Wednesday, September 24, 2008
PROGRESSIVE ECONOMIC PRINCIPLES:
Creating a Quality EconomyBy Mark Pash, CFP
With Brad Parker
The economic philosophy of the Progressive Democratic Party is designed to advance human commerce for the betterment of all, while protecting the business environment from itself and the government. Commerce is not perfect and is vulnerable to both human nature and the major flaws of capitalism. The government has to counter the flaws of capitalism, without hindering the market place, and provide a level playing field to insure competition as it facilitates the favorable elements of growth. Economies need checks and balances for successful operations just like the government. Progressive economic principles are the best way to achieve this balance between dynamic fair markets and community interests. Progressive Economic Understanding is the pathway to future financial success for all. “We are all in this together.”
In order to better understand the potential of Progressive Economic Principles, we first need to examine the three fundamental flaws of Capitalism. They include:
• Inadequate Recirculation of Money
• Failure to Create Quality Customers
• Lack of Long-Term Planning
THE THREE FLAWS OF CAPITALISM
The First Flaw:
Inadequate Recirculation of Money
In a free enterprise environment, there is a continual, natural flow of capital to the powerful; the highly educated and already wealthy by various means, both legal and illegal or by shear luck. This natural concentration of wealth continually reduces both the number of businesses and ample individual consumers, eventually hurting commerce and society. All studies, computer models, research and statistics in the past and present validate this scenario.
Concentrated wealth, promoted by this flaw of capitalism, creates a system of, “The Rich get Richer” for both individuals and businesses. This natural bias to the already wealthy reduces competition and the number of adequate consumers. The antitrust laws were established to counter this monopolistic tendency in business enterprises. The fiscal system of taxing the rich and redistribution back to the many was created to solve this problem on an individual basis.
Adam Smith stated: “capitalists left to their own devices would rather collude than compete.” This means the natural goal of a commercial enterprise is to attain monopoly status, control or own all or most of their market. (The healthcare industry, medical insurance and pharmaceutical companies are prime modern day examples) This coincides well with the natural goals of many individuals to become as rich as possible. Both Republicans and Democrats have recognized this flaw. In 1890, the Republican Party passed the Sherman Antitrust Act, which was enforced by Republican President, Theodore “Teddy” Roosevelt. Years later, the Democratic Party started the Keynes fiscal policy of redistribution of income and wealth under Franklin Roosevelt.
This is why it is very important to have an adequate antitrust policy and enforcement. The more competition the better! Competition creates more employment, which creates more customers. It rewards efficiency, with profits and with losses, and makes it more difficult for individuals and businesses to gain monopolistic control of the marketplace. Diffusing power and distributing wealth are essential to creating a healthy business environment. If we cannot have this multi-firm free market competition, then we have to regulate the monopolies and oligopolies, including prices, to stimulate more competition.
Frankly, I think the word “redistribution” is the wrong word to describe this policy. It should be called “recirculation”. The vast majority of government spending including military is allocated domestically. It is not hoarded so that its recipients can live on its return. It is recirculated through the economy. These monies collected by taxes are spread to more individuals creating better consumers. These consumers are able to spend more in private enterprises, which create wealth for certain capitalists and to some extent for their employees. Unfortunately, this system can be thwarted to achieve the aims of the few rather than the many.
The resistance to the proven Keynesian fiscal philosophy of redistribution persists in the current conservative industrial and political leadership as they resist most types of government spending except military. By not believing in Progressive Economic Principles, they hinder the creation and improvement of effective recirculation programs. They may be politically expedient in supporting certain types of these spending programs, of which Social Security and Medicare are the largest, but by not believing in and in fact hindering effective recirculation, they put capitalistic societies in danger from economic depression-recession or outright revolution.
The Second Flaw:
Failure to Create Quality Customers
In most competitive business environments, there is a conflict between managing for a profitable business and paying adequate wages to create a quality consumer. Owners want to pay employees as low as possible to increase their profits. This results in the creation of inadequate customers. To compensate for this effect, the government’s domestic spending agenda helps under-paid workers by providing such programs as education, medical, and retirement benefits etc. that they cannot afford to purchase. Perversely, it is usually these same conservative business owners who oppose these benefits! Labor unions, labor laws, minimum wages and labor regulations offer assistance in overcoming this major problem in our world today. However, quality customers can only be created by paying wages high enough to sustain and enhance every worker’s ability to purchase quality goods and services. Therefore, we should develop standards for a quality customer minimum wage instead of the present understanding and application of just a minimum wage.
