5 Questions on the Economy and our Democracy

Dear Mr. Obama:

A political democracy is built on the concept of one person one vote. In other words, in a democracy there’s a built in balance of power so that the few cannot dictate to the many.

In that light, my questions are…

1. Without a somewhat democratized/balanced economy, how is it possible for America to have a legitimate political democracy?

2. That is to say, if a small percentage of people (some would say 1%) own most of our nation’s capital/wealth (some would say 99%) how can government officials avoid being owned, controlled, and manipulated by Concentrated Power and Wealth, Inc. at the expense of the many?

3. And if it’s impossible to have a legitimate political democracy under such imbalanced economic conditions, what steps would you as President of the United States take to help systematically democratize the free market economy, shrink the cancerous wealth gap, and minimize poverty without resorting to bureaucratic, big government (i.e. socialistic or communistic) tactics to do the trick?

4. In this light, are you familiar with the works of economic theorists Henry George and Louis Kelso

5. Finally, if so what role could Georgian or Kelsonian economics play in your 21st Century solution to the many economic problems our nation/world is facing?

Please Weigh In…
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What Would Lincoln Do About Our Current Economic Dilemma? A Huge History Lesson

In May of 1862 President Abraham Lincoln signed the Homestead Act into law. When the Civil War ended three years later, a westward movement began that encompassed tens of thousands of people and lasted for over a half century while creating in its wake THE GREATEST ECONOMIC EXPANSION IN AMERICAN HISTORY.

Recognizing a Better Way
So, with our current market teetering precariously on the brink, you'd think the natural question would be, what can we learn from this fascinating piece of American economics history? For starters, despite the Ph.D.'s and the politician's reluctance to do so, we must get past the dueling, and temporary band aids of cutting taxes and interest rates. Realistically speaking, this is a malignant tumor, not just another scrape on the knee. And to contemplate Lincoln's Homesteading example is to recognize that there's a much better way to address our current national economic dilemma.

The Driving Force
Let's dig a little deeper and identify the driving force, the great motivator that inspired tens of thousands of courageous American families to pack themselves and their belongings into covered wagons in order to settle America's western frontier. What was it? It was the simple opportunity to own a piece of the American rock, and in so doing, to control their own lives in a way that's impossible while working for someone else.

Power Follows Property
In the immortal words of Daniel Webster, "Power follows property." Lincoln understood this basic principle in spades, and offered spirited Americans the opportunity to empower themselves by offering them the opportunity to own land. The net result of that offering was an economic expansion like we've never known before or since. Nothing else even comes close.

Let's Compare Conditions
So in the midst of Bush II's latest tax cuts, and the Federal Reserve's latest interest rate lowering (3/4's of a point today) one challenge for 21st century leaders today, whether it's Obama, Clinton, Edwards, Kucinich, McCain, Romney, Huckabee, or Ron Paul, is to compare current conditions with the post Civil War conditions of Lincoln's Homestead Act and see if there aren't some similar opportunities that we're overlooking.

Let's Ask a Few Questions
They could even ask a few questions such as, "Does the ownership opportunity have to be limited to land only? Or could it include community ownership of an NFL professional sports franchise like the Green Bay Packers? Could it include a state's natural resources such as the Alaska Pipeline project? Or could it include the public airways, power grids, utility companies, etc., etc., etc.? I mean are there any real limits to these 21st century ownership opportunities other than the limited resources necessary to consummate the transactions? The possibilities are limited only by our imagination!

What Would a Modern Lincoln Do?
And if limited resources are the only obstacle to ownership, then the 21st century leader's challenge becomes, how would a modern day Lincoln create economic access to almost infinite ownership opportunities (and all the financial benefits that flow from it) for new generations of Americans? What would he do to facilitate the transformation of American workers into American owners, and in so doing, inspire the American spirit, to inflame the American imagination, and revitalize the American economy in a way that ONLY PROPERTY OWNERSHIP has ever proven to do? Yes, it's all about ownership!

