Economic Solutions, Part 2 – economy – solutions – economic crisis – recession – depression – fix congress – job creation – fair tax – tax reform – wealth inequality – distribution of wealth – executive salaries – executive bonus – stimulate economy – entrepreneur – early stage funding – externalities – cost of pollution – carbon tax – micro-financing – business start-up

International economist Peter Bearse, who was featured in our video called “How to Fix Congress in One Easy Step” has outlined in greater depth the economic solutions to our recession (or depression) crisis. He and Carmine Gorga, PhD have collaborated to write the following recommendations:


Ÿ       Complete development of a new model that brings economic justice and distributional concerns into an integrated political-economic framework. Such a model is necessitated by the fact that the failed economic policies of the Obama Administration, like that of other governments, have been inspired by the “ideas of defunct economists.”[1]

Ÿ       Devise triggers and mechanisms to limit inequalities of income and wealth in the U.S. These would follow from a new “Declaration of Rights and Responsibilities.[2] For example, legal limits could be put in place, both on executive pay and unearned financial sector and executive bonuses. The former would address the excessive multiples that corporate executives are paid relative to their employees;[3] the latter, excessive bonuses paid to people for taking excessive risks with other people’s money  or to executives of underperforming or even failing companies.

Ÿ       Introduce economic democracy into the U.S., including:

  1. Broadening and liberalizing legislation that enables Employee Stock Ownership Plans (ESOPs) to include proper representation of long-term employees in the governing boards of companies;
  2. Expanding the legal rights of long-term stockholders in corporate governance and major corporate decisions, including those on the distribution of retained earnings;
  3. Legislation to limit or prohibit growth-by-purchase rather than growth-from-within; e.g., limit growth via “M&A” (mergers and acquisitions).
  4. Gain-sharing to distribute the returns to productivity more equitably.[4]

Ÿ       Enact former Senator Mike Gravel’s “Constitutional “Democracy Amendment” and “Democracy Act”. These would enable laws to be made via national initiative and referendum (I&R).[5]

Ÿ       Convert the “Earned Income Tax Credit” and the welfare system into a Guaranteed Family Survival Income based upon hours worked per week in relation to family subsistence requirements [less food aid, if any). This could pertain to limited time periods to help families overcome hardships and enable better transition(s) to a sound economy.

Ÿ       Revise Gross Domestic Product to account for…

  1. Costs external to the market economy, such as the costs of carbon emissions, large plant shutdowns involving jobs’ shifting to other countries, et al.;
  2. The value of women’s work in the home;
  3. The value of volunteer work, including political volunteerism; and
  4. Other significant omissions identified by various analysts and reports over the years.

Ÿ       Adopt and implement a “National Entrepreneurship Development” program to…

  1. Substantially increase funds available for investment in new, innovative or early-stage, independent enterprises;
  2. Subsidize entrepreneurship education at all levels;
  3. Allow a portion of unemployment insurance funds to be used to finance business start-ups (by adapting past models from states and other countries);
  4. Enable many more start-up funds to be obtained without SEC registration, via “crowd sourcing”, Joint Municipal-Private Security Offerings, micro-financing programs, Community Development Finance Institutions, et al.

Ÿ       Amend, refine and advocate significant changes to laws that regulate the financial sector. These should include oversight by independent citizens’ committees of regulations still being written to implement “Dodd-Frank” and taxation of financial transactions, such as a “Tobin tax” that would be higher, the shorter the term of an investment.[6]

Ÿ       Formulate and advocate changes to the legal framework that governs the operations of large, private, multinational and private/public corporations in the United States. Especially: A Constitutional amendment to revoke corporate personhood unless corporations introduce provisions of “economic democracy” into their governance.

Ÿ       Provide incentives for government agencies to save money (rather than spend the full amount of their budget).

Ÿ       Reform the tax code to —

  1. Simplify, but also increase progressivity of the graduated income tax;
  2. Remove incentives for short-term and Increase incentives for long-term (more than 5 years) investment;
  3. Enact a Value-Added Tax or Consumption tax that is also progressive;
  4. Maintain the inheritance (“death”) tax;
  5. Heavily tax “fast-trading” financial transactions.
  6. Tax costs external to (unrecognized by) the market economy, including costs of carbon emissions, large plant shutdowns involving jobs’ shifting to other countries, et al. As OWS recognized, this would be “a move toward a true (and full-)-cost market regime in which the price of every product reflects the ecological cost of its production, distribution and use.”[7]
  7. Gradually eliminate all tax advantages and subsidies to established (more than 5 years old) businesses.

[1] See Gorga, Carmine (2010), THE ECONOMIC PROCESS. Lanham, MD: University Press of America. Dr. Gorga calls his framework “Concordian Economics.” Work to put it into testable, econometric form is ongoing by Gorga and Bearse.[2] As set forth by Gorga, op.cit., as essential prerequisites to a “Concordian Economics>“[3] “In 1980, American CEOs earned 42 times more than the average employee…that figure has sky-rocketed to more than 300 times…By way of comparison, top executives at the 30 (German) blue-chip(s) …rarely earn over 100 times…” Shultz, Thomas (2011), “Has America Become an Oligarchy,” Spiegel Online (10/28, translated from the German).

[4] Note that this and ESOPs serve to reduce unjustified inequalities in the distribution of returns to productivity, a problem that Robert Reich identified as one of the causes of our economic crisis in his book AFTERSHOCK: The Next Economy and America’s Future (Vintage paperback).

[5] As proposed by former U.S. Senator Mike Gravel. See Gravel, op.cit.

[6] First advocated by Nobel Laureate economist James Tobin in his 1972 Janeway Lectures at Princeton, this tax was “originally defined as a tax on spot conversions of one currency into another.” In this author’s view as himself an economist, such a tax should include all financial transactions and graduated to decrease with the length of time that an investment enabled by a financial transaction is held — “to put a penalty on short-term financial excursions…” Quotes from WIKIPEDIA on “Tobin Tax.”

[7] Farrell, Paul B. (2011), op.cit.

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