There is no such thing as a competitive labor market, not with billions of people in poverty and low cost slave labor. These people do not make good customers. This is a major global problem. The challenge is running a business - microeconomics - with a customer base drawn from a fully employed and adequately compensated work force. There should not be any significant competition within any industry based on hourly wages, for the same job within a geographical region. Competition should be based on many other business factors including labor utilization. Competition for labor, based solely on low wages, reduces the number of customers and their ability to buy more goods and services.
There is a myth that wages should be left to the free market mechanism. This natural inclination of a business owner-manager is to either minimize his labor force or pay less for labor so he can make more profit. Corporate downsizing and offshore flight to cheap labor markets provides classic examples of this decision-making. Granted, these are correct business decisions for increasing profit. But, if all businesses in the economy implemented these policies, their sales will retreat drastically because their customers would not be well paid enough to buy their goods and services. This was basically the cause of the great depression in the 1930’s and the many other severe economic conditions that preceded it.
The world’s production systems can produce enough for everyone - supply - but the demand is not there because the people do not make enough to buy it. When mass production is accompanied by mass consumption, a more evenly spread distribution of wealth occurs. Since wealth is tied to both production and consumption, the economy thrives.
Therefore, businesses should not compete based on the payroll cost of individual workers. They should compete on the many other factors of business such as, labor utilization, marketing, operational efficiencies, management, innovation and quality. Henry Ford was the first to get this right, by almost doubling the daily wages of his workers, so they could buy his Model-T. The economists and businessmen of the day thought this was going to be an economic disaster. They were obviously wrong.
The argument is that the price of goods will substantially increase if wages are raised. The labor cost component is not the only component in the pricing mechanism. A reasonable increase in wages (fringe benefits) does not increase prices at the same rate. It is usually much smaller. Also, wages are deductible so any increases are partially paid by reduced taxation. Therefore, prices can go up somewhat but customer demand goes up also, creating more employment as well as a better economic and community environment. There are rising wages in the current capitalistic system but not enough to create an adequate diverse consumer base.
What currently hides this flaw – creating the quality customer - is consumer debt - credit cards, equity lines of credit and the necessity for working spouses. The government has helped to abate this problem with substantial government employment. The great depression was caused when the public had no access to credit when the Fed tightened monetary policy because their wages could not sustain the economy.
As capitalism gets more efficient it generally requires less labor to produce all the needed goods and services. Of course, this means less customer purchasing power - demand. Thus far, capitalism in the United States has solved some of this problem through innovation and the creation of new goods and services, some of which did not exist a few years ago. But, successful capitalism still might mean a larger government involvement both on a fiscal and monetary basis. In the end, creating quality customers through higher wages is paramount to keeping up demand for goods and services and completes the recirculation cycle.
The Third Flaw:
Lack of Long-Term Planning
There is the obsession with immediate - short-term - maximization of profits - “The Quick Buck.” Private capital and management are constantly expecting relatively quick and high rates of return. Government capital is more long-term and not profit oriented, so it works more for the benefit of society, including business. We see this clearly in the investments in infrastructure, education, research and other necessary projects. Government regulations and tax policies should always encourage more long range planning in the private sector.
An excellent example of encouraging long-term planning in the private sector is tax policy on dividends. They should be taxed at the same rate to individuals as wages are, with a small exclusion for lower income earners. However, they should be deductible to the corporations, the same as interest on their debt. This would encourage more equity capital and dividend payouts instead of accumulation. Thus, having the tremendous effect of trying to maintain the dividend resulting in better long-range policies than short-term profits for current stock trading. Generally a business will make substantially more money over time because it survives longer with appropriate long rage plans and operations.
Pollution is another notable example. Does it pay to maximize short-term profits by disregarding appropriate pollution controls resulting in costly clean ups, fines and possible extinction, not to mention killing your customers or making them sick so they have to spend more on healthcare instead of your companies goods and services? No, it does not. Pollution controls greatly enhance the long-term benefits not only to humans but also to all businesses - especially the sectors they regulate.
