Eurekanomics – for 99% of us
By Jim Osburn
Smashwords Edition
Copyright 2010 Jim Osburn
This book is an abbreviated description of a system for establishing and maintaining a just and reasonable distribution of wealth.
The Occupy and 99% movements are public recognition that the gap between the superrich and the average person is huge and getting bigger all the time. There is reason to believe that if the trend is not stopped and reversed, then we are headed into what the academics are referring to as neo feudalism.
The enemy is not wealth – it is greed.
Capitalism used to mean creating a cheaper and better product, selling it for a reasonable price and making a fair profit. Not anymore. These dinosaur capitalists are scorned by those who consider capitalism to be the clever manipulation of money and influence, as taught by the Harvard Business School and others. The prevailing philosophy is “Greed is Good”, honesty is for the stupid, and wealth is to buy influence.
Government is the average person’s only protection against the excesses of greed. Yet almost every politician since Ronald Regan has demonized government and tried to privatize everything. The philosophy of greed is obvious in Ayn Rand’s novels, the platforms of the three major parties, and the popularity of the ultra-conservative movement. Even the courts have equated campaign money with free speech, weakened the separation of church and state, and found that citizens do not have “standing” for many issues.
A revolution is brewing.
Unlike most revolutions, it does not have a clear notion of what it is and why it is. Like a baby with the colic, it hurts – but it doesn’t know where or why it hurts. The result is a motley collection of those who would protect the snail darter, those who struggle to create a new political party, those who bemoan the national debt, and countless other causes. Some revolutionaries would revive the guillotine, some seek only a kind word from a one percenter, and others believe the solution lies in tinkering with the tax system. What leadership exists is best characterized by the African adage, “There go my people. I must hurry and catch them, for I am their leader.”
The premise of Eurekanomics is that all such problems are based on the political and economic power that results from a serious maldistribution of wealth. Rather than picking around at the edges of the problem, we propose to confront it directly. Tinkering with the tax system, getting a dab of environmental protection here and there, or trying to influence career “representatives of the people” are all a waste of time and energy. Go directly to the heart of the problem – the maldistribution of wealth.
That is what Eurekanomics is all about.
Part One describes procedures for establishing and maintaining a Standard Wealth Distribution. All income and expense data are ignored, and all Federal Taxes, including Income Taxes, are abolished. Eurekanomics deals only with wealth.
In the examples that follow, the bold italicized numbers are supplied for the illustration. All others are computed. The columnar numbers are crowded to the left, and the ^ symbol is sometimes used in lieu of spaces, to accommodate the needs of ebook readers.
You are welcome to share this boklet with your friends. It may be reproduced, copied and distributed for non-commercial purposes, provided it remains in its complete original form. For a free copy of this document formatted in Microsoft Word and suitable for hard copy printing and distribution, send an email with “99” on the subject line to Eurekanomics@cox.net. Other works by this author are available at Smashwords.com.
Part Two describes some of the problems, benefits, and likely effects of implementing Eurekanomics.
============= Part One ============
percent of wealth ^^^ poor 20% to rich 20%
20% 20% 20% 20% 20% =100% Communist
0% ^ 0% ^ 1% ^ 3% 96% =100% Capitalist
2% ^ 6% 12% 20% 60% =100% Eurekanomics
The communist pattern shown above has never been achieved, nor is it likely to ever become acceptable to the American public. The ideal is expressed in Marx’s famous quotation, “From each according to his ability, to each according to his need.” It theoretically abolishes the enlightened self interest that produces rewards for extra effort. It is shown here only to illustrate the differences between communism, capitalism and Eurekanomics.
Eurekanomics is based on the premise that we can and must implement an economy that (a) allows for the accumulation of wealth in a manner that is consistent with the individuals luck, skill and economic efficiency,, (b) prevents the accumulation of excessive wealth that gives excessive economic and political power to the wealthy, and (c) provides just, fair and equitable treatment to all its citizens.
poorest ^^^^^^^^^^^^^ richest
10% 15% 20% 25% 30% =100%
To simplify the explanation we will assume a universe of only five people, and a small range of numbers that further simplifies the examples. These five people agree that whoever is the richest at the end of each year will get 30% of the Total Wealth. Whoever is poorest will get 10%. The others will get the percentages shown. We will call this their Standard Wealth Distribution.
At the end of the year, each submits a Net Worth statement of everything he/she owns and owes. There are no taxes. No money is submitted, and none has been withheld. Nobody knows WHO is going to be the wealthiest, the poorest, or in between. It will depend on each individual’s luck, skill, and economic efficiency.
