To: Serious reformers on several mail lists.

Hi Folks,

ONE HUNDRED AND TWELVE YEARS AGO, H. C. Adams, a young member of the "new 
school of political economy" wrote in Vol. I of the American Economic Review:

>> The most unfortunate consequence of so vicious a method of education in 
economics is found in the fact that the collapse of faith in the sufficiency 
of the philosophy of laissez-faire, has left the present generation without 
principles adequate for the guidance of public affairs.  (snip)  Herein lies 
the especial pertinency of the topic considered in this essay.  Principles of 
action we must have, for nothing is so mischievous as the attempted solution 
of great questions on the basis of immediate interests alone. <<

ON AUGUST 2, courtesy of Tom Lunde on list 
<[log in to unmask]>, from Tom Atlee at URL 
<http://www.co-intelligence.org/CIPol_Index.html>, we read:

>> Some of the most co-stupid groups are made up of brilliant people who 
use their brilliance to undermine each other so that together they add up to 
nothing -- or who are trapped in a dysfunctional group process or social 
system that erodes or wastes their brilliance or, worse yet, transmutes it 
into collective catastrophe. <<

ON AUGUST 2, seven hours after Tom's post, Douglas P. Wilson, at URL 
<http://www.island.net/~dpwilson/index.htm>, in his 99-08-02 20:10:14 EDT 
post to list Futurework, fairly well pulled the rug from under Tom Atlee's 
"Co-stupidity/Co-Intelligence" approach to social reform and asserted that 
"We need tools and techniques, or in other words, social technology" to cure 
what ails us.

ON AUGUST 3, Thomas Lunde corrected Wilson on the difference between 
structure and system when he wrote, in part, to list FutureWork:

>> Now, this new structure can come on us willy nilly through historical
movements like globalization or can come to use through the design of
structures that allow a humane rather than capitalistic globalization in
which a structure is being created by those who influence or control the
market. <<

ON AUGUST 3, at the end of the day, Douglas P. Wilson writes again, to say in 
part, on list FutureWork:

>> Anyway, as soon as Mr. Atlee or Mr. Lunde have an actual plan to
rebuild our society I'd like to hear about it.  Not a plan to have
a plan, though -- I want to see the actual plan itself, the real 
blueprint for change.  I have a plan of my own all ready to go, now, 
but I encourage them to work one out for themselves.  If I can help
in any way, please let me know. <<

Speaking of co-stupid groups, consider two of today's most active social 
reform groups on the internet: 

(1) those reformers who advocate an interest free medium of exchange as the 
cure for what ails us.   

(2) those reformers who advocate a Universal Basic Income (UBI) as the cure 
for what ails us.   

Together, they have preserved the status quo in the U.S. since the end of 
World War II, with no prospect in sight of any change.   Let's look a little 
closer at the "dysfunctional group process or social system" which still 
addresses our "great questions on the basis of immediate interests alone."

First, let's discuss how unimportant the debt service on our circulating 
medium of exchange really is, by reviewing the public imformation issued by 
the Federal Reserve System.  M1, the money which corporations and government 
agencies (the U.S. capital plant at 90 degrees on Figure 6) use to disburse 
wages, salaries, interest, dividends and purchases from other corporations = 
$1,144.9 Billion in July 1995.  At 5% interest, debt service on M1 = $57.2 
billion/year or 0.97% of the 1995 U.S. GNP.  If the banks are charging the 
U.S. capital plant 5% interest on M1, that business expense will be included 
in the gross sales of the U.S. economy, which consists of two parts: 

+A flow (between lines A and C on Figure 6), the GNP, = $5,906 billion/year, 
the disbursement by government agencies and corporations of wages, salaries, 
interest, and dividends to people (households) at 270 degrees on Figure 6.

+B flow (between lines 0 and A on Figure 6) = $8,853 billion/year, the 
disbursement for material and services purchased from other corporations, by 
government agencies and corporations. 

= +gross sales (between lines 0 and C on Figure 6) = $14,659 billion/year for 
the U.S. capital plant in July 1995.  Obviously, the $1,144.9 Billion of M1 
must turn over 12.8 times per year to generate the $14,659 billion/year in 
gross sales.
 
So the annual cost of M1 at 5% interest is only 0.39% of annual gross sales.  
That seems a reasonable price for business and government to pay for an 
effective circulating medium of exchange (M1) which compliments the 
production process and, by its circulation, measures all of the wealth 
produced, consummed, or saved annually in the U.S.A.  

