Dr. Louis Kelso's Binary Economics: A Practical Solution for Poverty

A Practical Binary Economy is within reach, if LEADERS will embrace new ideas.

    The War on Poverty federal government programs have failed.

It is not even a subject for debate. Use any metric and measurement. The Poverty rate in 1968 was 12.8%, in 2020 it was 11.4%.

Over 50 years of government programs/spending and all we accomplished is creating a dependent class for government money. That is NOT economic Freedom.

No building free-market opportunity for those at the low end, no value-wealth creation, no capital or property ownership. It is not rational, logical or PRACTICAL to keep using a War on Poverty government system, that was a relic the day it was signed into law.

36 million Americans are trapped in a government system of dependency.

  This is not my opinion, not even my analysis; this is a fact. The government's own poverty numbers back up the failure of the federal government's policies. 

  It is time for Practical Binary economics, that allows the Private sector, the Federal Government and the Federal Reserve, to each contribute resources, that can impact poverty, through the Economic Democracy Act.

What follows is an economic plan put together in 1984 by the Center for Economic & Social Justice(CESJ).

   Review everything that follows, as you have never seen anything like this before.

    This is a complex plan, a BIG solution and it will take a team of Leaders to make it happen. This is how you solve a poverty problem within our economy. This is how you build wealth within the lower parts of our economy. It is not simple, it will not happen in 5 minutes.

  I've already been a Leader on this and I'll continue to be. 

   Please note, I've worked as a volunteer project team member with the CESJ for 11 years. 

I would not invest that much of my time, if I wasn't completely convinced this is a world-class economic policy.

   There are other aspects to poverty, that must be worked on at all levels; this is the part I can and will work on.

   Please work with me and I will work with you.

Binary Economics is a PRACTICAL Solution:

 https://www.cesj.org/wp-content/uploads/2012/05/BinaryEconomicsOfLouisKelso_CWP1.pdf

 • The proposed Economic Democracy Act (EDA) would offer a private property and just, free market-oriented  national policy to foster “capital self-sufficiency” as a supplement to wage incomes and as a basis for all Americans to achieve lifetime prosperity and economic independence. 

• The EDA follows the precedent of Abraham Lincoln’s Homestead Act of 1862 that democratized the ownership  of limited frontier land. The new economic policy would universalize access to asset-backed money in the form  of insured capital credit. These loans would be repaid with “future savings” from each year’s profits from the  new capital added that year. This 21st century equivalent of the 160 acres of land would be extended annually to every citizen and permanent resident. Every citizen would thus gain equal access to the means to accumulate  over his or her lifetime an ownership stake in the ever-expanding technological frontier.

• The EDA would launch America as the first nation to promote the fundamental human right articulated in the  “Universal Declaration of Human Rights” at the formation of the United Nations on December 10, 1948. Article  17 of the UDHR stated: (1) “Everyone has the right to own property alone as well as in association with others.  (2) No one shall be arbitrarily deprived of his property.” This would encourage other countries, including those  led by communists or monopoly capitalists, to adopt America’s “Just Third Way” model for a more democratic and prosperous future — and truly free, global market system — for every person.  

• The Economic Democracy Act is based on four pillars of a free and just market economy — (1) expanded capital  ownership, (2) limited economic power of the state, (3) restoration of free and open markets, and (4) restoration  of the full rights of private property for every child, woman and man from birth until death. The EDA would  strengthen the political constituency for linking supply-side with demand-side economic policies. It would add  social justice and compassion to free market principles, and would reduce the political pressures for  redistributive, anti-growth and protectionist policies. 

• The Economic Democracy Act would introduce reforms into the monetary and tax systems geared toward  maximizing sustainable private-sector growth without inflation, while systematically building a nation of citizenowners. Along with shifting from a debt-backed to an asset-backed currency, a simplified tax system would be  introduced to encourage corporations to finance their growth more democratically. 

• The EDA would reduce the pressure of increasing Social Security and Medicare costs, leaving in place a social  safety net for individuals whose capital and labor incomes are insufficient to meet their basic needs. 

• The Federal Reserve would revive its existing powers under Section 13(2) of the Federal Reserve Act. This opens the discount windows of its twelve regional Federal Reserve banks to create through local commercial and  cooperative banks sufficient asset-backed money and insured capital credit to finance the estimated $4.976 trillion needed annually for new plant and equipment, renewable energy, green technology, new rentable  space, and new infrastructure. Rather than flowing only to the already wealthy, the new money and credit  would be channeled through financing mechanisms such as individual Capital Ownership Accounts (COAs).  Accessible to each citizen, these capital ownership mechanisms would systematically create new owners of the  new wealth without violating property rights of current owners over their existing assets. 

