-Caveat Lector-
From
http://www.newstatesman.co.uk/199906140011.htm
> Give £50,000 to every boy and girl
>
> Bill Gates's fortune exceeds the combined wealth of nearly half the
> households in America. Robert Reich offers big and bold ideas on how
> to bridge the gap
>
> <Picture>Here's an important new idea for helping the bottom half
> share in the nation's prosperity. Spread capitalism by spreading
> capital. Rather than just redistribute income to people after they've
> become poor, give them capital up front to build their fortunes. Give
> a young family a starter nest egg. Give a young adult a capital stake.
>
>
> This idea quietly underlies Bill Clinton's newly proposed universal
> savings accounts. The plan is currently being touted as part of social
> security reform. But it's not really about social security. It's about
> redistributing capital assets to lower-income families.
>
> Here's how it would work. Families earning under $40,000 would get an
> annual $600 tax credit, plus another $700 if they deposit $700 of
> their own money into their account. This adds up to an annual nest egg
> of $2,000. If they continue doing the same thing for 40 years, their
> nest egg, assuming a modest 5 per cent rate of return, would
> accumulate into a giant brontosaurus egg of over $250,000.
> Higher-income families would get a smaller subsidy. Total cost to
> taxpayers: about $30 billion a year, most of which would go to poorer
> families.
>
> Or consider Senator Bob Kerrey's Kid Save. Under this plan, the
> government would give every newborn a $1,000 savings account, to which
> $500 would be added every year until the child's fifth birthday. The
> money accumulates and the interest compounds until the child reaches
> 21, and - hey presto! - the kid has a cool $20,000 to start his or her
> adult life. The tab: about $15 billion a year.
>
> If neither of these is ambitious enough for you, here's another,
> proposed by Bruce Ackerman and Anne Alstott, both professors at Yale
> Law School, in a slim volume called The Stakeholder Society (Yale
> University Press).
>
> Every 21 year old gets $80,000 (just under £50,000), to do with as he
> or she sees fit. The cost is $255 billion a year - borne either
> through mandatory payback of the original stake (plus interest) at
> death or by an annual 2 per cent wealth tax on the wealthiest 40 per
> cent of Americans.
>
> It's unlikely that any of these schemes will see the light of day any
> time soon. But what's important here is the big idea common to all of
> them: redistribute capital.
>
> Big ideas like this are significant because they can reframe the
> public debate. They change the prevailing assumptions. Eventually they
> can change the course of the nation.
>
> So why the buzz now? Three reasons. First, it's dawning on many people
> that the old ways of trying to broaden prosperity aren't working
> nearly as well or as fast as we'd like. Not even the buoyant American
> expansion of the 1990s has done much to reverse the long-term decline
> in real incomes of the bottom third. Those just above them haven't
> gained any ground.
>
> The median American family is about where it was a decade ago in real
> terms, and its members are now working a total of six more weeks a
> year than they did then. To be sure, the very poor have bounced up a
> bit since 1996, both because the minimum wage was raised and because
> the labour market became so tight that they've had an easy time
> finding jobs. But that bounce was from a long way down, so they're
> still very poor. And when the economy cools, the slide is likely to
> resume.
>
> Most of the people who have been losing out don't have an adequate
> education - the first prerequisite in this global, digital economy. So
> obviously the best investment in their future prosperity is to improve
> their store of "human capital".
>
> But this takes considerable time. And it's far from a sure bet. Even
> if the half-trillion dollars the US spends every year on public
> schools were perfectly utilised, and children from poorer homes were
> learning like mad, they'd still start off their adult lives at a
> severe financial disadvantage. They would have a hard time getting a
> university education or buying a first home.
>
> Furthermore it's become clear that society cannot rely on direct
> handouts and income transfers to do the job. They have all sorts of
> negative side effects, such as dependency. And there's no political
> will to carry them out on a large scale. Trying to redistribute income
> from the relatively richer to the relatively poorer people through
> specific federal programmes funded by annual appropriations has become
> next to impossible.