Remember - the total of long-term profits will always be greater than the sum of all short-term profits added together! Long-term planning yielding long-term profits for both business and the community are the most sustainable economic model over time.
Summary of the Three Flaws of Capitalism
Government funded programs, such as education, unemployment compensation, wage-protecting tariffs and laws, and minimum wages are a necessity. In the general global economic debates, especially after the fall of communism and the unsuccessful socialistic efforts, we hear very little of the flaws of capitalism - free market systems. But, like all human endeavors, these flaws definitely exist and it is important for public and private institutions alike to help overcome them if we want to expand our economic future on this planet.
Capitalism does significantly raise the standard of living but not for all and not enough for many. Therefore, it is up to government to take a more active role in the economy in order to overcome these flaws with as little hindrance as possible. In other words, one of the major missions of a federal government has to be macroeconomic well being. But, the vigorous policies of government can also promote private solutions to these flaws. Private philanthropic and labor union measures can be encouraged, as can pension programs, profit sharing and equity sharing plans, job training, child care and medical insurance.
For some reason, many do not believe that these flaws exist. All they have to do is look at the economic record prior to the extensive gov’t involvement starting in the mid 1930s: the panics of 1837, 1857, 1873, 1893 and 1907; the Banking Crisis of 1884; the recessions of 1892-6 and 1921; the severe depression from 1873 to 1879 and the Great Depression of the 1930s. The record after this period of the modern industrial age is much less volatile with the average population living substantially better lives because steps were taken by the government to correct the flaws of capitalism.
Although we will be discussing these flaws, and other areas of how to improve our capitalistic system, it might seem to be an overly negative analysis of capitalism. Therefore, I want to impress on you the enormous success of our system, which provides the tax dollars and wealth to fund our government. There is a necessity not to hinder capitalism but to enhance it thru effective government policies.
ENHANCING FREE MARKETS - CAPITALISM
Enhancing the system of capitalism increases the total tax revenue, which helps the government provide the services that are needed. The government should pursue policies that encourage and facilitate business formations, operations and competition. Local and National governments need to reduce or maintain low the barriers to the formation of new businesses - entrepreneurship. The government can also play a key role in entrepreneurship by improving the environment for entry and operations. All government fiscal policies need to encourage and not hinder incentives, initiative, innovation, productivity, investment, research and development. The government always needs to continually simplify tax laws and regulations - red tape to facilitate business growth. It needs to not over-regulate the good but look more for the bad and increase their punishments. Government needs to insure a level playing field in the business environment to insure fair competition.
The government must discourage competition within an industry and geographical area based on the cost of an individual’s labor, as that reduces the quality of customers. It needs to insure labor utilization and flexibility of hiring and firing while protecting employee rights and unemployment benefits. It needs to create portability of benefits, income tax averaging and other features for today’s more mobile labor force. Government fiscal policy can boost productivity by creating more accessible and affordable quality education for all thus creating a more capable labor force.
GLOBALIZATION & TRADE
Globalization is the continual increase and expansion of commerce by individual firms worldwide. As a consequence, this is producing the gradual elimination of national boundaries, where commerce is concerned. However, these firms are basically in competition with each other not with individual countries. Eliminating boundaries has generated both positive and negative effects. The three flaws of capitalism have followed globalization and must be dealt with on an international level.
There are limited international regulatory bodies to oversee these firms except the World Trade Organization, which does not have much power. Obviously, we will need to develop more institutions for this purpose. It will be a major task for future administrations to comprehensively address these issues. So, how can we compete as a nation when our firms and other country’s firms buy, sell and produce all over the world to take advantage of these flaws of capitalism? We cannot! Therefore, the major area of concern for our government is and should be the economic well-being of our people, our customers. The concept of a well-compensated work force, thus creating quality customers, is the major objective of every nation. In order to rebalance global trade and wages, we must have the wages of the international work force progress towards us and not ours being lowered to theirs.
Countries like China are attempting to compete as a country not as independent businesses. The government owns many, if not all of their companies. This is a socialist scheme not capitalism. They compete by making use of flaw number two, outlined above. They are taking advantage of the huge consumer base (middle class) in the United States. The major long run problem with this strategy is that it is not building a large enough adequate consumer base in China. If the U.S. consumers slightly lower their consumption because of lower wages, less credit card and home equity-line debt or a basic recession, China could see a significant recession/depression.