Sam Joe Max Abe Bob Tot First Year
75 124 103 185 201 =688 reported wealth
26 -30 ^ 19 ^ 39 ^ 19 ^ =73 +/- reverse prior
101 ^ 94 122 224 220 =761 = ranking score
In the process of maintaining a standard wealth distribution pattern, a wealth adjustment will have been made to each individual’s wealth in the prior year. This adjustment was based on chance – where the person happened to fall on the poor-to-rich ranking. To prevent a series of good or bad chance adjustments, and to make the results consistent with the individual’s economic efficiency, the chance adjustments of each year are reversed in the following year.
The effect of this is to increase or decrease the persons “ranking score”, causing him/her to move higher or lower on the poor-to-rich scale, thus making him/her eligible for more (or less) of the total wealth. Note in the example below that all except Max have moved to a different place in the poor-to-rich sequence.
Joe Sam Max Bob Abe Totl Ranking score
94 101 122 220 224 =761 sorted poor to rich
10% 15% 20% 25% 30% =100% % total wealth auth.
Having determined the percent of the total wealth each person/position is authorized, we can now compute the specific amount authorized. The total wealth reported on all forms was 688. The amount required for government for one year is deducted from this, and the remainder is distributed. In this example, the amount for government is 51, thus the amount to be distributed is 688 minus 51, or 637.
Joe Sam Max Bob Abe Totl
10% 15% 20% 25% 30% =100% wealth % auth.
^^^^^^^^^^^^^^^688 -51 =637 wealth –gov’t =distr.
64 ^ 96 127 159 191 =637 amounts to distribute
These are the amounts each ends up with in order to achieve the standard distribution. If we subtract the amount each already has (as shown on their end-of-year statement), the result is the amount of adjustment required to reach the amount authorized for each person/position.
Joe Sam Max Bob Abe Totl
64 96 127 159 191 =637 Amounts to distribute
124 75 103 201 185 =688 minus wealth reported
-60 21 24 -42 6 =-51 =this year adjustment
Those who do not have as much wealth as their position authorizes will be given a payment for the adjustment difference. Max, in the example above, will be paid 24 to bring him to the 127 authorized for the middle position. Bob will be billed for 42, because he has more than authorized for his position.
This adjustment depends entirely on whatever it takes to achieve the standard distribution of wealth. It has nothing to do with income or capital gains or expenses, or even the economic efficiency of the person. To make it more related to his/her experience, it will be reversed in the following year before ranking on the poor-to-rich scale. Bob will move up on the poor-to-rich ranking because of a positive reversal of the 42 he pays this year.
Case Examples
The following is the procedure from the point-of-view of two participants, Carl and Art.
Max Abe
103 185 a. Reported year end wealth
19 ^ 39 b. Reverse prior yr adjustment
122 224 c. ranking score a+b
20% 30% d. rank percent authorized (*1)
127 191 e. rank amount authorized
24 ^ 6 f this year adjustment e-a (*2)
127 191 g resulting wealth a+f
*1 % of total wealth - assumed 637
*2 (-)collect (+)pay
The National Standard Wealth Distribution
The procedures used can be applied to any realistic set of numbers, and any large population. The National Standard is a mathematically sound pattern to insure a gradual and reasonable transition from poor to rich. The following describes how to develop a chart of the Standard.
1. Draw a square. Label the bottom horizontal axis 0-100 to represent a percent of the population. Label the right vertical axis 0-100 to represent a percent of the national wealth. Label points A, B and C as shown.
.
2. Place the needle point of a compass on A and draw a regular arc from B to C. Any point of the arc will tell you what percent of the population (horizontal axis) is authorized what percent of the national wealth (vertical axis). The arrow on the illustration indicates that 60% of the population owns 20% of the wealth.
3. The cumulative wealth for any position is the total wealth authorized for everyone up to and including that position. The authorized percent for a single position will be the cumulative minus the cumulative for the prior position. To compute the cumulative wealth authorized for any given position in a population of 100:
Cumulative Wealth = 100 – SQR(100 x 100) – (position x position)
This could not have been done just a few years ago, because we simply didn’t have the computer capacity. Now such a computation for a population of several million would only require a few minutes.
This pattern represents as close as we can come to a fair and reasonable distribution of wealth. It is an essential part of Eurekanomics, and it must not be altered in any way.