Keep in mind that the amount of M1 in circulation has declined from $1,144.9 
Billion in July of 1995 to $1,090.2 billion in January of 1999, while the 
U.S. GNP increased by 24%, the DJI increased by 270%, and M3 increased by 42% 
over that same 3.5 year interval.  If M1 were issued by the U.S. government, 
as it had been in the U.S.S.R. for 72 years, instead of by commercial banks 
under the Federal Reserve System, which by law must return all revenue in 
excess of expenses to the U.S. Treasury, does anyone truly believe that our 
circulating medium of exchange would cost less than the 0.39% of annual gross 
sales we are paying now?

Now, let's look at how a Universal Basic Income would change the process of 
"capitalistic globalization in which a structure is being created by those 
who influence or control the market."  In 1915, Bertram Russell described the 
four stages of a Universal Basic Income (UBI) in the order of their occurance 
in the life-cycle of every individual person, as follows:

UBI Stage 1, Education and support of dependent children ~~ 10% of GNP.  The 
5% for education is already in place, so 5% of GNP ($5,000/head/year at 
today's prices) more is needed in the United States to remove the fixed and 
unavoidable cost of supporting children from the household budget of 
parenting families.  This first stage of a UBI, if implemented,  would put 
American parenting households on the same financial footing that gay, 
lesbian, and celibate households now enjoy under our present public policy.  
Who will step up to the podium and say to the public: A universal children's 
allowance would place an unfair tax burden on the gay, lesbian, and celibate 
members of our society!

UBI Stage 2, A $5,000/head/year stipend for mothers who stay out of the 
workforce to care for their children ~~ ?~2%~? of GNP.  The minimum wage is 
now $10,000/year, as shown on Figure 8b, and unmarried mothers on welfare now 
receive such a stipend.  Why are married mothers not out on the streets 
demanding such a modest stipend for the important work they are also doing?  
Will the potential future Senator from New York, Ms. H. Clinton, propose such 
a measure during her campaign for the Senate?  After all, It does take a 
whole village to raise a child.

UBI Stage 3, A distribution to all current members of the workforce, of a 
poverty level ($5,000/head) annual income. ~~ roughly 14% of GNP.  This third 
stage of the UBI would cost as much as three U.S. national defense budgets 
and constitute an additional tax burden equal to a second 14% social security 
payroll tax applied to all income, "from whatever source derived," above and 
below $63,000/year.  Stage 3 of the UBI would move the U.S. total tax 
structure into the European mode, which is far above the 30% of GNP total tax 
rate we now enjoy, along with only Switzerland and Japan.  We might want to 
delay stage 3 until after we have a few years of experience with UBI stages 1 
and 2, and the economy has expanded enough to make stage 3 affordable.
 
UBI Stage 4, Old age pensions (social security) for retired people ~~ 5% of 
GNP, established in 1936 by U.S. President F.D.R., and refunded in 1983, by 
P. Moynihan, R. Dole, A. Greenspan, and a Presidential Commission, based on a 
payroll tax which now takes from the workforce 14% of all earned income below 
$63,000/year, 0% of all earned income above $63,000/year, and 0% of all 
unearned income (dividends, interest, and usury) above and below 
$63,000/year.  This writer, as you know, is now enjoying the only stage of 
the UBI which the U.S. establishment has allowed to be established in the 
United States.

>>> End Bertrand Russell's four stage UBI, as embellished by WesBurt <<<

Now let's repair to the "only technically valid global model on the internet" 
at URL <http://www.freespeech.org/darves/bert.html>, and use the macro-model 
Figure 6 and the micro-model Figure 8b to make the usury non-problem and the 
four stage UBI solution clearly visible to every student in our sixth-grade 
arithmetic classes.  Then, maybe, if we are lucky, twelve or sixteen years 
from now, after this writer is "around the bend" with Ronald Reagan, the U.S. 
may have elected public officers with "principles adequate for the guidance 
of public affairs," who will restore the U.S. to mint condition, a century 
late.  Better late than never.

There is not much to see on the macro-model Figure 6.  The capital plant and 
the banking system are working nicely in the U.S.A.  The macro numbers on 
Figure 6 show how big the Swiss economy would be if Switzerland had the same 
population and land area as the United States, based on GNP/capita data 
calculated at market exchange rates, before "purchasing power exchange rates" 
were devised to obscure the fact that the U.S. was losing ground in the 
global competition.  

The only obvious defect visible on Figure 6 is that 5% of GNP (the fixed 
expense of supporting dependents) which is included in the personal spending 
stream, rather than in the government spending stream at 270 degrees, where 
the other 5% of GNP, the fixed expense of educating dependents, has been 
located since the 19th century.  Either 5% item, or any other 5% of GNP item, 
when charged to the household budget of workers and distributed as dependents 
are distributed among households, would create the same 5% of GNP net 
deficiency of purchasing power which is the root cause of the century old 
4-10% unemployment and 2-3%/year inflationary trend shown on Figure 10 of the 
global model.  The most interesting aspect of our 20th century efforts to 
correct this 5% of GNP deficiency of purchasing power may be clearly 
visualized on micro-model Figure 8b, which is a cross section of the GNP flow 
of M1 at 270 degrees on the macro-model Figure 6.  Figure 8b locates the 
contribution and consumption of every member of the national population.