• Five central banking innovations would be introduced: (1) Qualified new industrial, commercial, and agricultural  capital investment would be financed with newly created, private sector, asset-backed money and insured, nointerest (but not no-cost) self-liquidating credit extended through the commercial banking system and  rediscounted at regional Federal Reserve Banks in ways that create new owners. (2) Monetization of  government deficits and speculative securities would be phased out. (3) Open market operations would be  limited to dealing in qualified private-sector securities once all government debt is retired. (4) 100% reserves  would replace today’s fractional reserve banking by immediate rediscounting of all qualified new capital  investment. (5) Private sector insurance and reinsurance companies would offer capital credit insurance and  reinsurance to replace reliance on traditional forms of collateral  

 Center for Economic & Social Justice (cesj.org) 

As summarized below, the Economic Democracy Act is designed to:

1) Generate millions of new private sector jobs by lifting ownership-concentrating Federal Reserve credit barriers in order to accelerate private sector growth linked to expanded ownership opportunities, at a zero rate of inflation.

2) Radically overhaul and simplify the Federal tax system to eliminate budget deficits and ownership-concentrating tax barriers through a single rate tax on all individual incomes from all sources above basic subsistence levels. Its tax reforms would:

a) eliminate payroll taxes on working Americans and their employers;

b) integrate corporate and personal income taxes; and

c) exempt from taxation the basic incomes of all citizens up to a level that allows them to meet their own subsistence needs and living expenses, while providing “safety net” vouchers for the poor.

3) Restructure inheritance and gift taxes (“death taxes”) to discourage transfers from one generation to the next, of “excessive” concentrations of wealth (i.e., when the income generated by one’s capital far outstrips one’s capacity to consume the goods and services of others, and where one’s unconsumed income is simply reinvested in more capital acquisitions, resulting eventually in the monopolization of future capital ownership opportunities by the already wealthy). In order to promote individual initiative, capital self-sufficiency and limited economic power of the state, inheritance policy should encourage the broadest possible distribution of private property ownership in income-producing assets.

To meet Social Security and Medicare entitlements, and provide for their eventual phasing out as the mainstay of retirement income for most Americans, and to shift the Federal Government’s role from today’s income redistribution policies to the more limited and healthy role of encouraging economic justice through free enterprise growth, a Capital Homestead program would:

A. 

Promote Private Sector Growth Linked to Broadened Ownership. Recreate in the 21st Century the conditions that resulted from the first Homestead Act of 1862, including full employment, declining prices, and widespread, individual and effective ownership of income generating assets. Set a realistic long-term target, based on the nation’s industrial growth potential, to achieve a minimum Capital Homestead stake for every American family. As an initial measure, this could be geared conservatively toward an equity accumulation of, for example, $150,000 over the next 20 years.

B.

 Stimulate Maximum Growth, with a Balanced Budget and Zero Inflation Rate. Remove barriers to maximum rates of sustainable and environmentally sound, private sector growth to achieve a balanced Federal budget and a zero inflation rate under the Capital Homestead program.

C.

 Establish a Tax System That Stimulates Economic Growth and Jobs, and is More Accountable to Taxpayers. Re-write and radically simplify the existing Federal tax system to automatically balance the budget. Keep more money in the pockets of taxpayers from their initial earnings to cover their own health, education, housing and other basic household living expenses. Make Congress more directly accountable and responsive to all taxpayers. Eliminate all tax provisions, personal deductions, tax credits, and exemptions (except for the front-end exemptions for adults and dependents) that unjustly discriminate against or discourage property accumulations and investment incomes for poor and non-rich families.

For example, a single tax rate on all sources of labor or capital income over exemptions would be automatically set to meet all Federal entitlement and other programs, and to pay down past deficits. To meet personal living costs the basic incomes of all taxpayers up to $30,000 per adult and $20,000 per dependent (or $100,000 for a family of four) would be free from any income or payroll taxes. To increase taxable income incomes for all citizens, corporations could escape from the multiple tax on corporate incomes by deducting dividend payouts.

D. 

Keep Social Security and Medicare Promises. Keep existing promises and reduce the unsustainable burden on the Social Security and Medicare Systems, by enabling every American to accumulate sufficient wealth-producing assets to provide each person with an adequate and secure taxable income from property, independent of Social Security and Medicare benefits and incomes from other sources. Based on conservative projections of U.S. growth potential, by age 65 a child born today could accumulate a capital estate of nearly $500,000, generating $1.6 million in after-tax dividends over that period.

