This is the promised follow up to Billionaires are not Benevolent, but they aren’t all Bad Either.

But how? As everyone is quick to point out when I say there are things that can be done, there are no easy answers. And there aren’t. Nothing worthwhile has ever been easy. Nothing worthwhile ever is easy. But if our ancestors refused to do anything until someone painted a rock red and drew a black circle on it and said, in the ancient proto-language of the day, magic rock, we would never have evolved to this point.

The US was in bad shape before, as a result of the robber barron railroad tycoons, the first great war, and the depression that followed, but it picked itself up by its bootstraps, introduced changes at the top, broke up the monopolies, allowed unions to raise worker’s prosperity, and by the ’70s had real prosperity that arguably surpassed any nation in the world at the time and, if those 10 years alone represented its economic history, it would stand side by side with many of the greatest recorded civilizations in the history books.

But then the Republicans, and their prosperous partisan proponents, came up with “trickle on” economics (which they renamed “trickle down” to fool you into accepting it) and, for anyone who is not upper middle class and above, their prosperity has gone downhill since Reagan took office in 1981. But history has shown this can be fixed, although we do have to be more careful this time because, if we do it wrong, the wealthy will just buy their own nation states, leave, and take 6% of the global GDP with them.

So what can we do? In short, we have to

• recognize the realities,
• create a multi-pronged solution that encourages the right kind of behaviour that truly floats all boats, and
• get the greatest (game theoretic) minds (who know that all billionaires are plunderous pirates who don’t care if their brethren get beheaded) to buy in and ensure that all of the proposed changes, in combination, will realize the intended effects (by thinking things through in multi-step cause-and-effect chains to eliminate all the loopholes in a manner that reinforces desired behaviour).

Before we continue, it is important to point out this economic series, designed to get you thinking about what’s truly important for a thriving economy, came as a result of

• the Deal Architect clarifying why US productivity is still lagging despite creating the greatest technology in the world in this Linked In article
• the Master of Cost pointing out how horrifically bad today’s US economy actually is in this Linked In Article
• The Prophet panicking after seeing a fake story about Costco raising the prices of its hot dogs because you want a hot dog followed by
• The Prophet updating us on the latest labour technology numbers

… and the doctor‘s need to correct and/or inform and/or pull more information out of them. You can find quite a lot of interesting debate in the comments to the four articles above.

The US has high unemployment, high poverty (and record high child poverty for a developed country), over 650,000 homeless [USA Facts], poor levels of education (16^th in science and 34^th in math out of 81 OECD measured countries — critical for STEM) [Source: The Balance], and crumbling infrastructure because it does not have enough money to fund everything it needs to (especially given it’s high defence and foreign aid costs).

Why? Because it’s taxes keep falling (when you adjust for inflation and compute the average tax collected on a per capita basis). This is because of the large shift in wealth from the middle class (who earn well, but not enough to make the investments or play the monetary games required to take advantage of tax loopholes) to the truly wealthy (multi-millionaires and, most prominently, billionaires that pay themselves $1 a year, while making millions of dollars in stock gains tax free because it’s not taxed until realized and they don’t need to access it as banks happily give them low-interest loans that they live off of until they die, at which point just enough stock will be sold to pay off the loan while the rest of their estate transfers tax free to their children).

And since trickle-on economics don’t work, the US (and Canada and the UK) need the billionaires to pay their fair share. And the key here is fair. If you expect them to pay higher rates than the middle class, they’ll pack up and move on because why should they?

We also need to ensure the workers in the corporations they control are paid a fair wage (because the government can’t afford welfare, and honestly shouldn’t need it in a truly prosperous economy). In the 1970s, a hard working blue collar couple could have a good life with job security, housing security (house or condo), food security, affordable company sponsored healthcare, college security for their children (not Ivy league, but the local college or trade school), a vacation once a year and still save for retirement. As far as I am concerned, that is a basic requirement for a prosperous first world country. Now, in any given month, they have to choose whether they eat or pay the bills because if they don’t pay the rent, they’re on the street. The key here is fair, because of all people, billionaires are the last people who believe in handouts (unless it’s a massive tax write off and publicity op), and if you want more than a basic quality of life, you should work for it! And we need to make sure this is not too much of a drain on the corporations to pay this minimum wage (hint: it’s not for any decent size corporation; only small businesses would be impacted) or on the billionaires ultimate earning potential.

