Democratic Capitalism: Basic Income Proposal Has Merit, But Only With New Money

By Mark Anderson / Stop the Presses News & Commentary
Also see http://www.thetruthhound.com

Society could be on the brink of an extremely vital renewal that, if clearly understood and boldly and intelligently implemented, could pave the way for far “calmer waters” and a much higher level of civilized life economically, politically and socially, even morally and spiritually.

I say this while referring to the pluses and minuses of the movement to give every adult in the United States a $1,000 cash “handout,” or dividend, per month. It apparently would grow the economy by $2.5 trillion by the year 2025. That's according to a new study by the Roosevelt Institute on what’s known as a “universal basic income.” Roosevelt research director Marshall Steinbaum, Michalis Nikiforos at Bard College's Levy Institute, and Gennaro Zezza at the University of Cassino and Southern Lazio in Italy co-authored the study.

RESEMBLES SWISS INITIATIVE

This is essentially the same proposal that Swiss voters narrowly defeated last summer after a major promotional effort that showcased a number of advantages of parting with the ironclad but destructive rule that all income must either come from means-tested welfare or work. So, bear with me, here. There is a third way, but some things need to be sorted out. The short 3-4 minute video at the top of this article gets into the nitty-gritty of this matter but in a way you may not expect.

“The [Roosevelt] study made economic forecasts for three proposals: a full universal basic income in which every adult gets $1,000 a month ($12,000 a year), a partial basic income in which every adult gets $500 a month ($6,000 a year) and a child allowance in which parents get $250 a month ($3,000 a year),” CNBC online reported.

“A $1,000 cash handout to all adults would grow the economy by 12.56 percent after eight years . . . . Current Congressional Budget Office estimates put the GDP at $19.8 trillion. The cash handout would therefore increase the GDP by $2.48 trillion,” CNBC continued. “The $250 allowance would grow the GDP by 0.79 percent and a $500-a-month payment would grow the GDP by 6.5 percent.”

A DEEPER LOOK

But here is where things begin to wobble. These estimates, says CNBC, “are based on a universal basic income paid for by increasing the federal deficit.”

Researchers also calculated what would happen if the cash dividends paid to the people were offset by increasing taxes. In that case, there were would be “no net benefit” to the economy.

“When paying for the policy by increasing taxes on households rather than paying for the policy with debt, the policy is not expansionary,” the report says, presenting false alternatives. “In effect, it is giving to households with one hand [while] taking away with the other. There is no net effect.”

WHAT'S WRONG WITH THE STUDY

The glaring gap in this Roosevelt study is that it overlooks the key thing that would actually make a regular citizen dividend work: We have to avoid money transfers based on redistribution, where we tax one segment of society in order to pay out the dividend—just as we must avoid more borrowing, which creates a larger deficit and more debt.

Instead, we must create new money interest-free through the Article I constitutional power of Congress. In other words, ladies and gentlemen, we’re facing a financial, political and social abyss and we have to know exactly how to proceed.

Adopting this proper process would necessarily mean that the banking system’s monopoly of money creation would be trimmed or possibly ended altogether. In that vein, take note that the real fourth branch of government has nothing to do with the press; instead, it’s the financial-monetary power along with the legislative, executive and judicial branches. In 1913, however, the U.S. government surrendered its money power to the newly created, privately owned Federal Reserve System and that power must be reclaimed.

2017 is the 100th anniversary of British engineer C.H. Douglas’s discovery of “social credit,” which, strictly speaking, is a broad monetary-societal reform that contains the proper formula for solving a real problem.

During his in-depth engineering work for the British government, Douglas found that the manufacture of goods racks up costs and creates prices far in excess of the purchasing power that it also meagerly creates through wages and salaries.

This is not some abstraction. Once Douglas confirmed this mathematical gap, he advanced “social credit,” wherein a dividend is regularly paid to the people to the same extent, per production cycle, that there’s a shortfall in purchasing power when goods come off the production line, steeped in production costs, including labor costs.

Douglas knew that the dividend had to come from somewhere other than the labor market. In other words, society needs a direct infusion of a properly calculated dividend that is not work-related. That way, the dividend does not become just another labor cost that’s automatically embedded in the final prices of goods and services.

But the overriding point is that social credit solves the problems cited in the Roosevelt study, while also answering the urgent call to society that more and more automation is on its way.

Widespread automation, if not accommodated, could bring forth several problems, but many people don't realize how it can be the key to much more leisure and freedom—as long as we carefully devise and issue a sufficient dividend to supplement people’s work incomes, even while human labor inevitably becomes less and less of a requirement to produce abundant goods due to the super-efficiency of the machine.

With that we combine the "wage of the machine," which negates the deflation inherent in constantly roaring at the oars of a slave economy that always lacks debt-free purchasing power, which means the economy careens near a steep cliff nonstop due to a profound lack of demand. Goods are profuse but buying power is slight, which gives way to the expression "full stores and empty wallets." Early-20th century social credit author and promoter Louis Even referred to the situation as "poverty in the midst of plenty."

And those who make the easy refrain that this is "socialism" need to read Dr. Oliver Heydorn's book "Social Credit Economics" to realize that while the state owns it all under socialism, under social credit the state's limited role would be to establish a national credit office that would simply keep a national assessment, a ledger for calculating production data---on which to base the amount and frequency of the national dividend.

Thus, government would only provide a basic monetary and accounting "infrastructure" without interest and debt, but ownership and opportunity, as economic democracy expands via the dividend and other adjustments, would be diffuse, widespread and vibrant as more "capitalists" are created among a now dispirited and dejected populace that senses what's wrong but cannot name it. The present private banking and corporate plutocracy, rigging the system for itself, and buying politicians and the press as an extension of controlling money creation, simply has got to go. The reason it's so hard to shake off the plutocrats is that they're catered to by a government that's been bought off by its symbiosis with "big money," as illustrated by the cartoon below (keep reading a little more after cartoon):

So, can we take our noses off the grindstone and flourish? Yes, provided we pay careful attention to the snares and pitfalls and understand what we’re dealing with. I’d suggest reading some of the essays at http://www.socred.org among other sources, discuss the matter with associates and make your views known to policymakers.

Social credit expert Wallace Klinck of Alberta, Canada observed that we're all enslaved by "an increasingly dysfunctional and fraudulent financial system which prevents society from accessing the products of industry without first producing something else and/or forcing the population into bondage to ever-expanding financial debt. Where incomes depend more or less exclusively on paid 'work,' the practical need for which is being rapidly eliminated by technology, everyone is thrust into an evermore intensive and uncivilized competition for so-called 'jobs.' We compete mindlessly and desperately for more work for which there is diminishing need. This creates ruthless competition and 'justifies' endless State interference to create 'equality' so as to ensure that everyone has a coveted job. People clamour for useless and ever-more destructive work by acceding to more slavery, imposed by external authority, for the 'privilege' of living while labour itself becomes progressively a diminishing required factor in production."

Douglas once said that society could literally leave one civilization and enter another, a much better one, if we shake off outmoded financial shackles and carefully and bravely forge ahead. All the signs that Douglas predicted would someday materialize are here, smack-dab in front of us. We must act. Failure to fix the money problem will make other political efforts largely if not totally out of reach.