E.

 Inheritance and Gift Tax Reforms.  To create a more just and balanced free market economy and discourage monopolies, super-rich individuals should be encouraged to democratize their enormous accumulations from one generation to another. Gift and estate taxes should not be imposed on the donor or his estate. Rather, taxation should be based on the size of the recipient’s total accumulations after receiving the gift or bequest. If the value of the recipient’s asset accumulations (other than one’s primary home) after receiving the gift or bequest makes the recipient richer than, for example, $1 million, the recipient would pay a gift tax on the excess accumulations.

F.

 Restructure the Credit and Tax Systems to Encourage Universal Health Care through the Private Sector. Capital Homestead reforms, supplemented by health care vouchers for the poor, would provide a sustainable way to finance the health care system. These reforms would empower each citizen and family with the means to enjoy and pay for affordable, quality health coverage of their choice. Through market-disciplined, comprehensive health care enterprises that are owned and controlled by health care providers and health care subscribers (patients), the doctor-patient relationship could be restored, while providing greater insurance portability, accountability and lower administrative overhead costs throughout the system.

G. 

Solve the Home Foreclosure Crisis and Make Home Ownership Accessible to all Citizens. Starting in communities with homes whose market values are deflated due to the subprime mortgage crisis, resident-owned Homeowners’ Equity Corporations (HECs) could receive interest-free credit to buy up the foreclosed properties. As occupants of the homes in default pay the HEC their monthly rents (which could be supplemented with housing vouchers for the poor), these would be applied toward debt service, using pre-tax dollars to pay off the loans that the HEC used to purchase the foreclosed properties. As they make their regular monthly lease payments, these renters would become full owners of HEC shares and their dwellings.

H. 

Stop Federal Reserve Monetization of Government Debt. Terminate use of the Federal Reserve’s powers to create debt-backed money, to support foreign currencies, or to buy and sell primary or secondary Treasury securities. This would reduce excessive Government spending and improve accountability. It would force Government to borrow for deficits directly from savers in the open markets.

I.

 Stabilize the Value of the Currency. Require the Federal Reserve to create a stable, asset-backed currency to encourage ownership by all citizens of productive private sector assets rather than non-productive public sector debt or future ownership monopolies.***

*** Ideal for Trade-Coin.

J. 

Reduce Dependency on Past Savings for Financing Growth. Require the Federal Reserve to distinguish between “productive” and “non-productive” uses of credit, by providing interest-free money to expand bank credit to enable every American to become an owner of a viable accumulation of new income-producing assets. This would reduce America’s dependency on past savings, corporate retained earnings, or foreign government wealth funds advantaged by America’s growing trade imbalances.

Require the Federal Reserve System to supply sufficient money and credit through local banks to meet the liquidity and broadened ownership needs of an expanding market-disciplined economy. Such “Fed monetized” loans would be subject to appropriate feasibility standards administered by the banks and limited only by the goal of maintaining a stable value for the dollar.

Unsound uses of credit, such as the speculative credit that created subprime home mortgages and the global financial meltdown, would be financed from the accumulations of those wealthy Americans and foreigners who could afford the risks.

K.

Democratize Ownership of the Federal Reserve. Provide every citizen a single, lifetime, non-transferable voting share in the nation’s central bank and in one of the 12 regional Federal Reserve banks. This will ensure that the Fed’s board of governors is broadly representative of all groups affected by Fed policy, and that power over future money creation is spread widely among all citizens.

L.

 Discourage Monopolies and Monopolistic Ownership. Link all economic reforms to methods that discourage privileged access to monopolistic accumulations of private property ownership of the means of production. Enforce anti-trust laws by providing access to interest-free capital credit to encourage broadly owned new competitors to enhance and sustain market-oriented growth.

M. 

Introduce a Market-Driven Wage and Price System. Gradually eliminate rigid, artificially-protected wage and price levels and other restrictions on free trade that afford special privileges to some industries, businesses and workers at the expense of American and foreign customers of US products. Replace subsidies with interest-free credit incentives to farmers who wish to associate voluntarily in cooperatives and in enterprises jointly owned by farmers and workers, including integrated agribusinesses. The income generated by farmer-owned enterprises would supplement farm incomes and reduce the need for subsidies.

N.

 Restore Property Rights in Corporate Equity. Restore the original rights of “private property” to all owners of corporate equity, particularly with respect to the right to profits and in the sharing of control over corporate policies. Preserve traditional powers of professional managers held accountable by Justice-Based Management corporate governance structures.

O.