The New Leader's Challenge
So the challenge for Clinton, Obama, Edwards, Kucinich, McCain, Romney, Huckabee, Ron Paul, as well as Bush II and Ben Bernanke is to move beyond the temporary (yet immediate) band ads of tax and interest rate cuts that do nothing to address the underlying root causes of our dilemma. The opportunity to develop a modern Capital Homestead Act of 2008 is staring us right between the eyes. The only missing piece is the leader who's capable of recognizing the opportunity, articulating those possibilities to the American people, creating the legislation, and allowing the inspiration of ownership, self determination, and economic freedom to take its course as Lincoln did 150 years ago. America's future depends on that leader, whoever he/she may be.

For a multitude of related possibilities check out www.capitalhomestead.com. Also check out a book entitled Curing World Poverty edited by John H Miller for more information.

Paul O'Neil's Capital Homesteading Solution to Social Security

January 16, 2005
OP-ED CONTRIBUTOR
Who Wants to Be a Millionaire?
By PAUL O'NEILL

Pittsburgh — THIS is what we should do about Social Security: At the same time we acknowledge that it is the most successful domestic program in American history, we should also admit that Social Security, in its present form, is unsustainable. And then we should come up with a plan that is different than what President Bush and most of the pundits are proposing.

We should ask ourselves what would be a worthy aspiration for the financial security of retired Americans in the years ahead. My answer is that we should establish a process that will produce a substantial annuity for every American at retirement age.

By substantial, I mean at least $1 million. In order to create a real, fully financed annuity of this size, people must begin saving when they enter the work force. The saving needs to be continuous, and it needs to be left intact so that compound interest can work its magic.

We can do this. We already have a process in place that requires that we give the government 12.4 percent of our income in the name of Social Security.

The problem with the current arrangement is that our contributions are a tax, not savings. So we should begin by agreeing that we are going to require all Americans to save, individually, to provide for their financial security in old age. After all, if we don't save on our own for our retirement needs, who will do it for us? Our neighbors? Our children? In a civilized society we have a responsibility to take care of our own needs so as not to be a burden on others.

Yet we can also recognize that some people may work hard during their lifetimes, and save 12.4 percent of their income annually, and still not produce enough for a $1 million annuity when they retire. The federal government could then make annual, supplemental deposits to their accounts from its general revenues to make up the difference. Those of us who are more fortunate can help those who are not. (It is useful to remind ourselves that the federal government is "we the people" - and the federal government doesn't have any money unless it takes it from "us the people.")

Let me define what I mean by financial security. Financial security begins with ownership of real assets; so the money saved each year in this plan would be the property of the person who saved it. I would use the existing Social Security collection process because it is already in place, everyone understands it and its costs are relatively low.

The money would then be invested in broad-based index funds with an objective of matching the overall rate of return for all investments in the United States. These funds typically have very low costs because they're not actively managed. That means there would be no windfall profit for stockbrokers in this system.

Further to the definition of financial security: it means enough money in retirement for all needs - food, clothing, shelter - and including medical needs like prescription drugs.

If we could work toward this idea, we could reduce our current dependence on the political process for these necessities. When Congress passed and the president signed legislation last year expanding drug coverage in the Medicare program, many politicians acted as though they were granting us some great beneficence. But they don't have any money (or the benefits they pay for) to bestow unless they first take it away from us in taxes.

As I write this I can imagine the chorus of pundits saying, "This isn't politically possible." Why not? Because it is too complicated for people to understand? Or because the only way to approach change in our society is through small incremental steps, like the president's tepid notion of a limited, voluntary diversion of Social Security taxes into small private accounts?

Baloney, I say. What stands between a truly worthy aspiration for our society and its realization is political leadership with the courage to dream big.

The social policy technocrats will have a more legitimate concern: how do we get from where we are to this new and better condition? While I was secretary of the Treasury, the Federal Reserve chairman, Alan Greenspan, and I worked on an idea to jump-start the changeover by borrowing enough money to put money into individual accounts now, beginning with the youngest workers. We did some very rough calculations that showed for $1 trillion, we could transfer the population from age 18 to the mid-30's into this new arrangement.

The value of doing this is twofold. First, it hastens the transition to the new program for society overall. Second, the $1 trillion of borrowing now (to be paid from general revenues over the next 20 years) makes a substantial dent in the unfinanced liability of the current program.