Since the U.S. is still the primary customer, it has the power to use tariff changes, not to protect industries but to protect the middle class purchasing power and more importantly - to force low wage countries to pay an adequate wage so they can become adequate consumers. We do not have to insist on equal wages but reasonable non-slave labor wages that are rising to continue to allow access into our markets. Yes, Labor Unions are an additional method to help accomplish an adequate consumer base goal but tariff changes are needed as well. The concept of Americans having super cheap goods and services, which offsets our wage declines, is absurd. This differential, so we can buy 10 shirts instead of 9, is not economically justified when those workers, who make the shirts, can’t buy any of our production of goods and services. Furthermore, the increase in the labor component of manufacturing in other countries will not significantly raise prices to alter our consumer habits. We should eliminate or reduce all tariffs on countries with adequate wages and environmental practices. We should raise tariffs on all those who do not. Also, we should probably continue with a small general tariff on all goods as a revenue raising structure in addition to taxes.
The excessive trade deficit is deceiving to some degree as well. It does not include monies coming into the United States in terms of education of foreign students, investments in stocks, real estate and government bonds. They receive our paper and we receive their goods and services. What it does mean is that foreign individuals, enterprises and countries will own our assets as we will own theirs. This is true globalization! How do we compete in this environment? The solution is to reduce our dependence on foreign oil and create an increase in the wages of other countries, through tariff increases, so their workers can afford to buy our goods and services.
The “Fair Trade vs. Free Trade” argument is somewhat bogus as almost all industrialized countries have some sort of tariffs. I am for total free trade with the proper tariffs to protect the consumer base-wage differentials, ecological differences and anticompetitive practices (dumping & subsidies) by governments with large pocket books. Our firms can compete with any firm globally - they only need a relatively level playing field.
There are many websites, newsletters, books, etc. on tax policy. Following are only the general important concepts and the defense of Progressive tax policy.
The Progressive Income Tax is one of the fairest taxes as it is based solely on the ability to pay. What is important is not how much any individual earns but how much is left over to be an adequate consumer and saver for retirement. This bears repeating: It is not important how much one pays in taxes but how much money is left after paying taxes! Creating quality consumers is essential to tax policy and therefore the Progressive Income Tax is the key to sound government fiscal policy in offsetting flaw number one.
The estate tax is also a very fair tax because the taxpayer is dead and no longer in need of their money. It is levied only on the very, very rich. It is the best tax to offset the first flaw above - the rich getting richer - which reduces the number of consumers and the ability to build wealth. Importantly, there are provisions to help family farms and businesses. And, contrary to some opinions, many of these assets have never been taxed!
Collectibility in tax legislation always has to be considered in specific tax regulations and laws. The capital gains rate at 15% is substantially below the maximum wage rate at 35%. But, the lower the capital gains rate, usually, the more transactions resulting in more total tax revenues. Ease of tax avoidance and evasion is also a consideration.
Tax Deductions and Credits can also be used to offset business risk and encourage social behavior.
Payroll-FICA-Social Security Tax is an income tax. It needs to be included in any income tax debate as more workers pay a higher payroll tax than income tax. It is not as progressive as the income tax because it is a flat tax with a ceiling. A great tax cut for 99% of the workers and many small businesses in the country would be a reduction in the employee based tax rate and elimination of the ceiling. This could be structured to be revenue neutral or a revenue increase to actuarially extend social security.
Lowering or raising income taxes does not necessarily create a boom or bust. There are many other factors involved. Most of these taxes are usually spent, as the government is the customer - offsetting flaw number two. The Clinton Administration raised taxes in the early 1990s and we had the biggest boom in the history of mankind. The income tax rate in the early 1930s, during the Hoover Administration, was 24% on only the wealthy and we had the worst depression in modern industrial history. Of course, no government taxing system can be too confiscatory resulting in overly restricting and reducing the incentives of the free enterprise system.
In other words, a tax rate of 99% is too high and 1% is far too low to overcome the flaws of capitalism. The Clinton years seems to depict an appropriate level of taxation. Personal and corporate tax rules, regulations and preparation should be kept as simple as possible. This does not mean reducing the number of brackets or itemized deductions but mostly the above the line regulations.
