Social Security 2100 - The Fierce Urgency of Now

WM, Social Security, The Fierce Urgency of Now – Social Security 2100: A Sacred Trust, December 7, 2021 

Social Security 2100 is the perfect “school solution''.” I hope that it clears the other body, preferably on a bipartisan basis. However as I mentioned in my 2019 comments, we can not stop because we have made the numbers work.

Too many of the retired and disabled find it hard to make ends meet. The savaging of pension rights has made a decent retirement a rarity, as it is impossible for workers to both save and feed their families. With the pandemic, we find it hard to feed ourselves as prices continue to rise. 

As usual, recently announced Medicare premium increases are cutting into a much needed COLA. As I wrote in my testimony to the Appropriations Labor, Health and Human Services and Education Subcommittee, we needed a COLA last summer. From my testimony:

Even before the pandemic, my SSDI was inadequate for food, medicine, clothing and cable. If I owned a vehicle, there is no way I could maintain it or even buy gas. I have an above average benefit, high enough to be ineligible for SNAP or Medicaid. Many are not so lucky, even on a good day. 

In the last few months, days have not been so good. Were it not for stimulus payments, I would be running out of food as I write this and would not have just bought new clothes, from socks and underwear to a jacket I can wear when the Committee finally asks me to testify in person. As it is, I will need to use the last $600 from my December payment (which should have come through Social Security) to attend my upcoming high school reunion. While I (do) have wifi, I cannot afford cable and a car is still out of reach.

Let me underline a point. In most months, new underwear is not an option, I rely on free bus rides due to the pandemic and subsidies from Ride On and there is never enough money in that last week before the check comes. When it does arrive, the cupboard is bare.

Double underline: food prices are skyrocketing. Part of the problem may be too much money chasing too few goods, but retirees and the disabled find (our)selves between a rock and a hard place. We need a COLA and we need it now. Most of us cannot even afford cola. Because this is a short term emergency due to the Pandemic, it should be funded out of the general fund until the normal process kicks in for next year.

The theory behind social insurance has two pillars. One: accidents of birth and family size must be evened out so that unearned gains and unreasonable burdens are not a feature of retirement, as they once were. 

The second is that, because a main feature of capitalism is the transfer of ownership of the products of labor, with a full return for that labor, social insurance returns what was surrendered during working years. 

This is especially the case for lower wage workers that make it possible for higher wage workers to avoid less profitable activities - like cleaning their own offices or serving business lunches. Social insurance restores what society took from them without just recompense. The value of every minute of their lives, on a personal basis, is equal to the value of those who are “more productive.”

More is needed than simply reinforcing the status quo. Work must pay well so that workers can afford to put money away, as the three-tooled retirement model requires. Note that an employee-ownership model would restore pensions and end the need for such furniture.

Build Back Better’s inclusion of the American Recovery Act’s Child Tax Credit provisions is a major step in that direction. It is one of the two things that must be continued to meet our sacred trust for their retirement, as well as their present well being. 

As we wrote in July, and many times since then, minimum wages must be increased for present workers. This also increases future revenue to Social Security and allows for a much needed raise in benefits that will occur when benefit formulas are rebased to align with new labor rates.

One last reform is to credit the employer contribution on an equal dollar basis and rebasing benefits to account for this as well. The redistributive function of Social Security needs to be accounted for in benefit accumulation. Doing so decreases the need for redistribution on the back end. 

In 1998, when I participated in on-line discussions on Social Security personal accounts, I brought up the necessity of doing this. This idea raised the hackles of the privatizers much more than their desire to take advantage of riskier investment strategies. The best way to kill talk of private accounts is to introduce redistribution on the front end and give organized labor proxies to vote worker shares. 

Under those conditions, those on the left should consider the advisability of  personal accounts holding employer voting and preferred shares, with an insurance fund holding enough of these shares to prevent pension loss.

Even without personal accounts, we must double down on encouraging employee-ownership. Currently, transfers to employee-owners are tax free for founders and initial shareholders. Sales of publicly traded and inherited shares should carry the same benefit. A greater incentive to sell such shares is the transfer of capital gains and inheritance taxation to a transaction based asset value added tax. Such a tax would be much harder to dodge, which makes any incentive to avoid it all the more attractive.