As to the current program, everyone above the age of 35 could keep their current relationship with Social Security and their benefits intact. Their children, though, would have a better life. And that, after all, is the promise on which this nation has been built.

So there it is. Do we have political leaders who are interested in surpassing Franklin Roosevelt's achievement of 70 years ago?

Paul O'Neill was secretary of the Treasury from January 2001 to December 2002.

The Relentless Momentum of Conventional Wisdom

I have people come up to me and say “OK Mr. Buckett, if this idea is everything that you seem to think it is, why haven’t economists like say Allen Greenspan, Milton Friedman, Paul O’Neil, or John Kenneth Galbraith embraced the ideals of Binary Economics and Capital Homesteading?” And to tell you the honest truth, I had exactly the same questions when I was first run over by Kelso/Adler’s Capitalist Manifesto. I mean to me, it was so obvious and blatantly right that I wanted to know why in the world “the experts” hadn’t picked up on it, implemented it, and made the world a better place?

But the more I looked at the situation, and the more knowledgeable friends I talked with, the more I began to understand why “the experts” WILL BE THE LAST ONES to tune into and endorse this incredible, but highly unconventional idea, regardless of how great it is. The reason is that they have far too much invested in conventional wisdom (far too much to lose) to ever embrace an idea as revolutionary as this. Even if they see it clearly, which most of them don’t, their conventional lock step prevents them from even talking about such things in public.

So What Do They Have Invested
So what do they have invested? Well let’s start with years of education and study, high school, college, graduate school, post graduate school, etc. And then there are the professional papers, the articles, the books, the lectures and speeches declaring their allegiance to and support of conventionalism in a myriad of ways. And ultimately there’s the JOB, which is what gives them value, stature, distinction, and worth in the eyes of their friends, peers, and colleagues, if not their family whose bills are paid by this JOB.

In other words even if one of these well invested experts recognizes that the emperor is wearing NO CLOTHES, they can ill afford to point it out without jeopardizing their lifelong investment, their identity, their JOB. So people like Greenspan and Friedman cannot say that Kelso is right because doing so would be confessing that they themselves ARE WRONG, and that’ll never happen.

This Dilemma Applies To Much More Than Just Economists
In a very real sense, what we’re up against is conventional wisdom itself, and this dilemma applies to more than just mainstream economists like Greenspan and Friedman. Academicians generally speaking, often suffer from a similar, uncontrollable case of conventional indoctrination.

I mean that these people are paid by the state to know the conventional answers in their respective fields of endeavor. They’ve studied the conventional subject matter. They’ve thought long and hard about it. They’ve discussed and consulted professionally. And their students and clients are all supposed to look up to them because they are recognized by convention. After all, these folks are educators and teachers and without the answers, then who the hell are they?

To say this a little differently, academicians are the vehicles that our society depends upon to pass conventional wisdom on to the younger generation, and they (the academics) can easily feel threatened by situations that make them look as if they don’t know what they’re talking about, and they tend to avoid these situations like the plague. One other factor, get below the college level and (public) academics are union, through and through…for very good reason I might add. Most own very little wealth producing capital and unionization is a much better alternative than being divided, pitted against one another, and conquered by administrators like the teachers in most private schools. Anyway, academicians will never be the ones to light the binary fire either.

How About Professional Politicians?
Well then, what about professional politicians? You’d think that there would have been at least a few ambitious players who had read about the solution, understood it, and said “My God, I can ride this one all the way to the White House. I’ll be a national if not an international hero by telling the people I represent about the magic in this 21st century concept.” But to date, there have been no such takers.

Of course the problem with politics these days is that the surest way to victory in the third millennium is to get your hands on lots of money, hire the best PR agency you can afford, and spin your way into office. And when it comes to money people, they only back conventional wisdom, which has obviously worked well for them.

Add to that the fact the professional pols are also deeply vested (books, articles, speeches, reputations, etc.) in conventionality and they can ill afford to announce that Kelso has been right all along, because that would mean that they’ve been wrong all along. So the fate of this concept cannot be left in the hands of politicians either.

How About Professional Journalists?
Inevitably someone will suggest that professional journalists should be ripe for a new, outside the box idea like this. After all, they’re always looking for a scoop, an angle, something with which to surprise, provoke, or otherwise capture a reader’s attention. Why would they be averse to spilling the beans on conventionality and to telling they’re readers what they should have been told decades ago now?

