will eliminate the boom and bust cycle we have experienced under the present system of creating new money based on debt instruments.

Further, the inflationary reaction to new money occurs when new money is not anticipated by the market.  Announced and predictable large increases in new money do not seem to result in inflationary pressures–witness quantitative easing.  So, the expectation is that basing new money creation on citizens doing their civic duty will not, prima facie, be inflationary.

This is not to say there will not be clamoring for increases in the size of each individual’s payments.  Clearly checks must be put in place to prevent these pleas from turning inflationary such as criminalizing votes by congressional representatives for such increases.  But, again, this only scratches the surface of the potential problems for managing the rate of creation.  But, inflation would be a result of manipulation or perhaps attempts by demigods to curry favor for power.