August 2008

SHARING THE WEALTH

By Peter Bearse

MAY DAY! MAY DAY! – The call of people in distress; also, the name of May 1st, traditionally more of a “Labor Day” than the one in September.

These days, “distress” and “labor” go together. Workers’ work is earning far, far less, either in real terms [their inflation-adjusted earnings have declined] or as a share of earned incomes [in an economy in which the share of the rich has risen by leaps and bounds]. Thus, rising inequality is a sleeper (read between the lines) issue of this 2008 political year, to become a time bomb of an issue if we don’t start to do something about it now.

What’s to be done? First, try to get to the root of the problem. One fundamental source is that garden-variety wage and salary workers aren’t receiving shares of the profits and other wealth that their work helps to produce. Some firms have profit-sharing plans. Others have “ESOPs” – Employee Stock Ownership Plans. The latter are preferable since shares of stock embrace all company assets, not just profits. Several studies have shown that companies with ESOPs perform better than those without.

Another source is that, while paying through the nose as gas prices rise, American workers are not receiving any shares of the considerable profits being accumulated by “Big Oil” from our nation’s (diminishing) natural resource of oil, nor from any other natural resources whose prices are also rising in the commodities markets. The exception is Alaska, whose citizens receive an annual check from the Alaska Permanent Fund, derived from oil revenues produced in the state.

A third source is the negative rate of return on the forced savings that American workers contribute to Social Security for their own retirement.

Anybody seriously concerned with the ability of American workers to earn “living wages” that can support families will do more than claim an increase in the minimum wage as a major accomplishment. The evidence shows that it “helps” no more than a small minority of the nation’s workforce and leads to a loss of entry-level jobs. The next Congress will need to do much more. A good start would be threefold:

(1) In light of a generation of experience, liberalize and improve laws to encourage and enable the spread of employee stock ownership.

(2) Allow more oil drilling on public lands and increase lease rates and royalties that oil companies would have to pay for the privilege. [At the state level, states with considerable natural resources should look at the Alaskan model.]

(3) Require that workers’ Social Security funds are invested to earn a significantly positive rate of return – by putting the funds into a true, secure trust fund in the form of a public/private partnership that would invest them in a broad spectrum of American enterprise. This would negate the need to raise the already high rate of FICA taxation to maintain Social Security.

The bylines of these suggestions are: “Everyman an entrepreneur!” by broadening the base of ownership, “Spread the Wealth!” and “Let’s hear it for the American worker!”

Yet, these points are but a partial beginning of an effort to deal with a long-run, fundamental issue. Let’s get a discussion going. Comments? Other suggestions? Reply to peterj@peterbearseforcongress.com.

 

[NOTE: The following is a rebuttal to a letter written to debunk the above.]

 

 

Rebutting a Non-“Rebuttal,” or Spiking a “Spike”

 

The rules of arithmetic may seldom guide those in public life but it would help to remember that the minus of a minus is a plus. And so we confront the “Rebuttal on Income Inequality” by “Spike, Brentwood.”

 

The earlier “May Day!” letter on “Sharing the Wealth” that inspired Spike’s lengthy response had only two aims:

 

(1)   Identification of a growing issue with serious long-term consequences, so that we can begin to confront the issue now before it becomes the subject of doomsday media hype, spurring knee-jerk reactions and ill-considered remedies.

(2)   Suggestions to start discussions of how we can begin to resolve a few of the many problems that fall under the inequality issue umbrella.

 

Instead of helping us to face the issue, Spike first tries to deny that there is one, and then he uses ideological sticks to try to beat me up in a partisan political attack. It’s not until the final paragraph of his letter that he reveals that he’s serving as a shill for another candidate.

 

I’m glad that Spike has read The Bell Curve, but the book is not very relevant to what I wrote. The bell curve, being a “normal” distribution, does not characterize the distributions that underlie the inequality issue. These are highly “skew” (non-normal, very unbalanced) distributions. Attributing the inequality issue to the rise of “our high tech economy and the higher value it puts on knowledge” is not original to the book, nor is it nearly a complete citation of the forces at work. These include globalization, the decline of union power, faults in the nation’s educational system and GOVERNMENT! The latter is capitalized here because it is the Trojan Horse of Spike’s letter.

 

Here again, we do not learn until the end where Spike is coming from. Here we are, living in a democratic Republic in which an ADDITIONAL hundreds of thousands of people have come out to participate in primary elections, yet we see: “Government is still not reason nor eloquence…It is force.” So, we finally learn that Spike is an anti-government Libertarian, pure and simple. If he thinks that the other candidate, Mr. Stephen, agrees with him, one must wonder: Why is Mr. Stephen seeking to be elected to serve in the government – to be oxymoronic? – walking the halls of Congress in opposition to our Republic?

 

What the Libertarian animus against government fails to appreciate is that we live in a system of the rule of law. Members of Congress are lawmakers. As we learned the hard way when a Harvard economist tried to transform the Russian economy through “shock therapy,” “less government” and “free market” lead to oligarchy and a growing return to dictatorship when there is no legal basis for free enterprise, competitive markets and democracy. Government necessarily plays a role in the economy. The rules of the (economic) game are constantly being adjusted during every session of Congress. That is why we need an independent Representative who is a watchdog and whistleblower, expert in economics and accountability, fighting to ensure that the “rules of game” treat people fairly – to create a level playing field for us all.

 

The fundamental, long-run importance of the inequality issue, Spike, is clear as long as you recognize what most Americans already know: MONEY is POWER in America. Thus, growing economic inequality increasingly threatens to undermine the promise of our Constitution, of political equality – of people being equal under the law and able to expect fair play within the rules of the game. Economic equality will always be an unreal expectation and/or a poor promise made by communistic politicians.

 

The fundamental issue in the campaign for Congress, therefore, is what candidates are prepared to do to break the financial arms race that Congressional campaigns have become – to reduce the influence of big money in Congress. What is Mr. Stephen prepared to do, except dial for dollars – to try to win the million dollar sweepstakes ticket to Congress that Congressional races in NH CD 1 became under the previous incumbent, Jeb Bradley [the current incumbent, Rep. Carol Shea-Porter, already has about $550,000, and rising, in her campaign account]? You may buy a Liberty Dollar but what is the price of liberty?

 

            Peter Bearse, Ph.D., International Consulting Economist, author of Mobilizing Capital & Services: The New Economy (co-author), and Candidate for Congress, NH CD #1. Released by Supporters of Peter Bearse for Congress on May 1, 2008.