To be honest, there have been a few of these journalistic renegades who have dared to think for themselves including Mike Wallace in a 60Minutes story back in the mid seventies, Bill Moyers in one of his famous interview books, and a guy named Nicholas Van Hoffman whose razor sharp pen and wit allowed him to challenge conventional wisdom regularly back in the day. But alas, these rogues were too few and far between to make a legitimate dent in the armor of conventional wisdom.

Furthermore, conventional wisdom owns the newspapers, the magazines, the TV and radio stations and networks who pay the professional journalists salaries. If they fly in the face of convention too hard and too often, they will not only find themselves unemployed, but unemployable in their chosen field of work…a large risk for anyone who lives and dies by the pen.

And Now Throw In The Totally Frustrated, Demoralized Majority
So far we’ve talked only about the protective layer of experts who are effectively paid to guard the palace gates of conventional wisdom, to repeat the company line, and who are unwilling, unable, or both, to risk their own immediate futures for the futures of generations to come. But let’s take one final step here and throw in the myriads of non-experts who have become so dazed and confused, so thoroughly disgusted and frustrated by today’s politics as usual, that they’ve been labeled the demoralized majority.

These people have lost hope. They’ve stopped listening. They’ve stopped thinking about it because it’s too frustrating, and such a waste of time. They feel totally impotent, and unable to make a real difference in the face of the crushing momentum that conventional wisdom has accumulated over the decades. And if they’ve lost hope, if they’ve stopped listening, and stopped thinking, these folks are playing right into the hands of the same status quo who pays the experts to say and think what they want them to say and think. This group of people also offers conventional wisdom a humongous layer of protection that will also have to be pierced if real change is going to occur.

Layer Upon Layer Of Conventional Armor
So what we’re talking about here is a situation where conventional wisdom is protected by layer upon layer of vested interest which discourages the likes of economists, academicians, politicians, and journalists from entertaining any new paradigm. But if they’re unusually adventurous and they happen to taste the forbidden fruit, they’ll find themselves in a situation where revealing a new-found truth would cost them dearly. They’re simply unable to say THE EMPEROR IS WEARING NO CLOTHES OUT LOUD, without having the emperor chop their heads off…a true dilemma for anyone.

If Not The Experts Then Who?
OK, now if “the experts” will not, or cannot afford to tell the public about this amazing new 21st century solution to 21st century problems, who can? The basic answer is that this revolution is going to depend on many non-experts, courageous and resourceful people whose livelihoods and identities are not owned, controlled, and totally dependent on the bondage of convention.

Using the emperor as our analogy once again, it was the non-expert, (THE CHILD) who revealed to all the wise old experts, (THE ADULTS) that the emperor was wearing no clothes. It’s going to take independent minded people who, like the child, recognize that what we’re talking about here is not some gigantic, mystical mountain, but something that the average Joe and Josephine walking around on Main Street USA can understand if they’ll only trust their own god given intellects and give it a try. Of course failing to try, effectively prevents all understanding.

Average Folks Cannot Afford To Wait For The Experts To Lead
The moral of the story is that the average folks in this nation can ill afford to wait around for the economists, the academicians, the professional pols, and the journalists to lead the way out of the mess that they led us into. We’re going to have to lead ourselves. And if we fail in that endeavor, the future of justice, democracy, peace, and prosperity for generations to come in these United States and around the world is in deep trouble.

A Simple and Viable Solution to Iraq

Here it is:
1. Give the people of Iraq a direct ownership stake in the oil that’s being pumped out of their land.

2. Form a corporation and give all Iraqi citizens equal shares.

3. As owners of the corporation they can contract with Shell, Exxon, or others to develop and market the oil.

4. Start pumping and selling oil on the free market, generate billions in revenue.

5. Then start writing out monthly dividend checks to each new shareholder, starting immediately, today!

6. The effect will be to make the people of Iraq partners in the corporation, and it will give them a reason to defend the oil fields from terrorists because they will be defending something they own and benefit from. In other words, they’ll have a real, live stake in the outcome.