In addition, we need to make sure a Billionaire’s earning potential is not limited in any attempt we put forth to extract fair wages and fair taxes. Some countries think that the more you make, the higher rate you should pay — all that does is cause the wealthy to pick up and leave (why do you think Canada has so few Billionaries, if you live in Quebec you pay 25.75% on top of the 33% federal tax, for a total tax rate of 58.75%; in the countries in Europe with the best quality of life where almost all the basics are free or cheap (education, healthcare, transit [almost] free; rent and food way less), they accomplish that (with incredible infrastructure) with less than 50% tax. In the US, it’s 37% + 13.3% in California. A strict limit needs to be set, << 50%, because if more billionaire gains were taxed even at the average middle class rate, that would be more than enough!

We also need to limit their base compensation of multi-millionaire and Billionaire CEOs — money for nothing is supposed to be for rockstars and Beverly Hillbillies, not for billionaires who sit on their assess all day and do nothing. Especially considering, adjusted for inflation, we noted their compensation over the past 46 years has increased over 1,322% while the average Joe saw a mere 18% increase. There’s no way any job is worth that much (unless you perform spectacularly). It used to be, in Europe especially, a manager would make 2 to 3 times his underlings, and a CEO 2 to 3 times his C-Suite executives. So if there were 5 levels in a company, the CEO would make 10 to 15 times more the average worker. Which was fair. Now, corporations have become more global, jobs more demanding, and leadership more critical, so we should maybe double or triple that. But at the end of the day I don’t see how anyone could argue that a CEO should be paid a base salary that is more than 100 times what the lowest earning employee makes.

They also shouldn’t get bonuses for non-performance, and even if they do perform, bonuses should be limited to actual performance. Again, go back to our goal, use them to grow the economy for everyone, not just their bank accounts. Here we have to be careful how we define limits because they’ll take whatever negative short term behavior is required to maximize their earnings today.

Then there is the stock issue. If we force the majority of their compensation into stocks, then they are going to do whatever it takes to up the stock price, which usually includes making extremely shortsighted decisions.

Sounds like a tall order of requirements, and it is, and there is no one single solution. However, since the US recovered spectacularly the last time they took on the robber barons and busted up their monopolies, there’s no reason it can’t be done again. It just has to be done with care to ensure that that the desired effects are achieved.

Namely:

• increased workforce prosperity (and more equitable pay)
• increased tax reclamation for critical services and infrastructure
• increased incentive for Billionaires to build truly prosperous businesses

As far as I am concerned, if great game theoretic political minds come together, convince the politicians to stop serving their own interests and start serving the interests of their constituents, it can be done starting with the following multi-pronged seven point framework. (And the final version of such framework would have to be all or nothing because partial approaches just create new tax loopholes and more unintended consequences.)

Increase the Federal Minimum Wage

to at least $12.25 an hour (i.e. the minimum wage of 1975 adjusted for inflation)

Decrease the Small Business Tax Rate

by 20% on average (70% minimum wage increase in a small business with minimal profits that dedicates at least 25% of revenue to payroll is a hit, so decrease the small business tax rate to support the big one time increase)

Limit CEO base pay to 100X the annual salary of the lowest paid employee whether directly or indirectly employed by their organization

if they outsource Janitorial services to an organization that pays the Janitor 12.25 an hour or 24.5K a year, then their salary is limited to 2.45M a year; if they want to earn more, they have to pay more, lifting everyone up

Limit CEO bonus pay to the greater of half their base salary or 2% of year over year REVENUE

when you base bonuses on Profit, they will cut headcount or quality to artificially inflate profit; so base it on year over year revenue increase using a rounded average profit percentage; since the average corporate profit is 7.5%, they should be limited to a fractional amount of 10% of revenue gain (i.e round up the 7.5% for easy math); we want them to keep profit in the enterprise to grow it, so their compensation should be limited to 20% of growth (which I think is still excessive, but I would leave it up to the board to decide how much to incentivize the CEO), which gives us a bonus limit of 2% of year over year revenue GAIN; so if they want a 10M bonus, then they need to increase revenue year over year by 500M (and if they do that, they’ve earned that 10M)

