If you don’t know where you are going, you might wind up someplace else.
– Yogi Berra
It’s not easy to write good economic policy. You’re never starting with a clean slate. It’s always a “How do we get there from here?” kind of project. Plus, it’s difficult to even suggest changes without triggering intense responses in line with political agendas and social-cultural issues. What may seem to be a common-sense change that would benefit 90% of the population somehow generates conflict, even among those who stand to benefit from the change. There is a lot of misunderstanding among the population and boat loads of logical fallacy at play by politicians and propaganda-style news media. So much money and effort has been put into getting the middle class to support economic policy that goes against our own interest, it’s truly astounding.
But, let’s separate ourselves from the noise for just a bit and examine our current economic reality. The wealth consolidation in our nation is untenable. 90% of people have less than 10% of the wealth, and it’s shrinking faster and faster. We need to understand the mechanics that generate this outcome, and we need to change them in ways that generate a different outcome.
We must have a clear vision of what we are trying to create, so that we can have clearer purpose in our work and more meaningful measurement of our progress. So, what outcome do we desire? Where are we going? Do we even have a destination? Or are we just trying to hold this ship together while screaming at the new captain because he wants to be king? We need to put forward what we want as a society and as a nation. Then, we need to work to make the changes to create it.
Principles
I would not give a fig for the simplicity on this side of complexity, but I would give my life for the simplicity on the other side of complexity.
– Oliver Wendell Holmes
Before we start writing changes to benefit one group or the other, we should establish a set of principles that will guide our ideas and decisions moving forward.
Democracy
Democracy is our founding and primary principle as a nation. We cannot let those who stand to gain from wealth consolidation convince us otherwise. We are a democratic nation above and beyond all other things. A democratic government exists for the specific purpose of keeping power distributed among the governed. To keep power distributed among the governed, you must keep wealth distributed among the people (or as we like to call it, a strong middle class). Every economic policy written should be measured by this litmus test: Does the policy ultimately serve to increase median wealth (and across quantiles)?
Market Economy
In the 20th Century, our market economy drove wealth expansion and distribution across the nation—creating and growing a healthy and powerful middle class that made America great. Today the market economy is overshadowed by the capital economy, which is driving wealth consolidation—draining the middle class and consolidating wealth to a smaller and smaller group of owners. The government can keep a market economy free and optimal by having a clear and fair set of rules that everyone plays by, that are agreed to, adhered to, and enforced, as well as by designing those rules to avoid the outcome of consolidated ownership.
Assets
The consolidation of the ownership of appreciating assets is a primary driver of wealth consolidation. We need to design a system that leverages the assets that we have as a nation to create wealth and opportunity across the entire population.
Outcomes
We should write policy that is based on outcomes, not features. The government doesn’t need to control or micromanage private sector activity, but instead should design policy that generates desired outcomes.
Incentives
Incentives and disincentives are very powerful and positive ways to create change. Aligning people’s interests drives organic change.
Wealth
Wealth is the primary factor to the success of a nation. If wealth is increasing and increasingly distributed among the people, then more and more people benefit and have power in our society and government. If wealth is consolidating (whether it’s increasing or not), then fewer and fewer people benefit and have power in our society and government. A financial system that functions to keep wealth increasing and increasingly distributed among the people is a requirement for a democratic government which then keeps power distributed among the governed.
KPIs
The key performance indicators for the nation’s success are the increase of and the increasing distribution of wealth (median, mean, and quantiles).
Net Wealth Impact
We should judge the value of a business to a community by its net wealth impact. We tend to measure economic development success by jobs and tax base, but Walmart and Dollar General are both examples of businesses that bring lots of jobs and tax base, but over time have a net negative wealth impact on the community. They ultimately serve as vacuum cleaners of wealth, extracting it from the bottom of a community and sending it off to corporate ownership in the financial markets (90% of which is owned by wealthiest individuals in the nation). A good business for a community would have a net positive wealth impact. It would be importing wealth and distributing it around the community, not consolidating it from the poorest and exporting it to the richest somewhere else.
Ownership
In a capitalist society wealth comes from ownership of natural resources, infrastructure, property (physical and intellectual), businesses, systems, investments, and money. The consolidation of the ownership of these things equals the consolidation of wealth which in turn equals the consolidation of power, which is the opposite of the outcome we are trying to achieve as a democratic society.
Debt
Our debt will likely be our undoing. Sadly, consumer debt drives the financial markets, so the wealthy gain “inventory” the more the common person goes into debt. This is a broken system that will lead to either collapse or authoritarianism. We need to transition from a debt-based economy to a savings-based economy.