Attachment - Legislative Hearing on the Social Security 2100 Act,  July 25, 2019

Attachment - Tax Reform, Center for Fiscal Equity, December 7, 2021

The Pandora Papers

WM: Oversight: The Pandora Papers and Hidden Wealth, December 8, 2021

No one was very much surprised at what was revealed in the Pandora Papers, although going over the details is great fun. The excesses of the rich and proud need to be laid bare occasionally. The challenge, however, is to craft ways to move beyond a world where the super-wealthy can accumulate fantastic wealth. The more important portion of that task is to strip the wealthy few of the power they have over workers, voters and elected officials.

Earlier this year, we submitted comments to the Special Revenue Measures Subcommittee on how the tax code treats the wealthy. A portion of these comments are attached. They emphasize who the wealthy buy, rather than just what, the valuation of unrealized income and why a wealth tax falls short. The main reasons for the latter are that the wealthy find ways to spread the burden of such taxation elsewhere.  

While it is impossible to squeeze more out of low wage workers, there are plenty of things the wealthy can do to transfer their obligations. That is the point of today’s hearing.

As members and staff well know, our  go-to solution for economic justice is tax reform. The latest iteration of our plan is also attached. The bones are the same, but the proposed tax rates and brackets have been adjusted to reflect the recent compromises which will pay for us to Build Back Better. 

Our approach is to shift most taxation to transactions rather than people and corporate profits. This includes individual consumption, vehicles for distributing tax benefits for families through employers (regardless of ownership class), shifting debt holding to tax prepayment by the very wealthy, improving retirement equity by the equal dollar funding of the employer contribution to Social Security, taxing asset gains and returns on a transaction basis rather than the end of the year results for each investor and expanding the benefits of transferring wealth from the investment sector to the employee-ownership sector. 

That last point is the most important. Until employee-ownership becomes a viable replacement for capitalism, human resources will be human assets. Such assets are more precious, but are not treated as such by those hiding in Pandora’s Box.

Asset value added taxes do not care where assets are parked, just when and how they are sold. When the wealthy sell financial assets to each other, or try to unload junk onto retirement funds and small investors), a tax should be paid. The tax should be high enough to stop the junk flowing into the system and to give heirs an incentive to sell out to workers rather than arranging for mergers and acquisitions. 

Many critics of the value added tax (some of whom are well funded) cite their regressivity, but if adequate family income is provided through tax benefits to employers (or government subsidies when those benefits are unused), the wealthy will find that, like buying investments burdened by an asset value added tax, buying luxury goods can be expensive. 

It is impossible to dodge value added taxes in the same way that life insurance, retirement funds (especially Roth IRAs) and loans against liquid assets when everything these funds buy is taxed at between 13% and 28.8%. This is more revenue than a wealth tax will ever provide.

Pandora has shown us that international cooperation is needed to collect such taxes and repatriate the funds to both countries of purchase and countries of residence. There is no crisis, however, if the idle rich spend money on painted canvas of no intrinsic value if these purchases mean the emancipation of workers from authoritarian capitalism to self-ownership. Note well, there is no such thing as free market capitalism - capitalism implies obedience, not a free market.

Attachment - Reforming the Tax Code's Advantageous Treatment of the Wealthy, May 12, 2021

Attachment: Tax Reform

Technology Sector Privacy Protection

Finance, Subcommittee on Fiscal Responsibility and Economic Growth, Promoting Competition, Growth, and Privacy Protection in the Technology Sector, December 7, 2021

The technology sector has certainly been an attractive target for those who seek to create a wealth tax, which is why we believe the subcommittee is addressing this topic. Whether this sector produces long-term wealth for its owners is questionable, however. Founders are often leveraged and cash flow comes, not from revenue, but from continued capitalization. When making comments on wealth and social media, I always ask the following question:

“How often do you buy a product that is advertised on the platform?”

Me neither. When I buy things, I go to Amazon and similar sites and browse. When I buy airline tickets, I go to the carrier’s web page or a page where I can compare prices. On some media sites, I may follow an ad from one influencer to another, but commercial ads are simply an annoyance, not an opportunity to buy something outside of my budget.

The jury on commercial advertising success in this sector is still out. Any regulation of such advertising is, or should be, the job of the Federal Trade Commission. Advertising in such an environment is no different than advertising in other broadcast or  print media. If there are gaps in the law, they can be easily filled by the appropriate committee, which this is not.