As drawn, in 1993, Figure 8b distributes every member of the national 
population along the X axis.  Those individuals who are supported or employed 
by the public revenue, including defense contractors, appear along the (-) X 
axis (public sector) according to their consumption or production as measured 
in units of value-added (uva).  Those individuals who produce the goods and 
services which the whole population consumes, or saves for capital formation 
and replacement, appear along the (+) X axis (private sector) according to 
their production.  Additional fold-out pages, at 200,000uva/year per page 
will show members of congress, federal judges, grade 13 and up bureaucrats, 
and the President on (-) page 2.  Bill Gates and associates will appear about 
on (+) fold-out page 100, while most of the private sector workforce and 
their household dependents will be distributed over (+) page 1 between zero 
and 100,000 uva/year, as shown by the normal distribution curve below the (+) 
X axis.  

With both the private sector workforce and the government supported workforce 
distributed over the (+) and (-) X scale according to the units of 
value-added (uva) which they produce or consume, we can now introduce the 
circulating medium of exchange M1 to define the earned income of each member 
of the workforce along the radial line 0, +a, which continues down to -a (not 
shown) to define the earned income of public sector workers, or the cost of 
supporting public dependents.  The market, using the plain old human beings 
we have on hand as decision makers, is not perfect.  But much experience 
shows that it matches $/year income to uva/year contribution everywhere along 
the earned income line 0, a, with a standard deviation of not more than +/- 
5%.   Central planning, after 72 years practice in the U.S.S.R., never 
matched the performance of the market.  To see more clearly what central 
planning does to indirect taxes and the labor market, look at Figure 6 and 
expand the 30% of GNP government spending to include the 30% G&A rate of the 
capital plant.  

The structure of the U.S. total tax rate is worth showing in more detail on 
micro model Figure 8b to illustrate the futility of adding progressive tax 
rates to the income tax system.  For earned incomes between 0 and 
$63,000/year, the SS payroll tax will take 14%, leaving 16% of GNP for the 
Federal, state, and local taxes.  For earned incomes above $63,000/year, the 
payroll tax line becomes parallel to the earned income line 0, +a, so that 
Bill Gates on page 100 pays the same $8,820/year payroll tax as his 
$63,000/year employee.  The Federal income tax is 15% of earned income, less 
$300/year/dependent, below $63,000/year and 28% of income above $63,000/year 
(or whatever the break point is these days), less $560/year/dependent.  
Taking the income and payroll tax together, we have Mr. Forbes' "Flat Tax" 
with a 30% rate.  It is always better to have a high income than a low 
income.  

Now we must look at the other so called money measures M2, M3, & L, which are 
also included in the total national debt of $13,408.6 billion in July 1995.  
The two components of total national debt, as defined by the FEDERAL RESERVE 
BULLETIN, are:

Federal Debt, July 1995, = $3,614.4 billion at 5% interest = $180.7 
billion/year or 3.1% of the $5,906 billion/year U.S. GNP in July 1995.  So we 
can show debt service on the Federal debt as a line, about 3.1% of GNP above 
the total tax line 0, b.   The U.S. Congress must keep a close eye public 
spending, to 
hold debt service to 3.1% of GNP, or 10.3% of public revenue.

Non-Federal Debt, July 1995, = $9,794.2 billion at 5% = $489.7 bjllion/year 
or 8.3% of the $5,906 billion/year U.S. GNP in July 1995.  This larger amount 
of debt service on non-federal debt may be shown as a radial line 8.3% of GNP 
below the total tax line 0, b.  This debt service lowers the break-even 
points at which each worker's discretionary income (after taxes, debt 
service, and depend support) becomes zero and goes negative at all lower 
incomes.

Now we may define unearned income, TOTAL USURY, INTEREST, DIVIDENDS, or DEBT 
SERVICE   = $670.4 billion/year = 11.4% of the $5,906 billion/year U.S. GNP 
in July 1995, as a curved line, located about 11.4% of GNP above the earned 
income line 0, a.  Relatively little unearned income is received by low 
income people because they have little discretionary income available to 
invest.  The area between the lines, which define the $670.4 billion/year 
interest on the national debt of $13,408.6 billion, will be displaced toward 
the higher incomes.  Most certainly, "Them as has, gets!"  And yet, if the 5% 
of GNP net difficiency of purchasing power in the lower end of the workforce 
were corrected, would not more of the high income investable funds be 
invested in growing new businesses rather than in consumer debt and 
speculation?  Would not those growing new businesses, which are now not able 
to survive, improve their communities and enrich the lives of those who 
created or were employed by the new businesses?  And is not simple justice 
and equity at issue in connection with our public policy on who pays to 
replenish the workforce?
 