Preferential Capital Gains Tax Rate for their Stock in the ONE Business they are CXO for

While the 20% Trump capital gains tax rate, compared to highest middle class tax rate of up to 50% in some states, is contributing significantly to the tax deficit, they should be allowed to keep this rate for the one business they are actively running and/or contributing most of their time to (and if they want to pull a Musk or a Bezos, they get to pick ONE); this encourages them to grow it through the roof (as they will have the lowest tax rate in their stock growth in their long term stock growth in that business) while preventing them from having (multiple) monopolies; plus, they will have no need to tank the stocks in other businesses they have a hand in because they’ll have enough leverage in their current business to ignore them, plus

Biden’s Proposal to Restore the Capital Gains Tax to a meaningful level WITH Mandatory “Estate” Taxes

but no higher than the highest tax rate paid by the middle class; they’ll hate it, but the US needs the revenue, and they can still avoid a lot of the tax until they die, so they really shouldn’t care too much

[more specifically, since I agree with The Master of Cost that all income should only be taxed once, upon death, before the passing on of wealth through inheritance, all capital gains are declared and realized, and all amounts not yet taxed are taxed; so, if during their lifetime, they only realized 10% of their gains, the other 90% are realized and taxed, and then the money gets passed on … ]

Passive Income Taxing (including Mandatory “Estate” Tax)

the ultra rich pay zero (0) tax because they borrow against their paper assets, and then pay the interest from other loans against other paper assets, and just move debt around at rates way below the rates of return on their investments; as soon as any paper assets are used as leverage for capital, they have to be declared and taxed at the current value; no living free; now, if they want to keep taxes down, they’ll have to live frugally and keep the money in their companies, growing them and the prosperity of their employees and the economy in the process; they only have to pay taxes above the means at which they live until they die (as estate taxes will be mandatory on current value when the assets are passed on; this way the US will get a regular stream of critical revenue and their descendants will have to grow their holdings to grow their wealth, as the wealth will decrease by about a third on handover (but their descendants should be able to still quintuple it with smart management and elbow grease by the time it’s passed onto the next generation)

When you put all this together:

1. Workers have a higher quality of life (lifting many of them, and their children, out of [near] poverty) and more job security, especially if the CEO wants a bigger salary.

2. The USA gets more taxation revenue for critical programs and infrastructure.

3. Billionaire CEOs are incentivized to grow the business (as that’s the only way to significantly grow their net worth)

• no more money for nothing (most CEOs won’t earn more than 3M base unless they pay their people more than minimum wage)
• no more big bonuses for poor performance (revenue will have to increase or their bonus will be pocket change)
• no short sighted measures (such as massive layoffs) that will negatively impact the stock price (as it’s now their biggest long term earnings vehicle as it will be taxed at half the rate as their other stocks and they will want to borrow against it as they will be taxed at double the rate to borrow against other stocks )

And, most importantly, we’re not limiting their earning potential. This is key because the minute you impose a limit in any organization (non-profit, profit, government, church, etc.), you lose your top performers. The whole goal is to put a framework in place that aligns their best interests of the billionaires with the best interest of the country and the people to the extent possible. (Remember, just because the billionaires say I Want It All, it doesn’t mean they deserve it all, and they certainly don’t deserve it now. The rest of us have to work for it, so they should have to work for it too!)

Now go forth and debate and turn this into a full-fledged solution!

And just remember, Nobody Said It Was Easy! But something has to be done because it’s Situation Critical and some of us are sick and tired of Crying Over You!

This is the promised follow up to The USA is a Third World Country.

As the great Robert Reich points out in How Much Wealth is Too Much?, there are now only five (5) ways to become a Billionaire, and none of them are good!