Social media is by nature monopolistic. Our generation finds old classmates, paramours and even disconnected relatives in one place, rather than across multiple platforms. Should the inability to stay afloat without capital infusions be realized, many of us will search for different platforms as a group, using old fashioned technologies like the telephone to decide where to land. True social groups are not really a productive market for most advertising. Indeed, in order to remain friends, political debates often run out of steam. 

Of late, it is the political advertisements that are attracting the most attention. There is very real concern about online sedition - although seditionists who use public sites are not the sharpest of tacks in the desk drawer.

If it were not for the lives lost and the potential for real mayhem, the Insurrection would have been comical. It was based on Mr. Eastman’s rather wishful reading of the 12th Amendment. Once alternative slates became an impossibility, the winner had to be the current President. Even with all of the contested state delegations omitted, Biden still had more electoral votes. A clear reading of the Amendment states that the House counts only a majority of valid electors. Invalidating electors reduces the total. 

Even if a Kangaroo Kongress had found a way to kill or detain members to get a majority to their liking, the rule of law is strong enough in this nation and its military for the traitors to have succeeded. The organizers  would have simply been elected immediately rather than after the current FBI and congressional investigations (including the Ethics Committee) finish their work. Our democracy was never in real danger - although members of Congress certainly were.

Most social media politics is not that blatantly stupid or dangerous. The real “muscle” of the militia movement is currently rotting in the District of Columbia jail. Most will realistically face long prison terms, as will certain members of the legislature who were in any way part of the master conspiracy. Existing law will punish the guilty, as will the Ethics Committees.

Having eliminated commerce, capital finance and sedition as concerns in the technology sector, it is time to address what is left and why there is little that can be done by this, or any other committee.

Issues of competition, growth and privacy must be considered around the issues of political speech and advertising. Platforms have, of late, been policing themselves (Twitter) or are shut down (Parler) when extremists become dangerous. Any discussions along these lines are probably best discussed by the Intelligence Committees and their staff. A new minority leader, with new staff, on the minority side of the other chamber can be trusted to get down to business.

The avenues for Congress to regulate political advertising have been foreclosed by the Constitution and the Courts.  The content of political speech on social media cannot be touched. The same applies to issues and independent campaigns. That social media leaves a trail that could prove that some independent campaigns are more linked to the main campaign than is allowable is a positive. 

The FEC needs adequate staffing to follow such leads - and a more robust membership model. The current structure would be comical if it did not endanger our democracy. The FEC must also build stronger relationships to the intelligence community to avoid a repeat of 2016. I suspect more shoes will drop soon.

The questions of the privacy of data in this context consist of voter identification, get out the vote and fundraising data. When funds are raised for a candidate’s political committee, information must be public. For dark money committees, more sunshine is desperately needed.

President Obama’s campaign perfected the tools for using technology in 2008. The Trump campaign merely followed the existing playbook. Any campaign that does not target using the same methods should not bother filing papers to get on the ballot.

Regulations on soliciting contributions and volunteers are problematic. The real gold in electoral politics are good donor and volunteer lists. The kind of donors and activists who are most in demand already know that their information is as valuable to future campaigns as it is for the ones they are currently working on. 

Adding “fine print” to donations - or possibly a video to be watched before making a contribution or volunteering would be worthwhile to let first time donors know what they are truly signing up for.t I wish you luck getting such measures passed. No one wants to be the first to warn potential donors, although in the long run, it may be a selling point for reform minded candidates.

As long as the Supreme Court takes a broad view of what constitutes political speech (and measures to regulate it constitutionally have as much chance to pass as those on flag burning - and neither should pass), there is little that Congress can do to regulate political speech on the Internet. 

As long as there are monied interests in politics, these issues will arise. The problem is capitalism itself. The truth is, even if capitalism is entirely replaced by a more cooperative economy, the governance of political speech should still be off the table - especially as authoritarian capitalism is in its eventual death throes. Eventually, workers will beat them at their own game.

I hope these comments have raised issues not previously discussed in this debate - which if taken to heart should end it.

I hope these comments have raised issues not previously discussed in this debate - which if taken to heart should end it.