Corporate tax rates should be more progressive as they have more of the ability to pay as it is based on profits after salaries and expenses. It should be lowered for smaller and less profitable businesses and increased on more profitable corporations. Of course, the very significant corporate loophole system and offshore havens always needs to be reviewed and corrected, which will allow actual rates to be lower without losing revenue.
One has to be careful with taxes based on sales not profits; sales taxes, consumption taxes, the VAT tax and property taxes. They can over-interfere with commerce and are usually over burdensome for lower income families and businesses.
Should the tax on dividends be so substantially below the taxes on interest and wages? The answer is - no. Dividends should be taxed at the same rate as everything else with exclusion for a small amount of dividends and interest so it will stimulate and help the lower income families save for retirement. In fact, the dividends paid out by corporations should be tax deductible with offsetting increases in taxes to make it revenue neutral. This will encourage corporations to plan more for the long term, which addresses flaw number three. These increased dividend payments will help the Baby Boomer Bubble through retirement without any requirement to sell securities.
There is an argument that individuals end up paying all taxes either directly or through high prices. This is not a completely accurate statement. Although, this is somewhat true because we are all in the system, it is an unrelated argument because what counts is how much a business or individual has left over after taxes. Also, pricing mechanisms include many costs and other factors of which taxes is only one of them. Taxation comes out at various points of the production-sales-profit cycle. The question is at what point does it come out?
Monetary Policy (the creation of new money) is as economically important as fiscal policy (how much the government taxes and spends). Currently, the monopoly of creating and distributing new money is accomplished by the commercial banking system - i.e. Bank of America, Wells Fargo etc. - by the creation of debt. We thought it was well controlled and regulated by the Federal Reserve – central bank, until the recent sub-prime fueled financial crisis. We have learned that no matter how much regulation there will always be errors in a human system.
Over the last two hundred years, we have seen many monetary crises in every country on the globe. There are many reasons for these failures, such as over-corrections, mismanagement, cronyism, familism, corruption, and political interference. Since human behavior is not perfect, when this single system over lends, usually in the booming sectors, it has substantial problems when those sectors start their decline. Also, having one system with its strict guidelines reduces competition and diversity. “You can only borrow if you already have money – collateral!” This means the single banking system for the distribution of new money is too limited and too under-diversified in its infusion of new money. This stifles growth, competition, the recirculation of money and employment.
These failures can be drastically reduced in two major ways: (1) by having many systems deliver new money reducing the ravages of human error; (2) and by educating the public with full disclosure and transparency regarding monetary and financial functions and products.
The banking system will remain the major source for the monetary system for some time. I am recommending that the Federal Reserve increase the commercial banking system’s reserve requirement by a small percentage. This allows them to distribute some new money through many other new distribution institutions under their control. Some of these new monetary delivery systems should have an equity return not just an interest rate charge - or combination thereof. This reduces the extreme negative effects of high interest rates causing failures - defaults - and the reluctance of private enterprise to invest.
The evolution of our monetary system, which is based on an archaic banking structure, developed several centuries ago, needs modernization. The future evolution of our monetary system is of vital importance. It can fund appropriate programs that have a return relieving the burden on the fiscal side of government.
Education is very, very important to individuals in a capitalistic system - especially math and science education in our high tech world. It is also very important to a democratic society in general. But, it is only one of the important components for a successful economy. Brazil, Russia and India - before recent economic booms - had well-educated populations with nominal success economically.
What is important in the United States is that we must begin to educate the general population in matters of personal finance and capitalism. We live in capitalistic society and world. The more educated the public is - the less reliant they will be on government-fiscal programs. Every high school student should be required to take a course in personal financial planning in order to graduate.
Since money can be created at no cost by the government, except for excess inflation, and education is a primary social policy, the government can make long-term college loans - 20 to 30 years - at a cost of about 3%, with repayment starting after graduation. The interest charge just covers administration costs and defaults. The government does not have to make a profit and it does not matter how long it takes to be repaid, as long as it is repaid. This allows almost everyone to afford a student loan and relieves the burden on the fiscal side of government.