=============== Part Two ===============
Disclaimer
It should not be expected that Eurekanomics or any other system will work perfectly without some problems caused by ambiguities, definitions and irregularities. What is important is that it work well enough and often enough to be a useful tool for public administration. The present Income Tax system is far from perfect, but it does produce substantial revenue.
The Institutional Distribution
Two Standard Distribution Systems are proposed: one for individuals, and one for institutions. The institutional standard is needed to prevent the same kind of maldistribution among institutions that exists with individual wealth. The procedures described in Part One would apply equally to institutions.
Coverage
Any person or institution owning accountable assets in the nation would be required to participate by filing a Net Worth Statement. It is the location of the asset, not the nationality of the person or institution, that invokes the requirement to participate.
Institutions include, but are not limited to, all corporations, non-profits, religious groups, and associations.
Individuals includes, but is not limited to, all individual persons, members of partnerships and associations. All ages, genders and nationalities are included if they own accountable assets.
Accountable Assets
All physical property located in the nation or its territories is to be reported. That includes, but is not limited to, real estate, buildings, furnishings, tools and equipment, vehicles, collections, inventories, and mining and mineral rights.
All non-physical rights and documents having a market value involving goods and services transacted within the nation and its territories. That includes, but is not limited to, cash, bank account, stocks and bonds, patent and royalty rights, commodity ownership rights, and prepaid fees.
System Characteristics
Unemployment: To participate in the present economy requires investment wealth, or a job, or reliance on others. While the expanding population increases the number of people looking for work, automation and technology reduces the number of jobs available. The effect is massive unemployment, which distorts the distribution of wealth.
Eurekanomics maintains the standard distribution of wealth regardless of the level of unemployment. Individuals who become unemployed will have to adjust – but the overall effect on the distribution of wealth will be zero. In a hypothetical example, if all the things we need were made by machine and nobody was employed, the overall effect would be the same as if everyone was working.
Motivation: Eurekanomics assures the survival of everyone – but there will still be motivation to move higher on the poor-to-rich scale and become eligible for more wealth.
Inflation and Depression: Adjusting the money supply to moderate either problem can easily be done by adding to or taking from the amount distributed. The amount of “fiat money” in circulation would always be controlled by government, and never by private banks.
The Federal Debt: The debt has been caused by lending money rather than taxing the wealthy. Eurekanomics does not need to borrow anything from anybody. What government needs is simply taken out of the national wealth at the time of redistribution. The amounts taken are progressive – more from the richest than from the poorest, in the same proportion as the standard wealth distribution. These amounts are reversed in the following year to allow the participant to recover by moving back up the scale.
Federal Taxes: Taking funds for operation of the government at the point of wealth distribution would replace all federal government taxes. Where fees are charged for government services, such as toll roads or park admissions, these could be treated the same as private institutions.
State Taxes: State and local governments could raise revenues by a system of “revenue sharing” or “piggy back” arrangements, as is currently done by some state and local governments. It is not likely that most state and local governments will give up their taxing authority, so they are not likely to be included in the Eurekanomics system.
Compliance: It would be impossible to predict any special advantage from under or over reporting assets, because Eurekanomic results are always dependent on what everyone does, not just the action of a single participant. Whatever the result, it is always reversed in the following year. To insure compliance, however, deliberate failure to report an asset should carry a penalty of forfeiture of that asset.
Socialization:. Radical capitalism has conditioned us to put the costs and administrative burden of social programs like health care, workman’s compensation, unemployment insurance and others on the back of the individual business. These costs must be added to the price of American products, making them too costly to compete with foreign products. Foreign competitors socialize these programs, relieving the business of the costs and clerical burden of administering them. This gives the foreign business a major competitive advantage over American businesses. Eurekanomics proposes to level the playing field by following the foreign model.
Moving Offshore: In our present system, where large profits involve high taxes, many businesses have elected to move operations overseas to avoid what they consider to be an excessive tax on profits. Eurekanomics does not tax profits – thus there is no motivation to move production overseas. This could be the most effective jobs preservation and restoration action ever taken.
The Compromise: There are many of the wealthy who never felt comfortable with the “Greed is Good” philosophy of the Harvard Business School. They might well accept the Eurekanomics “fair share” guarantee that the richest 10% will always own about 44% of the nation’s wealth – in lieu of the unknown strife and uncertainty that the current revolutionary fervor may bring. Eurekanomics may be an offer that is too good to refuse.
* If we have come this far and don’t finish the task before us, history will record our revolution as nothing more than a footnote in the human struggle for justice. Our founding fathers had the courage to build a new kind of republic. It is up to us, as Jefferson challenged, to have the courage to keep it.
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