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Bureaucracy-Ridden Welfare System vs. Guaranteed Income

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Author Topic: Bureaucracy-Ridden Welfare System vs. Guaranteed Income  (Read 12324 times)
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« on: August 24, 2010, 11:19:20 am »

To eliminate the job-destroying, poverty-increasing wage tax from the equation as well, I propose that...we institute a hybrid system consisting of both (a) the credit-based “National Dividend” advocated by author and monetary reformer, Richard C. Cook, and (b) the rent-based “Citizen’s Dividend” advocated by many Georgists.

I'd like to elaborate on the above. Based on his estimation that the production/consumption "gap" is approximately $3.8 trillion, Mr. Cook advocates closing this gap by paying out to every U.S. citizen an annual dividend of $12,000 (give or take a little, depending on how large the "gap" is that year).

Yet according to his own argument, much if not most of this "gap" could be closed simply by instituting both a Greenback money system and a Georgist tax system. Allow me to explain.

On page 26 of his book, We Hold These Truths, Mr. Cook writes:


"After more than a decade of continuously writing on the subject, Douglas, in a 1932 publication, The Old and New Economics, listed several systemic causes 'of a deficiency of purchasing power as compared with collective prices of goods for sale.' These included business profits not distributed as dividends (retained earnings); individual savings, i.e., 'mere abstention from buying'; 'investment of savings in new works, which create a new cost without fresh purchasing power'; accounting factors, where costs previously incurred are carried over into current prices; and 'deflation', i.e., 'sale of securities by banks and recall of loans.'

"Other elements not mentioned by Douglas include insurance, which is costly in the U.S., maintenance of unused plant capacity, which is extensive due to the decline of U.S. manufacturing output, employer retirement contributions, and the cumulative sum of retained earnings and other cost factors when businesses buy from each other.

"These factors all show up in the prices of goods and services but are not paid as earnings to individuals. A simple way to understand what happens is that prices that a business charges must not only pay for labor costs but must also cover all non-labor costs, as well as equip the firm to perform in the future." [Emphasis added]


Of all the "non-labor costs" that add to the prices of goods and services, the three most costly to business owners as a whole are

(a) usurious interest (which business owners pay not just directly through debt service to private banks, but indirectly as a result of the silent incorporation of usurious interest costs into the selling price of all the capital goods they buy -- higher prices being the only way that the indebted producers of those capital goods can capture the necessary portion of other people's loan principal to service their interest-bearing debts to private banks);

(b) the deadweight loss imposed by taxes on labor and capital goods (see this and this); and

(c) speculative rents and land prices ("rack-renting" for short).

A Greenback money system will delink the issuance of new money from the lending of it. In doing so, it will greatly reduce the need that most (if not all) business owners currently have to incur usurious interest costs in the first place, and thereby reduce the aforementioned "gap" to a considerable degree.

A Georgist tax system will reduce this gap still further by simultaneously eliminating both the deadweight loss imposed by taxes on wages, sales and capital goods and the parasitic rack-renting to which land speculation invariably and inevitably gives rise.

Thus, by implementing those two reforms, the "gap" between our gross domestic product and what each of us, on average, is able to purchase will be much smaller than it is now. Consequently, although there might still be a need for the size of the gap-closing National Dividend to be several hundred billion, it will not be necessary to resort to the multi-trillion dollar cash handout that Mr. Cook calls for.

It is for this reason that the "hybrid system" I advocate contains a much more modest version of Mr. Cook's "National Dividend."
« Last Edit: March 12, 2011, 09:46:49 am by Geolibertarian » Report Spam   Logged

"For the first years of [Ludwig von] Mises’s life in the United States...he was almost totally dependent on annual research grants from the Rockefeller Foundation.” -- Richard M. Ebeling

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