STATISTICS AND FORMULAS
Beware of economic Statistics and Formulas. They reduce the human economic conditions to numbers and we over rely on them. They can be unreliable from errors in collection and they can be interpreted in many different ways. Most of the economists do not agree on their own definitions like growth and productivity. The savings statistics are also very misleading. They do not include pension contributions and subtract them when they are paid out. They also do not include investments. The highest savings rate in the world is in Japan, which has been in a deep recession for 15 years.
Ownership should be encouraged for everyone in a capitalistic system. It is very difficult to continue to raise wages so that workers can save and build wealth. Therefore, the government, to promote ownership by every citizen, should implement laws and regulations that enhance that outcome. Not necessarily direct ownership in business and real estate but in stock markets and other equity avenues. We should continue to encourage all pension, profit sharing, ESOP, 401k, and IRA plans. In the long run, it will mean less reliance on government fiscal services.
Moderate inflation is good and excess Inflation is bad. Growth and wage increases do not cause inflation in the overall economy. The economic boom in the 1990s proved this. The only thing that creates excess inflation is too much money issued by the banking system and Federal Reserve chasing an inadequate supply of goods, services and assets.
BALANCED ANNUAL FEDERAL BUDGET
A balanced annual budget has a positive compounding effect. It generally lowers interest rates. This means the interest charges on the total national debt declines. This makes it easier to balance the budget and/or increase fiscal spending. Since there is no new debt added, the national total debt can be retired by the gradual monetarization of the debt by the Federal Reserve without excess inflation. This again makes it easier to balance the budget. So, the comments we often hear, that building debt that our children and grandchildren have to pay off, is not completely true.
Of course, in an extreme recession or war a budget deficit might be warranted. I foresee a possible deficit used for Medicare to get the baby boomer generation through retirement. Therefore, it is important to balance the annual budget as soon as possible.
In the not too distant past, certain principles of money were not subject to alteration by society’s money managers. They might be ignored or forgotten for a time but they could not be repealed. One of these principles was the ancient biblical injunction against usury. The definition of usury may have vacillated over the centuries but the moral meaning was the same. When lenders insisted on terms that were sure to ruin the borrowers, this was wrong. This was usury.
There were practical, as well as moral reasons, why usury was considered a sin. It was more than a social plea for fairness and generosity from the wealthy. No social system could tolerate usury, not as a permanent condition, because it led to an economic life that was self-devouring. The money monger collected his due until he owned all the property and the peasants had nothing. No one could really survive. Who would buy from the money monger if he had all the money? And what kind of life would the peasants have?
We have had usury laws in our country. Currently there are none.
Consequently, moneylenders can charge as high a rate of interest as they want - 20%, 30% or more. Usury laws pegging the highest rate that can be charged to the Federal Reserve Funds rate must be enacted to preserve the buying power of the quality customer and reduce bankruptcies. Those rates must be reasonable for both the lender and the borrower.
PROGRESSIVE ECONOMIC PRINCIPLES
• Capitalism is a wonderful freedom-oriented and wealth-building system. It is the best economic system on earth but it is NOT PERFECT.
• Economies need checks and balances for successful operations just like the government.
• Reduce competition based on minimizing wages as it reduces the number of quality customers.
• Insure more long-range planning by business and government - i.e. infrastructure, education, and environment - long-term versus short-term profits.
• Promote competition by limiting and/or regulating monopolies and oligopolies.
• Balance the fiscal budget except for severe recessions and/or war.
• Government spending is not anti-growth it is a recirculation (redistribution) program that aids the economy. It provides for an ample supple of quality customers.
• Government policies need to encourage and not hinder business formations, operations, incentives, initiative, innovation, productivity, investment, competition, research and development.
• Government needs to insure a level playing field in the business environment to insure competition.
• Governments need to insure Property Rights are always protected while also protecting human rights and community interests (i.e. the rule of law).
• Governments should not over regulate the good but look more for the bad and increase their penalties.
• Taxation should not be based on how much one pays but how much one has left over to raise a family - be a quality customer - and save for retirement. Progressive Income and Estate taxation are the fairest taxes as they are based more on the ability to pay.
• We need to compete on a global basis by protecting the wages of our customers and encouraging other countries to do the same. This is accomplished by a change in our current tariff charges and by encouraging the formation of labor unions.