Offer a More Just Social Contract for Workers. A top priority during the next decade would be developing a more just “social contract” for persons employed in the private sector. This would be geared toward establishing maximum ownership incentives. Instead of inflationary “wage system” increases, employees would begin to earn future increases in income through production bonuses, equity accumulations, and profit earnings. These “bottom-line” rewards would be linked to workers’ individual contributions, and to the productivity and success of their work team and the enterprise for which they work.

P. 

Encourage More Harmonious Worker-Management Relations. Promote the right of non-management workers to form democratic unions and other voluntary associations. Instead of promoting the traditional “conflict model” of industrial relations, however, “labor” unions would be encouraged to transform themselves into democratic “ownership unions.” These ownership unions could become society’s primary institutions for promoting a free market version of economic justice, while continuing to negotiate and advance workers’ economic interests, including worker ownership rights and Justice-Based Management policies.

Under Capital Homesteading, unions could expand their role in a free market system by educating and expanding their membership to include all citizen-shareholders. Ownership unions would enhance the property rights of all shareholders by enhancing management accountability and transparency, and protecting against unjust executive compensation schemes.

Q. 

Promote a Life-Enhancing Physical and Cultural Environment. Encourage special ownership incentives for those engaged in research and development, especially in the search for new and sustainable sources of energy, ecological restoration and labor-saving technologies. Provide sufficient low-cost credit and royalty-free licensing for enterprises capable of commercializing life-enhancing technologies developed for the military and space programs. Subsidize the development of new methods of conserving and recycling non-replenishable and limited natural resources that are vital to civilization’s long-term survival, at least until suitable substitutes can be discovered and developed. Promote the teaching at all levels of education of universal principles of personal morality and social morality that are based on the inherent dignity and sovereignty of every human person within all institutions of a just social order, including the State.

R.

 Reduce Public Sector Costs. Provide America’s military, policemen and firemen, teachers, and other public-sector workers with a growing and more direct equity stake in the free enterprise system, both as a supplement to their costly pension plans and so that they will better understand and defend the institution of private property. Whenever feasible, transform government-owned enterprises and services into competitive private sector companies, by offering their workers (and customers and other stakeholders in capital-intensive operations like TVA) opportunities to participate in ownership, governance and profits.

S.

Establish Workable Demonstrations of Capital Homesteading at the Community, State, Regional and Global Levels. Launch several Capital Homesteading demonstrations. These would be most effective in areas of high unemployment, such as the for-profit Citizens Land Bank now being proposed in Cleveland, Ohio, Harris Neck, Georgia, and East St. Louis, Illinois. Similar projects could be developed on Native American reservations. A major objective would be to evaluate ownership-broadening Federal Reserve reforms, innovative broadened ownership mechanisms, advanced concepts of worker participation in decision-making, and servant leadership developments like Justice-Based Management.

Encourage State and local governments and other countries to promote widespread capital ownership as a basic “Just Third Way” framework for building a sound market economy.

Study the feasibility of a national and global citizen-owned “Land and Natural Resources Bank” to plan development of Nature’s resources, receive rentals for use of land and natural resources, and distribute citizen dividends among the population. With the leadership of the United States, urge the United Nations and other international agencies to encourage the use of such economic development vehicles in order to bring about “peace through justice” in such conflict-torn countries as Iraq, Afghanistan, Pakistan, the Sudan, Kashmir, the Democratic Republic of Congo, Somalia, Burma, Sri Lanka, etc. Such an approach could provide a model “Abraham Federation” solution for resolving the conflict between the Palestinians and Israelis.

T.

Initiate New Challenges for Multinationals. Provide special encouragement to US-based multinational corporations and global financial institutions to become instruments of peace and a more just world economic order, by broadening access to their ownership base to all citizens of the world community. Encourage businesses to open up future ownership opportunities as they begin harnessing the resources of the sea, the airways and other planets.

U. 

Promote a New Global Monetary System. Encourage the convening of a second “Bretton Woods Conference” to consider the implications of the Kelsonian binary economic model on global currency standards, the feasibility of a single global currency, and more just foreign exchange rates. The new policy should seek to reform global financial markets to address the challenge of global poverty and sustainable development, as well as leveling the playing field among nations for global free and open trade.*

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For more detail on Capital Homesteading reforms, see Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security, by Norman G. Kurland, Dawn K. Brohawn and Michael D. Greaney, published by Economic Justice Media, 2004.

* This is the ideal setting for implementing Trade-Coin as the currency vehicle. It allows for: Digital crypto-curency, controlled at a local and individual levels; that is asset backed and a transparent ledger system.