Wealth and Want
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Campaign Finance Reform

Think how different our economy would be were we to be collecting from the owners of radio and television spectrum the annual rental value of the bits of spectrum they occupy.  Remember the saying that the airwaves belong to the American people?  Here's how that would be implemented.

Were we to collect rent on broadcast spectrum, every campaign ad would be a contribution to the commons, instead of lining the pockets of the individual and corporate owners of the spectrum.

David Cay Johnston, in an interview with the Rochester City News a few months after the publication of his important book, Perfectly Legal: The Covert Campaign To Rig Our Tax System To Benefit the Super Rich — And Cheat Everybody Else which, among other things, speaks to the extent to which our elected representatives are focused on those who supply the funds they will need for their next election campaign, was discussing the estate tax when he said,

After finishing the book, I got off a plane and shared a taxi with a former state senator who is personally very comfortable. He told me that I was being overly kind to politicians in my analysis. He said, "Every year that I was in office I knew who my 10 biggest donors were. I knew that I had to show them that I was working for what they wanted or they would just take their money and go to the other guy. And, you know, I don't think I ever once looked in the mirror and said, 'What am I doing for the average person in my district?'"

My best example of the political donor class is: Two days after 9/11 Congress came back into session. The Republican leadership had 10 bills they introduced to deal with the attack on 9/11. One of them was a tax bill. So what did it do for the firefighters, the police officers, the volunteers, the secretaries, the military officers sitting at their desks at the Pentagon and the flight attendants [who were killed]? It gave them estate tax relief. Not income tax relief, not a guaranteed college education for their kids --- estate tax relief. That's what Congress thought they needed. It was like a Rorschach test, and what did we find out? Congress was thinking about the super rich. Classic economic theory says that's what Congress should do under our campaign system, because those are their real patrons. ["Tax watchdog: David Cay Johnston on your tax dollars at work… for the super rich," by Ron Netsky, March 24, 2004, http://www.rochester-citynews.com/gbase/Gyrosite/Content?oid=oid%3A2473]

How different would America look if we took back the influence over our elected representatives? How different would America look if, for every dollar of pork spending, America collected back the increase in the economic value of land it created? How different would America look if, instead of the corporations who own our broadcast media being enriched by our political campaigns, the public till was the beneficiary? How different might journalism be?

Nic Tideman: Comments on the NTIA's Comprehensive Policy Review of Use and Management of the Radio Frequency Spectrum

Both on grounds of justice and on grounds of efficiency, a market-based system of allocating rights to use the radio frequency spectrum, with public collection of the value of rights granted, is best. The right to use the frequency spectrum is a scarce resource, whose value is derived primarily from the mere existence of the spectrum and not from the efforts of those who might be granted use. Thus the whole population has equal respectable claims to use. But efficient use of the resource requires exclusive assignment of frequencies within particular geographical areas. Therefore justice is served by requiring those who receive the privilege of use to compensate the rest of the population for that privilege. Read the whole article

Jeff Smith and Kris Nelson: Giving Life to the Property Tax Shift (PTS)
John Muir is right. "Tug on any one thing and find it connected to everything else in the universe." Tug on the property tax and find it connected to urban slums, farmland loss, political favoritism, and unearned equity with disrupted neighborhood tenure. Echoing Thoreau, the more familiar reforms have failed to address this many-headed hydra at its root. To think that the root could be chopped by a mere shift in the property tax base -- from buildings to land -- must seem like the epitome of unfounded faith. Yet the evidence shows that state and local tax activists do have a powerful, if subtle, tool at their disposal. The "stick" spurring efficient use of land is a higher tax rate upon land, up to even the site's full annual value. The "carrot" rewarding efficient use of land is a lower or zero tax rate upon improvements. ...
And by taxing land, society impels owners who had been speculatively withholding or underutilizing theirs to develop or offer their parcels for development. Hence the newly-available land comes from recycled sites, not from open space.

The PTS not only lowers the price of land, it also lowers the cost of buildings. Untaxing structures, besides reducing their cost, also augments their supply. More buildings means lower prices and rents. As the prices of both buildings and land drop, more people are able to purchase a home, apartment, or condominium.

Ethically, the PTS simplifies the revenue system, leaving fewer decisions to be made by politicians in favor of their backers. All the essential facts are open to public scrutiny: the land's owner, value, use, and levy. And since mere speculation would no longer be profitable, owners would have less monetary motive to try to unduly influence the political process.