Unfair Chinese Trade Practices

WM Trade: Supporting U.S. Workers, Businesses, and the Environment in the Face of Unfair Chinese Trade Practices, December 2, 2021

China is a victim of its own success. It now has a vibrant middle class which is used to living with all of the comforts that implies. Every year, migrants are driven off their land, often by investment housing, seeking factory jobs which will eventually lead them into property ownership outside their home villages. This pattern has repeated itself time and again in the capitalist era.

The Chinese Communist Party is facing a quandary, however. When middle classes are formed, they begin to chaif at authoritarianism. Traditional culture has slowed the desire for revolution, but this does not negate the analysis of none other than Karl Marx. Revolution is inevitable as a matter of economic destiny.

Our comments from June underlie the fragility of authoritarian regimes, such as China. Let me offer four new examples:

Lower level governments fear losing face with the central government. This was especially true in Wuhan at the start of the COVID pandemic. The crisis was hidden until it was too late. Problems were complicated by giving citizens a deadline to flee rather than imposing immediate lockdowns. This probably spread the virus to the entire nation. There is little visibility on the results of such an error, which indicates they are being covered up.

In a fete of pique, the Chinese government objected to Australian Prime Minister Abbott’s off the cuff comments on their response to the virus. This led to a boycott on Australian coal. This coal was bound for the industrial sector. After the current backlog at our ports has been cleared, it may be followed by a different set of supply chain issues. A freer society would not have made this mistake (aside from the prior U.S. Administration). 

There has been no let up in the use of coal for utilities, although less is available. There are now power shortages in some areas, according to recent reports. The Party tries to keep the lights on to placate the middle class (peasants don’t really have good electricity). They correctly fear a usually docile urban culture becoming less docile when conditions get worse.

A further example of their impending troubles is the Evergrande crisis (and a housing crisis in general). Authoritarian cultures do things for show. Many of Evergrande’s developments are Potemkin investments that were never designed for actual occupation. These developments are essentially a Ponzi scheme. 

As an aside, in America cryptocurrency is such a scheme. Also, much of our single-family rental market is known for leaving maintenance in the hands of tenants. Secretaries Ross and Mnuchin should be called to account for their part in this.

In order to placate the Chinese middle class, some developments are condemned and demolished, which leads to payments for investors - but not enough to keep their boom alive. Their efforts to bail out these investors will divert funds which are currently being invested in U.S. Treasuries into their own crisis. This assumes a slower unwinding than is likely possible. A major crash will not stop at the Pacific Ocean.

For this reason, it is imperative that our own debt limit default issues be dealt with promptly. Adding uncertainty to the mix may crash the world. Currently, some American investors are taking profits before higher capital gains taxes are enacted in Build Back Better. This will further deflate our overvalued markets, cushioning the blow from the inevitable crisis in China. 

A full-on Chinese economic crash is an existential threat to the Communist Party in China (and they know it). Such a crash  is also an existential threat to the value of trillions of dollars of American bonds. The only way out is to raise taxes more than Build Back Better’s levels. Taxing the wealthy takes money out of speculation (deflating Ponzi schemes even further) and diverts funds to the consumption sector (including credit for the middle class).

A collapse of the Chinese economy may or may not help American workers. Factories do not spring up overnight. Businesses will certainly take a hit and, unless Congress is as generous in dealing with this crisis as it was for COVID, poorer families will be hit with liquidity issues and scarcity through no fault of their own.

The tenure of Mick Mulvaney at the Consumer Financial Protection Authority has created a ticking time bomb at NYMEX’s oil futures market. Global supply is fine. The trading rules have been gutted. Hopefully, the Administration will be able to undo the damage before what is an inevitable recession (or depression if housing values again drop below mortgage debt obligations). This time, mortgage loans that are purchased by the Federal Reserve must be written down to  loan balances, reducing M3 and inflationary pressure. This will restart the world economy. Punishing the lower middle class is not an option.

The donor class is about to take a big financial hit to their investment portfolios - and not because of rising taxes. It is time for them to put pressure on both parties to do something soon. They may not suffer physically, but a loss of paper wealth is inevitable if action is not taken now.

Attachment -  Strategic Benefits of a Multilateral Approach to Trade Policy in the Asia-Pacific Region,  June 22, 2021

Attachment - U.S.-China Relations: Improving U.S. Competitiveness Through Trade, April 22, 2021

Attachment -  Fighting Forced Labor, March 18, 2021