>
> The second reason for the new conversation is that capital assets -
> rather than income - are now where the action is. The story of the
> 1990s, if you hadn't noticed, is the extraordinary boom in the market
> valuations of companies, followed by homes. The boom may end tomorrow.
> But it's been an amazing ride, and it can't help but affect how people
> think about the public interest, as well as personal gain.
>
> To date, most Americans haven't got much out of this capital boom,
> however, because most don't have much capital. While almost half of
> American families nowadays own some shares of stock, most of those
> holdings are valued under $5,000. Young families are even less likely
> to own capital. The average young family has a net worth of only about
> $11,400, including the value of the family car.
>
> Fewer than half of them own a home, which is usually heavily
> mortgaged. The typical young family in the bottom half of income
> distribution has a net worth of $2,000 or less.
>
> On the other hand, people at the top have never had it so good. The
> biggest single consequence of the Clinton bull market (or, if you
> prefer, the Greenspan bull market) has been to make those who were
> already rich before 1991 fabulously richer. The wealthiest 10 per cent
> of Americans have received 85 per cent of Wall Street's gains since
> then. The wealthiest 1 per cent has got 40 per cent of them. Even
> before the increase in stock prices, America's wealth gap had already
> turned into a chasm - wider and more permanent than the income gap.
> It's now a canyon. Bill Gates's net worth exceeds the combined net
> worth of the bottom 45 per cent of American households.
>
> Even if the stock market sags, the wealth gap is likely to endure.
> When the parents of today's baby boomers leave this world, the
> wealthier of them will leave behind a collection of assets worth
> hundreds of billions of dollars more than they paid for them. Their
> boomer offspring will inherit the largest inter-generational windfall
> in the history of modern civilisation. And thanks to the
> "stepped-up-basis-at-death" tax rule, these assets will arrive free of
> capital-gains taxes.
>
> The tax favours don't end there. Those who have earned enough to be
> able to invest in this buoyant capital market also profit from rules
> allowing them to defer income taxes on that portion of their incomes.
> The resulting benefits are wildly tilted toward the very people who
> are already gaining the most from the surge in capital values.
> Two-thirds of all the tax benefits for pensions and retirement savings
> now goes to families earning more than $100,000 a year. Only 7 per
> cent of these benefits go to families earning $50,000 or less.
>
> Current tax law is lifting America's wealthy even higher. Hence the
> case for allowing the rest of America on to the lift, too. Whether
> it's government-subsidised universal savings accounts for Americans of
> modest means, or a scheme to give every young adult a certain amount
> of capital, the goal is to let everyone in on the ride.
>
> The third reason for the new conversation is that we can afford to do
> something like this. The US government's budget surpluses now extend
> as far as the eye can see. President Clinton wants to fund his plan
> out of them. Senator Kerrey's Kid Save would cost half as much. The
> price tag on the Ackerman-Alstott proposal is higher - but with asset
> values of stocks, homes and the rest heading into the stratosphere,
> their plan to fund it out of a 2 per cent wealth tax on the wealthiest
> doesn't seem far-fetched.
>
> This new conversation is important. Vast inequalities of wealth and
> income can strain the social fabric of a nation. They make collective
> decisions more difficult because citizens in different economic
> positions are likely to be affected by these decisions in very
> different ways.
>
> Politics can only become more fractious; common purpose and identity
> will be eroded. Those who already worry about the fragmenting of
> culture and the fading of civility will have far greater cause for
> concern. A polarised society is also less stable than one with a large
> and strong middle. Such a society offers fertile ground for demagogues
> eager to exploit the politics of resentment.
>
> Will any of this new conversation be part of the upcoming US
> presidential election? Don't hold your breath. Candidates watch the
> polls, and the polls don't yet reflect the new conversation, because
> it's new. But there's at least an outside chance of an opening for
> some bold ideas about something truly important.
>
> The author, US secretary of labour in the first Clinton
> administration, is professor of social and economic policy at Brandeis
> University
A<>E<>R
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