A big problem needs a big solution which in turn needs a matching shift of our prevailing paradigm. Geonomics -- advocating that we share the social value of sites and natural resources and untax earnings -- does just that.
Read the whole article

Jeff Smith: What the Left Must Do: Share the Surplus
What would you do if you could work two days and take five off? Write? Play soccer? Tend to the community garden? Time off is an option made increasingly viable by our relentlessly rising rate of productivity. French Marxist and media critic Jean Baudrillard, while still advancing the interests of labor, implores the Left to move on from seeing humans as workers to seeing workers as human beings, with more needs than merely the material. Enabling people to live their lives more fully is an issue made to order for rescuing the Left from the doldrums that descended when “history ended”.

What would single mothers do with enough income to stay home? What would minorities do with the wherewithal to begin their own businesses? What would communities do if they did not leak resources up to an upper class and out to a distant lender or tax collector? What would the elite do without our commonwealth? The means to these ends is an extra income apart from labor or capital (savings), that is, a “social salary” from society’s surplus, a “Citizens Dividend” from all the rents, natural and governmental, that people pay for land and to the privileged, redirected to everyone equally.  Merely demanding a fair sharing of the bounty from nature and modern society would raise people’s self-esteem, a key component for political involvement. Actually receiving an income supplement would transform our lives and restructure society.

Unless humanity needs militarism, corporate welfare, and debt service, it’s fair to say most public revenue gets wasted. Demanding a dividend – similar to Alaska paying residents a share from oil royalties – forces a new dialog on spending priorities. Beyond arguing “bread not bombs,” a dividend replaces expenditures by politicians (necessarily influenced by donors) with spending by citizens, the people who generate the surplus in the first place. With a dividend, citizens get to see themselves as direct beneficiaries from reigning in the wild spending spree on imperial aggression, disloyal multinationals, and on “borrowing” money that never existed until “lent” by the Federal Reserve. ...

The much and justifiably criticized corporation is in essence its corporate charter, given value by limiting the liability of managers, directors, and investors. It’s worth at least the cost of the insurance payments not made by the corporation, which would equal the costs imposed upon worker, customer, and nature. As the “need” arises, legislatures extend limited liability even further: Congress legally lowered the greater risk of nuclear power to benefit Westinghouse, of the Valdez oil transport spill for Exxon, and the Y2K software design bug for Microsoft. Politicians define legally “safe” amounts of polluted air and water for GM and Monsanto, keeping safe the wealth of those responsible.

Not to be outdone by any legislature, the Supreme Court has ruled in favour of compensating landowners for environmental “takings”, but has remained silent about landowners compensating the public for any “givings”, as when site values skyrocket near a new light rail stop. Molly Ivins wrote,
"Henry George must be in his grave spinning' like a cyclotron. We, the people at large, make the land more desirable; and then the landowners want us to pay them because we won't allow them to poison the air or to pollute the rivers." (1995 March)
That’s how great fortunes are made: by sloughing off private costs (which become “negative externalities”) while soaking up public benefits (some “positive externalities”). Land titles, corporate charters, and other privileges – mere pieces of paper – are worth trillions each year. The corporations – from the Federal Reserve to Exxon (both founded by the “oiligarchy”) – that receive these privileges make their owners rich or richer. Their wealth is not compensation for the exertions of either labor or capital, not profit in the market from output, but rent from present lobbying of legislatures or past conquest of others’ lands. Thus laws (“privilege” means “private law”) funnel multi-trillions of dollars each year from the many to the few.  ...

Trillions are enough money that the present beneficiaries spend fortunes on electing their water boys to Congress and state legislatures. Why do public servants agree to let public assets go for peanuts? Partly out of habit, partly because the recipients contribute mightily to their political campaigns, but also.  ...

As taxing land spurs employment, taxing labor and capital does just the opposite. Taxing salaries makes it more expensive to hire people. Taxing earned profits makes it more expensive to invest in firms that hire people. If you want jobs, don’t tax them. Demanding jobs while taxing wages is irrational. When we tax (or in other ways reduce) one’s efforts, most people naturally produce less.  Less output not only shrinks private assets but also the formation of public assets downstream.

Unlike taxing earned incomes, which shrinks the pie, collecting rent grows the pie. While taxes on effort lessen the motivation to produce, charging people rent for what’s already been provided, by definition, does not diminish the motive to produce. Instead, recovering rent removes the private profit from speculating in land and resources. And once we redirect revenue from sweetheart deals (e.g., Pentagon contracts), tax breaks (e.g., depletion allowances), and subsidies (e.g., agri-business support) into a general dividend, then why bother currying favours from the state? Finding rent-seeking from both nature and the legislature less profitable, investors would turn to improving production: new technology and worker re-training, providing society more from less.  ...