1. Exploit a Monopoly
2. Exploit Inside Information
3. Buy off Politicians (20M in lobby funds gave Billionaires a 1B tax cut)
4. Defraud Investors
5. Inherit It (60% of all wealth is inherited, tax free)

There are no “Self Made” Billionaires. As the great Robert Reich again points out, the origins of today’s Billionaires are Multi-Millionaires with the money and connections to get them going. Wealth is begot from wealth.

And due to all the inheritance and capital gain loopholes, every time it’s passed on it just grows and grows so millionaire families from a century ago had 100 times that before the turn of the century and now have billions today. (Unless, of course, they exploited a monopoly, inside information, or investors, in which case they may have went from millions to billions without the intermediate step.)

Then there’s the fact that most of them greatly increase their wealth by:

• manipulating stock prices for short term gains
• paying their workers as little as possible to increase profits
• using their success to get massive raises and bonues, and even bigger salaries and bonuses at their next job (CEO pay has skyrocketed 1,322% since 1978 [Economic Policy Institute], your pay has increased less than 18% … see the discrepancy (as their pay has increase 73X more than yours has)?
• borrowing against their wealth to invest in other ventures …
• including borrowing against their capital gains tax free (while paying less interest than they make on their new investments)
• contributing to lobby groups / SuperPACS that create new loopholes for them to exploit
• etc. etc. etc.

So they’re not benevolent.

Not to mention the fact that, in GDP terms, 6 Trillion is more than the GDP of every country on earth except for China and the USA. In fact, that’s more than the GDP of the bottom 128 countries combined (Worldometer). They have more buying power than 70% of the world. (And if you tell me it’s not right, I’d agree.)

But banning them is not the answer. If you try to take away their wealth, they’ll flee with it to another country. If you overtax them, they’ll invest all their money somewhere that doesn’t. If you limit their earnings, they’ll go elsewhere.

And while the departure of some of them would lead many of us to say goodbye and good riddance, the reality is that the country needs the (very) small number of “self-made” billionaires that start with millions and end up with billions and do it the old fashioned way they used to do it a century ago (after the US government busted up the railroad tycoons and brought in anti-monopoly laws) … i.e. there used to be a 6^th way, and that way was build a business that increased value for everyone involved … the founder, the shareholder, and the workers. Like Ford did.

Ford wasn’t perfect (do your research), but he knew two things.

1. if you want to grow your business, you need to make an affordable product
2. if you really want to grow your business, make sure you pay your workers enough for them to afford it

Billionaires like that grew the economy because they lifted all boats (not just theirs). It’s billionaires like that who are needed to grow it again. Hopefully some well meaning ones will come along and start the cycle on their own, but like Reich, I’m a bit doubtful. The government may need to stand up for the people who elect them and push the billionaires in that direction.

How? That’s a damn good question. But we’ll tackle that in our next post.

Why do I say this? Because the “official” US poverty rate is over 11.5% and the official US (long term average) unemployment rate (U3) has been averaging 5.7%, and we both know the official rates (far) undercut the reality since:

• in big cities and wealthy states, you couldn’t afford rent and food if all you made was $1 above the poverty line; and the US leads all nations with the highest overall child poverty rate of 20.9% (Source: Confronting Poverty)
• the official unemployment rate (U3) excludes part time workers seeking full time, people who have not been able to secure a job in more than a year, went back to school (even part time) in an effort to level up, etc. and this (U6) rate is usually 50% to 60% higher (putting the long-term average U6 rate at 10.1%)

None of these statistics should exist in a first world country!

According the World Bank, of the 162 countries they track with a poverty line, 18 have a lower percentage of people living in poverty, including pre-war Ukraine, Belarus, Vietname, Kazakhstan, and Algeria. Something is VERY wrong here!

According to Trading Economics, 68 countries have less unemployment than the United States, with Uganda, Liberia, Vietnam, and Mexico included in the countries under 3%! Something is VERY wrong here!

According to UNICEF, there are 34 countries with a lower child poverty rate than the USA. THIRTY FOUR! Something is TOTALLY FUCKED UP here. You are (way) better off having a child in Slovenia, Czechia, Poland, or Croatia than the good Ol’ US of A.

Moreover, if you’re a blue collar worker or a low-tier white collar worker, you’re also screwed since you’ll never be able to pay off your student loans as almost everything you make will go on rent and food. And even if you’re true white collar middle class, good luck buying a house or sending your kids to college.