Having followed this tedious presentation of sixth grade arithmetic to this 
point, are you still wondering why I bother to post it?  Perhaps Sally Lerner 
has expressed, better than I can, my reason for hammering on this need for a 
widely accepted graphical frame of reference capable of intergrating the many 
lines of inquiry leading to Globalization and the Good Society.

On July 27, I had the pleasure of receiving from Sally Lerner, owner of list 
FutureWork, a copy of her recent paper on the political resistance to a 
universal basic income in North America, which she presented at the Madison 
(Wisconsin), 8-10 July 1999, Tenth Meeting of the Society for the Advancement 
of Socio-Economics," together with a copy of Philippe Van Parijs' report on 
that SASE conference to members of his own organization, Basic Income 
European Network (BIEN).

Van Parijs wrote:
>> SASE was founded by the "communitarian" sociologist Amitai Etzioni, and is 
currently chaired by Wolfgang Streeck, director of Cologne's Max Planck 
Institute.  SASE holds one big international conference every year.  "The 
theme of this one, Globalization and the Good Society, hardly guaranteed that 
basic income would play a prominent role in it."  Yet, it did.  Among the 
countless parallel workshops, one was explicitly devoted to basic income, 
with a critical review of a number of recent books by Karl Widerquist (Levy 
Institute), a paper on the limits of the work ethic by Michael Lewis (State 
University of New York), and a paper on political resistance to basic income 
in North America by Sally Lerner (University of Waterloo), who announced at 
the end of the workshop her intention of starting an interactive forum on 
basic income
([log in to unmask]). 

But the surprise came from the semi-plenary addresses and plenary panels. 
While Robert Haveman (University of Wisconsin) restated his plea (see OECD 
Econ. Papers 1996) for a comprehensive package including a refundable tax 
credit at two thirds of the poverty line and employment subsidies targeted at 
the low skilled, Ronald Dore (Centre for Economic Performance, London School 
of Economics) made a vibrant plea for a citizen's income at 40% of GNP per 
capita and predicted that the Blair Government's Working Families Tax Credit 
(analogous to the US Earned Income Tax Credit) would gradually expand and 
move in this direction. Joel Rogers (Department of Law, University of 
Wisconsin and leader of the New Party) contrasted his new egalitarianism
(enabling, empowering, responsibility-compatible, decentralized) with both 
neo-liberalism and traditional egalitarianism (passivity-inducing, ex-post 
correcting, centralized).  In reply to comments by Fritz Scharpf (Max-Planck 
Institut Köln) and Philippe Van Parijs (Université catholique de Louvain), he 
indicated that his views had been moving away from conditional, "activating" 
benefit schemes to a non-means-tested unconditional basic income (which would 
give more bargaining power to its recipients while eroding the hurdles that 
prevent activity).  Finally, Erik Olin Wright (Department of Sociology, 
University of Wisconsin) concluded the last plenary panel by stating that 
everything he heard (especially by the Harvard law professor XXX and Julie 
Kerksick, director of the State of Wisconsin's project "New Hope. Buiding 
Bridges to Work") pointed to the relevance of introducing a universal basic 
income. As the the next SASE Conference (London School of Economics, XXX July 
2000) will be on "Citizenship and Exclusion", there is no doubt more than a 
fair chance that "socio-economics" will be pondering again on the virtues and 
drawbacks of a basic income. <<
>>>>>>> End report to BIEN by Philippe Van Parijs <<<<<<<

Sally Lerner summed up our common cause, it seems to me, when she concluded 
her paper, as follows:

>> At the end of the day, if there are not going to be enough secure, 
full-time, adequately-waged jobs in the future, both justice and societal 
interest dictate that we not continue to penalize and stigmatize people who 
cannot find such positions or families who cannot cobble together a living 
from several sub-standard jobs or contingent serial contracts. 
 
All people, as a human right, should have the means to live decently. And it 
is clearly in the societal interest that everyone be motivated and able to 
participate fully and positively in community life. <<
>>>>> End Sally Lerner's paper <<<<<<

A solution of the global problematic may be closer than we realize.  If the 
Clinton administration's "Earned Income Tax Credit" and the Blair 
administration's "Working Families Tax Credit" should happen to be 
implemented at anything above 20% of each country's per capita GNP for each 
dependent in U.S. and U.K. households (that was the rate for Japan, Western 
Europe, and Scandinavia in 1946 according to Stuart Chase, John Lacerda,  and 
other authors of the post war period), the other nations would soon follow 
suite, just to remain competitive.  And the public would never need to know 
that it had a UBI.

KInd regards,

WesBurt


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