Given the collateral damage by most taxes, the Left must make clear that the extra income is to come not from taxes upon people’s legitimate earnings but from rent, making it a social salary from society’s surplus. While opponents will cry “redistribution”, the Left can point out that sharing the commonwealth is actually “predistribution.” Acting like a REIT (Real Estate Investment Trust) for the public, government would merely recover and disburse rents before the elite or their friendly politicians have a chance to misspend society’s surplus. Read the whole article

Peter Barnes: Capitalism 3.0 — Chapter 3: The Limits of Government (pages 33-48)

Numbers can be put on this sort of thing, and Kevin Phillips, a former Republican strategist, has done so. “The timber industry spent $8 million in campaign contributions to preserve a logging road subsidy worth $458 million — the return on their investment was 5,725 percent. Glaxo Wellcome invested $1.2 million in campaign contributions to get a 19-month patent extension on Zantac worth $1 billion — their net return: 83,333 percent. The tobacco industry spent $30 million for a tax break worth $50 billion — the return on their investment: 167,000 percent. For a paltry $5 million in campaign contributions, the broadcasting industry was able to secure free digital TV licenses, a giveaway of public property worth $70 billion — that’s an incredible 1,400,000 percent return on their investment.” ...

Three points are worth making here.

  • First, ownership isn’t the same thing as trusteeship. Owners of property — even government owners — have wide latitude to do whatever they want with it; a trustee does not. Trustees are bound by the terms of their trust and by centuries-old principles of trusteeship, foremost among which is “undivided loyalty” to beneficiaries.
  • Second, in a capitalist democracy, the state is a dispenser of many valuable prizes. Whoever amasses the most political power wins the most valuable prizes. The rewards include property rights, friendly regulators, subsidies, tax breaks, and free or cheap use of the commons. The notion that the state promotes “the common good” is sadly naive.
  • Third, while free marketers are fond of saying that capitalism is a precondition for democracy, what they neglect to add is that capitalism also distorts democracy. Like gravity, its tug is constant. The bigger the concentrations of capital, the stronger the tug.

We face a disheartening quandary here. Profit-maximizing corporations dominate our economy. Their programming makes them enclose and diminish common wealth. The only obvious counterweight is government, yet government is dominated by these same corporations.

One possible way out of this dilemma is to reprogram corporations — that is, to make them driven by something other than profit. This, however, is like asking elephants to dance — they’re just not built to do it. Corporations are built to make money, and the truth is, as a society we want them to make money. We’ll look at this further in the next chapter.

Another possible way out is to liberate government from corporations, not just momentarily, but long-lastingly. This is easier said than done. Corporations have decimated their old adversary, organized labor, and turned the media into their mouthpiece. Occasionally a breakthrough is made in campaign financing — for example, corporations are now barred from giving so-called soft money to political parties — but corporate money soon finds other channels to flow through. The return on such investments is simply too high to stop them.

Does this mean there’s no hope? I don’t think so. The window of opportunity is small, but not nonexistent. Throughout American history, anticorporate forces have come to power once or twice per century. In the nineteenth century, we had the eras of Jackson and Lincoln; in the twentieth century, those of Theodore and Franklin Roosevelt. Twenty-first century equivalents will, I’m sure, arise. It may take a calamity of some sort — another war, a depression, or an ecological disaster — to trigger the next anticorporate ascendancy, but sooner or later it will come. Our job is to be ready when it comes. ... read the whole chapter

Peter Barnes: Capitalism 3.0 — Chapter 9: Building the Commons Sector (pages 135-154)

A spectrum or airwaves trust would have a distinct mission: to reduce the influence of corporations on our democracy. Its economic and ecological impacts could be significant (reducing corporate political influence will improve many policies), but they’re secondary to the political objective.

According to a study by the New America Foundation, the market value of the airwave licenses we’ve given free to corporate broadcasters is roughly $500 billion. It’s possible this value will decline as unlicensed wi-fi spreads, but meanwhile broadcasters sell our airwaves to advertisers and reap billions that belong, at least in part, to all of us.

Part of that money comes from political candidates who must purchase TV and radio ads to get elected. The problem isn’t so much the unearned windfall broadcasters collect; rather, it’s the fact that candidates are compelled to pay it to them. That makes politicians kowtow to corporate donors in order to pay broadcasters. Other democracies give free airtime to political candidates, but we protect the broadcasters’ lock on our airwaves. By privatizing our airwaves, in other words, we’ve effectively privatized our democracy. The job of a spectrum trust would be to take back our democracy by taking back our airwaves.

This could be done in a couple of ways. One wouldn’t require an actual trust: Congress could simply say that, in exchange for free spectrum licenses, broadcasters must give a certain amount of free airtime to political candidates. Alternatively, broadcasters could pay for their licenses, with revenue going to a nonpartisan trust. That trust would allocate funds to candidates for the purchase of TV and radio ads; the allocation formula would take account of cost differences between media markets and other relevant variables. Neither of these approaches would prevent corporations from lobbying or contributing to candidates’ other expenses, but they would level the political playing field by greatly reducing the sums candidates have to raise to get elected. ... read the whole chapter




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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper