To: Citizen's Income Online at URL http://citiinco01.uuhost.uk.uu.net/discussion/index.shtml and friends on several mail lists Hi folks, For the March topic of discussion Citizen's Income Online has posed the question, "How does an idea become policy?" The idea of taxing the value-added by productive persons ("From each according to his ability.") and using the tax revenue to support persons who are not producing any value-added ("To each according to his needs.") is certainly a controversial idea that has not yet become a clearly defined policy in the UK and the US. This idea was omitted from the Ten Commandments, omitted from the Magna Charta, omitted from the American Bill Of Rights, and omitted from the United Nation's Universal Declaration of Human Rights. If the idea is treated as a whole, over the whole life cycle of each person in the whole population, then the idea becomes simple but profound and appears to approach a general theory of a prosperous and sustainable society, with liberty and justice for all. If, on the other hand, various parts are omitted from the idea, and proper names assigned to the incomplete ideas, the incomplete ideas become the red herrings we call capitalism, communism, socialism, welfare state, free markets, interest, debt, usury, Tobin Tax, corporations as living beings, etc., etc., and every discussion of those incomplete ideas becomes inconclusive and endless on the Internet, in the media, and in the literature of our society. There is a widespread consensus that the general welfare of society is not advanced by excessive taxation of particular individuals or particular groups of individuals within the society. So public opinion favors the idea of having a minimum tax rate which is common to all productive persons. The local property tax on owners of farms and small businesses satisfied this requirement when the US was an agrarian society, as does a flat tax on personal income today in an industrial society. So much for the first phrase of the idea, "From each according to his ability." The three Mosaic tithes enumerated in the book of Numbers and the tax rates of industrial societies like the United States, Japan, and Switzerland, demonstrate that a 30% of GNP total tax rate is sufficient for the obvious functions of government. Notice that the 50% tax rate for the USSR on Figure 1 of the global model was an error. The USSR should be located on the chart at 75% of GNP because all management functions of business and industry in the USSR were performed by individuals on the government payroll. There is much more to think about, however, when defining the "needs" of a particular person, because we will be asking the wealthy, healthy, intelligent, and powerful people (the WHIPs) to supply much of the tax revenue to meet those "needs." With rare exceptions, the WHIPs do not experience these "needs" of ordinary people and are therefore oblivious of any interest of theirs in satisfying such "needs" from the public revenue. By "needs," I understand anything essential for survival which the individual cannot provide for him/herself. To illustrate the scope of this controversial idea, allow the life cycle of an individual to run from conception to death, an average of 78 years, and consider each period of the life cycle in the order of its occurrence. >From conception to birth, both the unborn individual and the mother "needs" food, clothing, shelter, and health care. From birth to becoming self-sufficient is a 16 year period for a high school dropout and a 27 year period for a Ph.D. Again, during this period food, clothing, shelter, and health care are essential "needs," along with tuition for the education necessary to develop the individual's full potential. As they say, people are our most expensive and productive capital assets, and we can't afford to waste too many of them. After formal education is complete and the individual is producing his unique contribution of value-added, he/she still "needs" food, clothing, shelter, and health care for just one dependent, him/herself. But the annual cost of subsistence for one person ($5,000/year) is so modest, when compared to the typical annual output of each individual during his productive period, that only a very few individuals of working age could claim to have a "need" for assistance from private or public sources. A figure of $5,000/year per dependent for subsistence, a $10,000/year minimum wage law, and a $50,000/year mean value of the earned income distribution of the workforce are shown for the USA on Figure 8b of the global model at URL http://www.freespeech.org/darves/bert.html. This visual-aid invites the reader's attention to the relationship between the productive members of society and the various classes of dependents, including themselves, which they must support either from the public revenue or from the household budgets of the individual workers. Last but not least, what "needs" can a retired person claim? He/she had about forty productive years during which he/she should have saved enough to support themselves through the retirement period. So why did President F. D. R. establish the old age social security system in 1935 rather than a children's allowance for parenting families? Probably because of either the Catholic principle of "subsidiarity" or the English/American taboo on any financial assistance to parenting families before they become unemployed, deep in debt, and completely dependent on public welfare. Or maybe F. D. R. preferred old age assistance over children's allowances because old people vote and children do not vote. Or maybe F.D.R. had an elderly relative as a dependent in his household, who was a pain in the ass. But this leads to another question. What purpose were Greenspan, Dole, and Moynihan serving on the 1986 President's Commission when they restructured the social security payroll tax with a 15% combined tax rate on earned income, without any exemptions for dependents, and with a zero tax rate on all earned income above $63,000/year? What reason did they have for departing so far from the public's "minimum tax rate which is common to all productive persons," as discussed above? Why is the public content to have Bill Gates and Warren Buffett each pay only the same amount in SS payroll taxes as their $63,000/year accountants pay? Now there is no need for any intellectually gifted person to disgrace himself by looking at, or discussing, Burt's system diagrams at URL http://www.freespeech.org/darves/, or, at URL http://www.geocities.com/Athens/Academy/3142/IR/items/. With paper, pencil, and a few minutes thought any one with more than a sixth grade education can prepare a technically valid micro model of an industrial society. Begin with a sub-society of consenting adults who are subsistence farmers with no under age nor elderly dependents, no taxes, and no money. Then add the division of labor, a circulating medium of exchange, public dependents, infrastructure, taxes, government debt, private debt, interest, elderly dependents, and under age dependents; to arrive at a technically valid micro representation of a developed society. To model the sub-society of consenting adults, you will need a X-Y chart on which the X axis measures the value-added by each productive member and the Y axis measures the value-retained by each member, after all members have bartered any surplus of their unique value-added. If all members produce the same means of subsistence, there will be no reason to exchange products and the whole population will appear on the chart as a locus of points along a radial 45 degree line from the origin of the chart with a normal distribution of retained value about the mean 45 degree line for all members contributing any particular amount of value-added. In a free market, the standard deviation of retained-value about the mean 45 degree line is probably no greater than 5% at every level of value-added. Notice that the location of each member depends entirely on human values and human valuations. Each member may produce as much as he/she is capable of producing, or as little as he/she thinks is sufficient. It the citizens of today's industrial nations could moderate their production to what they think is sufficient, the world would be well on its way to sustainability, but the system is biased toward maximum production, 4-10% unemployment, a 2-3% per year decline in the value of our medium of exchange by the principle of "increasing returns to scale" in every parenting household and in most small businesses, as illustrated by Figure 9 of the global model. Now expand the sub society model by adding the eleven features enumerated above; the division of labor, a circulating medium of exchange, public dependents, infrastructure, taxes, public education, government debt, private debt, interest, elderly dependents, and under age dependents; to arrive at a technically valid micro representation of a developed industrial society. Notice that the addition of each feature makes the next feature more necessary, but does not distort the shape nor impair the operation of the model until the two classes of dependents are added. The addition of the retired dependents does not disturb the model because they presently receive their subsistence payments each month. But the structure of the payroll tax needs to be evaluated because it has a zero rate above $63,000/year. The education of children is provided from the public revenue, not too well perhaps, but well enough for our purposes here. It is the subsistence of under age dependents and students, at $5,000/year per head that subverts the model and causes the bias of industrial societies toward maximum production, 4-10% unemployment, a 2-3% per year decline in the value of our medium of exchange as a result of "increasing returns to scale" in every parenting household and in most small businesses. Notice that this item of expense in the USA is similar in amount to the US Department Of Defense budget and falls on the productive members of the society during the first half of their working career when their income is low. It does not matter that most of them can carry the burden of their dependents, what matters is that the market for their value-added contribution is diminished by about 5% of GNP because they must give first priority to supporting their dependents. The obvious result is 4-10% unemployment and a shortage of purchasing power in the lower half of the workforce combined with an excess of purchasing power in the high income half of the workforce which is supplemented by unearned income from interest on public and private debt. And as Margrit Kennedy documents so concisely in her book, Interest And Inflation Free Money, the low income 90% of the workforce are net interest payers and the top income 10% are net interest receivers. But the top 10% did not coerce the 90% into borrowing all that money, the 90% insisted on borrowing it. Every time I reconstruct this model, beginning with the Libertarian sub society of consenting adults, I converge on the same systemic defect of omission in the English/American public policy. And nobody will talk about it. Some ideas become policy very ... very slowly, while most ideas become red herrings which are used to keep the public in the dark about their common interest. Don't presume to explain figures 7-9 to your local village idiot or your sixth grade children. Your presumption would suggest to them that you were making sport of their limited intellects by explaining the obvious to them. That would only hurt their feelings. I am looking forward to some spirited discussion of this simple idea, before it becomes policy. Kind regards to all, Wesburt