Banking
While banking was once a way to allow the average American access to capital, it is now the primary wealth extractor from every community in the nation. Corporate banks have most of us paying them interest for the entirety of our lives. We pay 25% interest on our credit cards and carry the balance for life. We have front-loaded amortization schedules on our home mortgages and auto-loans that have us paying as much as 80% interest on the first payment we make (just look at how much of your payments have gone to principal and how much have gone to interest, then compare that to the interest rate you think you are getting). We must redefine banking and lending as mechanisms to spread wealth throughout the population with low-cost lending that removes barriers to entry and barriers to growth.
Trade
We should seek to be the world leader of integrated world trade. We should invest in global trade with soft-power, partnership development, robust value chains, and widely shared and integrated economic interests. This helps manage peace and prosperity for the world.
Tariffs
Using tariffs to re-shore manufacturing is the act of forcing the middle class and the poor to pay (through increased prices) for our wealthiest to own more of the global means of production.
Using tariffs to squeeze other nations for better short-term deals is erasing our gravitas and standing in the world, giving up the role of big papa who dictates global economic policy and trade.
Using tariffs as an act of aggression is motivating other nations to move away from the dollar as their primary trading currency.
Using tariffs in a rapidly changing manner as if at the whim of one man will cause Japan and China to dump their US treasury holdings and will fundamentally alter the bond market and thus the global economy.
Policy Ideas
Progress is impossible without change, and those who cannot change their minds cannot change anything.
– George Bernard Shaw
These are ideas for changes that would benefit 90% of the population. At this stage, these are only ideas and need vetting of course.
Consumer Debt
Eliminate the Consumer Debt Markets
Eliminate, altogether, the use of consumer debt as an investment asset in the financial markets. This may be the single most impactful move we could make to create a strong middle class in America, which is what we need to survive.
Government-Backed Refinancing & Buyouts
The government could buy out high-interest consumer debt (credit card debt, personal loans) and refinance it at lower interest rates or zero interest. This would reduce the financial burden on households while keeping lenders solvent. It would be a national low-interest consolidation program for credit card debt. Or it could be done at the state level, and the state could lower the interest rate to 5%, and then apply that to investing in roads, bridges, and transportation infrastructure. Though, there would need to be some way out of that situation eventually because we don’t want an outcome of poor people paying interest to the state perpetually (no matter how low the interest). The point is to eliminate the perpetual state of consumer debt.
Cap Interest on Any Loan at 5%
Impose a cap on any and all loans of 5% interest. No lender can charge more than 5% on any loan – credit cards, banks, mortgages, etc.
Disallow Front-Loading of Interest through Amortization
Disallow lenders to stack the interest on the front side of the loan, and require that all loans have the interest spread evenly throughout the life of the loan. So, if you have an 8% interest rate on your mortgage, then the first payment you make is split 8% to interest and 92% to principal (and that stays true through every payment through the life of the loan).
Student Loans
Immediately forgive any and all student loans held by the federal government.
Income
Raise the federal minimum wage
The federal minimum wage has remained at $7.25 since 2009. This is not only shameful, but it is untenable.
Taxes
Tax Capital Gains Like Income
The long-term capital gains tax (max 20%) is significantly lower than the top income tax bracket (37%), benefiting wealthy investors over wage earners.
Eliminate Capital Gains Classification Loopholes
Carried interest loopholes allow hedge fund managers and private equity executives to classify income as capital gains rather than wages, significantly reducing their tax liability.
Corporate Tax Rate
The 2017 Tax Cuts and Jobs Act lowered the corporate tax rate from 35% to 21%, leading to record stock buybacks—an action that benefits shareholders and executives rather than workers. We should put the corporate tax rate back to 35% and strictly enforce it with a significant increase in the size of the IRS to do so.
Mortgage Interest Deduction
The mortgage interest deduction benefits wealthy homeowners and landlords disproportionately, subsidizing property accumulation. We should eliminate this, but then decrease everyone’s tax burden by what was going to the deduction. In other words, we should not use this change to increase tax revenue for the government, but instead to decrease tax burden for all the people whether they own houses or not.
Business
Create Tax Deductions for Small Businesses Paying Off Debt
When a small business has some cash flow, they want to pay down debt. But the principal they pay down is not an expense and therefore they have to pay taxes on that money like it’s profit, even though they aren’t keeping it but are using it to pay down debt. For a small business, this translates into something like this… if you pay off $10k in debt, then you have to pay the government $3k for doing so. Therefore, you have to have $13k in cash to pay off $10k in debt, which is expensive. We should create some kind of tax deduction for paying off debt. This would need to be explored to keep it from just being a tool to spend up and pay down debt just to avoid taxes. This should, instead, be a real tool to allow small businesses to get out of debt.