• Insure there is an ample supply and diversity of access to capital from our monetary system with interest and equity return.
• Moderate Inflation is good. Excess Inflation is bad.
• Beware of economic statistics and formulas.
• Encourage ownership and financial education by all.
• The government can fund it but it does not have to run it. Governments can fund, regulate and operate certain functions if they do not lend themselves to market competition.
• The question is not more or less government involvement in the economy but the right government involvement in the economy.
• Implement a variable maximum percentage interest that can be charged on loans, so that we can avoid usury in our credit system.
VISION FOR A PROGRESSIVE ECONOMIC FUTURE
The conflict between business and social interests does not arise from the entire capitalistic system itself but from it’s three major flaws:
• Inadequate Recirculation of Money
• Failure to Create Quality Customers
• Lack of Long-Term Planning
In order to create a quality economy we must commit ourselves to overcoming the flaws of capitalism, while steadfastly following the essential Progressive Economic Principles. Conservative Economic Policy has run into a dead end. Progressive Economic Principles can rescue America and the world from this calamity and lead us into a future where wealth is created and enjoyed by every citizen in a quality economy by creating a new framework of economic decision-making.
Capitalism and social well being are not antithetical but are both enhanced when the government is run with sound progressive economic policies.
A properly empowered government with an intelligent mandate, both monetary and fiscal, can accomplish these objectives for the 21st century. However, the current structure of a significantly unbalanced budget and an expansive single monetary distribution channel - banking - does not completely meet the needs of the economy and usually causes excess or hyperinflation. Any government policy that combines the opposite, both a constrictive fiscal and monetary policy, can only lead to a disastrous recession or depression.
The current structure does not make common sense for long-term growth. Keep in mind though, that changing a major structure and operational system is very difficult to accomplish, especially in good times let alone bad. Change has to be slow and gradual to reduce economic turbulence.
One of the major structural changes should be to continually increase investment by diversifying the monetary delivery systems. The major problem with capitalism is that governments do not increase the monetary supply in an efficient manner. The best doctrine is an expansive fiscal policy with no deficits and an expansive monetary policy with multiple delivery channels under the central bank - Federal Reserve.
In an economy guided by Progressive economic principles the legislatures will continue to fight over how much to tax, regulate and where to spend. What is eliminated is the economic philosophical debate that the government should not be involved in the economy and the death of laissez-faire-libertarian economics, forever. The legislatures should also debate over the best policies to increase competition and promote growth in our economic environment.
Another major challenge for future governments is; how do we combat the flaws of capitalism in a globalized economy, where enterprises move from country to country to avoid regulation and the flaws? Eventually, in a Century or so, they are going to run out of countries! It is also very important in the debate on reducing the negative effects of globalization to include suggestions on creating a global level playing field and promoting growth in the entire global economy. Remember that increased growth brings in more tax revenues, without increasing rates, for our favored fiscal long-range programs, which advance the human condition. Economic logic is circular. It is not linear. Everything affects everything else.
With this economic blueprint I have endeavored to provide the Democratic Party with an outline that charts a path to the future. My hope is that Democratic and Republican elected officials as well as candidates and economists will study these concepts and implement them at every level of our government.
We can expand the economy by reducing the flaws of capitalism and encouraging the favorable factors of commerce. This increases the standard of living for all, while eliminating poverty. Thus, capitalism becomes a system that provides for all even though many have more. Diversity of ownership further enhances this growing sustainable economic possibility for the entire globe.
Creating long-term wealth for the maximum number of quality consumers is the direct product of creating a quality economy. Creating a quality economy requires a more reasoned knowledge of and application of Progressive Economic Principles, which create the quality customer and entrepreneurial opportunity for the greatest number of citizens. Economic well being for all requires a balance between business and community needs that work together in everyone’s best interests.
We need to explore the solar system, the seas, cure diseases, stop poverty and urban blight, and promote democracy and capitalism in the old Soviet bloc and Third World nations. We are capable of accomplishing most of these tasks. The only thing stopping us is macroeconomics.
Macroeconomic policy based on Progressive Economic principles will offset the flaws of capitalism creating an adequate standard of living and community for all. By raising overall business growth through competition and diversity we will foster local, sustainable, renewable and humane communities living in a quality economy.