While all the economists and politicians want to tell you how great things are because the averages keep going up and up, this is all a facade to prevent you from finding out the truth that things have actually getting worse for you since the eighties (when “trickle on”^*, which the Republicans like to call “trickle down”, economics were introduced) because the median is not getting better. (In good years, it’s barely holding steady.) The problem with averages is that they include everyone, which includes billionaires that are collectively worth more than 6 Trillion dollars. (If Bezos moved to a small town with under 1,000 people where the average income was 35,000, the average income per person would suddenly be over ONE Million dollars, while the median would stay the same. It’s all lies, damn lies, and statistics.)

The problem is that our buying power has decreased considerably since the 70s (which was the last time things were really good for the average American) as our median family income has not kept up with rising costs (which should not be a surprise as the federal minimum wage in the US has not increased in 15 years). The relative cost of a house has almost doubled, and the cost of sending our children to a community college or trade school has almost tripled.

Here’s a simple table to break it down for you.

Year	Median Income	Median House Price	X times Median Income
1975	13720	39300	< 3X
2020	76600	391900	> 5X

And yet another simple table:

Year	Median Income	Average Tuition	% Median Income	Harvard Tuition	% Median Income
1975	13720	542	4%	5350	39%
2020	76600	9488	13%	47730	62%

When you break it all down, relatively speaking, the cost of almost everything has increased significantly since the 1970s. The only budget item that has stayed relatively flat (in the 10% to 15% of median household income) is food for a family of 4, but that’s only looking at the numbers. Today, most Americans can only afford cheap (ultra) processed foods, and even Fox News is now warning us about those! (If you were to compare spending on healthy food baskets, the buying power does not remain constant.)

In other words a significant number of you are poor (and much worse off than the majority of OECD Countries [Confronting Poverty]), unemployed, or both, and the way things are, this number that has been rising for decades is going to keep rising unbounded unless something is done. And until that something is done and these numbers start decreasing and level off at acceptable levels (5% max for poverty and 3% max for U6 unemployment), as far as I’m concerned, the US (and Canada, which switched from following the UK’s lead to America’s lead a few decades ago), is a third world country!

So what can you do about it? Some would say ban billionaires (because no one needs that much money and it should be shared more equitably) while others would say fix government (and ban SuperPACS and lobby groups that have too much influence over governments and divert them from your welfare to theirs) and others still fix economics (and what it actually measures), but neither is a solution on its own. It’s not about fixing the wealth imbalance (it’s always been there, it always will be), or ending lobbying (although we probably should end SuperPACs and limit funding levels from any individual or corporation), or changing the definition of economics (because, thanks to lies, damn lies, and statistics, there will always be ways to corrupt the measures and mislead the public), but about increasing the prosperity of the average blue collar and white collar worker, getting them back to 1970 levels, and putting them back on the path to increase prosperity (compared to the majority of the world and making the USA a true first class country again).

How? That’s going to be hard, especially since you’re one of the last “democracies” (well, not really, you’re a republic) still on a two-party system (which is easily corrupted and has been for decades and that’s why you’re not a first world country anymore), but if a party would come along and focus on the right things, it wouldn’t be too hard to right the course … especially since productivity of the average worker has increased almost fourfold since the 1970s due to American ingenuity and grit.

But first, let’s babble about those Billionaires and why they simultaneously are and aren’t the problem. Stay tuned.

 

^* Republicans have been telling us that “trickle-down” economics are good for us, when history has shown time and time again that they are not. In reality, those Billionaire tax cuts are “trickle on” economics, because that’s what the Republicans and their Billionaire buddies are doing to you, and if you don’t understand what that means, then type “golden shower” porn site into Google and it should bring up links to at least 30 sites that should have very graphic visual descriptions that demonstrate precisely what “trickle on” economics really is! (I asked Google how many golden shower porn sites and it said top 30, so I am assuming it will deliver at least 30 links to you.)

^# Statistics Canada is always years behind compared to other countries, with no good data beyond 2021, but the projection for Canada this year was a 10.1% poverty rate!