7. Furthermore this solution resolves the problem of unemployment in Iraq, which has been epidemic ever since we started bombing them 36 months ago. You will also be pumping money in their economy, creating demand for goods and services, and jump starting their economy immediately.

8. On the other side of the world it will stem the sea of red ink (over a billion per week) that’s flowing out of the US treasury, which threatens to burden future generations with debt, and undermine our own economy for decades to come.

9. It will democratize, instead of monopolize, Iraq’s fledgling free market economy and it will create natural setting in which the political democracy that most Americans claim to support, will be actively encouraged to take root.

10. It will also demonstrate to the rest of the world (and to large segments of a cynical American public) that the American people did not attack Iraq for the benefit of a few oil barons here in the US or around the world.

If this simple ten point solution makes as much sense to you as it does to me Joe L. Buckett, then I suggest you write your Congressmen right now and urge them to support it. Tell them also that you see this as a long term, systematic deterrent to the terrorism growing in the Middle East and see if you get a response.

For the moment, let’s call it THE PARTNERSHIP ACT, and on behalf of the people of the world, let's ask the American people to take a solid stand in the name of democracy for Iraq. Let's do it right now and avoid procrastinating any further in this time of immediate crisis. There really is no time like the present, so do it right now

Let's Simplify Politics

My hat is off to any person who can tackle a complicated problem, boil it down to its basic basics, and render it digestible, accessible, and understandable to the average Joe on the street in order to inspire action of the right kind. In this regard I'd like to introduce you to a friend of mine named John P who has done precisely that with the totally confusing and frustrating subject of politics.

To use John's own words, "In school they always talk about the three R's...reading, writing, and arithmetic. But in politics it's all about the three E's... the environment, the economy, and education." Let's take them one at a time.

The Environment is E # 1. And most people, with any degree of common sense at all, will readily admit that clean air, clean drinking water, and rich soil in which we can grow crops are pretty important issues for the human race, not to mention every other species on the planet. If we continue to screw up the environment in the name of development, of any kind, we do so at our own peril, and future generations will be the ones to pay the price for our self centered lack of foresight. It's just plain dumb to do anything other than cooperate with Mother Nature because if we choose to compete, we choose to lose.

The Economy is E # 2. In short politicians (or anyone else) can talk about the environment, they can talk about education, health care, terrorism, crime in the streets, government corruption, family breakdown, abortion, and school prayer...etc., but without the ability to pay for what needs to be done on these issues, we're all just talking. It’s nothing but talk, and talk is cheap.

In other words, if the economy is hitting on all cylinders we can pay for tackling all kinds of problems. But without a sound economy, without the ability to pay for pro-active initiatives, it's total BS. The difference between "cheap talk" and "legitimate action" is a sound economy. It's that simple.

Education is E # 3. But I'm not talking about the conventional indoctrination and bull manure that we label education in the 21st century. You know, the 12 to 20 years worth of classroom experience that systematically grinds our naturally round pegs into entities that fit neatly and efficiently into square corporate holes, and underwrites the status quo regardless of what it's doing to people around the world.

In contrast, I'm talking about real education that encourages real questioning, real thinking, and real practical understanding of real problems. That is to say, if there are real 21st century answers to real 21st century environmental and economic problems, people must be able to understand them if they are going to implement them and if they are going to have any positive and practical effect on our world. The education that allows that kind of understanding is what I have in mind when I talk about E # 3.

In Summary: I'd like to meet the politician who will cut right to the chase and say "Look folks, there are only three real issues out there that we really need to address. First we must secure the environment for without it we're toast. Second we must discover how we can democratize the free market (the $64 trillion dollar question of our age), and pay for the things that we need to do as a nation and as a world. If we fail in this endeavor, everything we do is little more than idle chatter, designed to confuse and frustrate American voters who are already so totally confused and frustrated that over half don't even bother to vote.

And finally, the people must be able to understand what needs to be done in order to salvage the environment and to rectify the economy. If people fail to understand, there can be no mandate from the people, in which case there’s no legitimacy to what we like to call America’s democracy. On the other hand, if we get a handle on the three E's, then we can discuss the other issues, they’ll make sense, and we can vote intelligently. Amen