Remove Government-Imposed Costs on Hiring and Employing People
Remove any taxes or fees imposed by the municipal, county, state, or federal governments on a business in relation to that business hiring someone, employing someone, or paying someone to work. Currently, employing someone costs about 25% more than their salary. Much of that is government imposed costs (taxes, fees, etc.). This disincentives businesses from hiring and disables them from being able to pay better wages. Also, when a small business owner tries to give their employees a bonus, they have to pay the government to do so. This means that it costs $1,300 to give a worker a thousand bucks. This is poor use of incentive. The small business owner should be rewarded for giving out money to employees. It should cost $900 to give an employee a thousand bucks (through some kind of tax rebate or something). This is the exact type of wealth distribution we want in our society (private sector generated). Our policies are specifically disincentivizing the behavior that we desire. That’s bad policy.
Detach Healthcare from Employment
Businesses don’t need to be buying people their healthcare. This is an archaic idea and a broken system.
Healthcare
Universal Healthcare
Healthcare should be universal and available at no cost to everyone in the nation. We should completely eliminate the healthcare insurance industry. The whole endeavor would cost less, generate better outcomes, and drive upward mobility in our market economy. The success of universal healthcare is demonstrated by all of the major developed nations of the world. Our system is the shining example of corruption and profit trumping the health and well being of our people.
Education
Universal Public Education
Preschool, K-12, and state owned higher education should all be free to the public. The result would be the greatest nation in the world.
Banking
Expanding Public Banking Options
Create public banks that offer low-interest credit options, reducing reliance on private lenders. Create a nationalized banking service leveraging the infrastructure of the U.S. Postal Service (USPS) to offer basic banking and lending services.
Require Banks to Share Investment Returns with Customers
Require that banks pay 50% of any money that they make from investing or trading their customers’ money to the customers themselves. This would mean that everyone would benefit from the strength of the market, not just the banks and their shareholders.
Retirement
Create Universal 401k Accounts
Create 401k accounts for every adult in the US with a required 4% of income contribution (taken with taxes and put into the account), with the first allowable amount automatically going into a Roth and the rest into a traditional IRA.
Public Ownership of the Stock Market
25% of the entire stock market should be owned by the public and distributed into the universal 401k accounts.
Housing
Zoning Laws
Restrictive zoning regulations limit affordable housing development, driving up costs and excluding low-income families from wealth-building opportunities through homeownership.
Create specific incentives and disincentives for property upfit and landlording
It’s good that investors buy a dilapidated property and upfit it to be a livable home. We want them to do that. But it’s bad that a landlord stays in the way of the tenant owning the home indefinitely. This disallows the tenant from the wealth building (through home ownership) that they will need to fund their retirement. So, let’s incentivize investors to purchase, upfit, and build homes. Then, let’s disincentive them to keep the property long term. We can incentivize them with tax rebates for purchase and upfit costs and waiving of capital gains tax when the property is sold to the occupant. And we can disincentive them from keeping ownership of the property indefinitely by introducing a climbing property tax and eventual penalty on the property that would get so high over time that it would make it a bad investment to stay owner and would make more financial sense to sell to the tenant.
Create federally insured home-buying options without down payment
The down payment is the prohibitive piece to buying a home. Most house renters pay 20% more in rent than they would in a mortgage if they owned the property. They just can’t get over the hump of the down payment. We need options for people to buy homes without a down payment.
Infrastructure
Prioritize smart, clean, and cheap mobility and connectivity of the population
Invest heavily in transportation and broadband infrastructure. This will create a strong and growing middle class.
Regulation
Roll back Deregulation of Stock Buybacks (1982 SEC Rule 10b-18)
This change allowed corporations to repurchase their own stock, artificially inflating stock prices and enriching executives who receive stock-based compensation.
Rollback Deregulation of Derivatives (1999-2000 Commodities Futures Modernization Act)
This change allowed risky financial speculation that fueled wealth accumulation at the top.
Antitrust Enforcement
Lax enforcement of monopoly regulations has allowed massive corporate consolidations, reducing competition and worker wages.
Rollback Repeal of the Glass-Steagall Act in 1999
This change allowed banks to engage in riskier investments, contributing to financial crises that disproportionately harmed lower-income groups.
Campaign Finance Reform
Undo the damage done by Citizens United which allows anyone or any corporation to spend as much money as they want to buy an election. This fundamental change brought down what gate there was left between wealth consolidation and power consolidation and is one of the main reasons our democracy is slipping away from us.
Trade
We should invest in global trade with soft-power, partnership development, robust value chains, and widely shared and integrated economic interests. This helps manage peace and prosperity for the world.