According to Forbes, “In 1965, America's top 1% controlled
about 10% of the nation's after-tax income. That number has now grown to over
15%. The average CEO-to-worker pay ratio has increased from 20-1 in 1965 to a
whopping 312-1 in 2017. And middle-class real wage growth has been stagnant for
decades.”
Presidential
candidates are also weighing in on the fast-growing income inequality in the
US. On September 24, 2019 Senator Bernie Sanders announced his “Tax on Extreme Wealth” with a proposal
for ultra-wealth tax ranging between 2% and 8% depending on the net worth. Presidential hopeful
Andrew Yang’s campaign website Yang2020.com states, “Andrew would implement the Freedom Dividend, a universal basic income
of $1,000/month, $12,000 a year, for every American adult over the age of 18.
This is independent of one’s work status or any other factor.”
Given this widening income gap between rich and poor and
stagnant wages for the middle class, we need some serious socio-economic
re-engineering. Here are some:
1. Implement Laureate
Yunus’ Microcredit Model to Create Economic Opportunities in Inner Cities –
Most inner cities in the US lack proper economic opportunities resulting in
poverty, often rampant poverty. Thousands of bright people are stuck in poverty
in inner cities due to state and local governments’ inability to create any meaningful
economic opportunities. One size fits all economic model does not work there;
instead, the local governments should try Laureate Yunus’ Microcredit Economic
Model, thus financially empowering the local entrepreneurs (who “are too poor
to qualify for traditional bank loans”) to turn their neighborhoods around.
Though this bottom-up economic model was developed for poor villages in third
world countries, it has tremendous potential for our inner cities. In order to
maintain the uniformity of the program, it needs to be federally (HUD) funded
or insured, with a dedicated chain of private financial institutions operating
and managing it, in line with the existing SBA program. Again, for the program
to successfully work, governments must not be involved in running it.
2. Proclaim all small and mid-size
Downtowns as Enterprise Zones –
Downtowns of many small and mid-size towns
around the US suffered heavily with the out-migration of population to the suburbs.
While the theme of revival and revitalization of downtowns has been gaining
momentum, it needs to accelerate and become more widespread. In fact, all such
downtowns must be proclaimed as Enterprise Zones, enticing businesses and
builders to return to take advantage of the long-term income and property tax
abatements. Sales tax subsidies could be offered to entice consumers to return
to shop in revitalized downtowns as well. Public parks could be privatized in
an effort to convert them to esthetically-decent yet income-producing
family-oriented amusement and entertainment centers. A well-planned nationwide
downtown revival initiative will create enormous economic opportunities and
jobs; in fact, it could complement the much-talked about trillion dollar
Federal Infrastructure Plan, creating much better synergy than approaching them
mutually exclusively.
3. Build Water and Sewage Treatment
Plants – Clean water along with effective sewage system is life’s
basic necessity. In fact, providing clean water to citizens is as important as
the basic education and preventive healthcare. Therefore, investing in water
and sewage treatment plants must also be viewed as preventive healthcare,
helping people avoid unnecessary trips to health centers and emergency rooms
due to easily avoidable water-borne diseases and lack of sanitation. Private
companies must be enticed to build and run these plants in exchange for
long-term tax-free revenue. Upon expiration of the initial contracts,
governments must auction off the maintenance and revenue rights for lump-sum
and upfront revenue. This could be one of the best investments in keeping
people healthy while reducing overcrowding at the ER, thus freeing up doctors
and nurses to provide more critical medical services. This rising tide will
incentivize private companies to make bigger and better (AI and robotics)
investments in water treatment and recycling technology, striving to lower the
overall development and maintenance costs.
4. Let
the Private Sector Develop a Fair and Equitable Property Tax Assessment System –
Property tax is often the major source of revenue for Cities and Towns. The poorly
built or haphazard assessment systems tend to be highly regressive, thus
heavily favoring the rich. Under such a biased system, the poor and
middle-class homeowners subsidize the upscale and high-end properties. The
young and prospering cities and towns around the country must therefore consider
outsourcing this important public task to the private sector or at least
develop it in collaboration with the private sector so it becomes truly fair
and equitable. Ideally, the development and managing of this task must be
entrusted to the private sector. Obviously, an unfair system discourages home
ownership at the rank and file level, uproots seniors and minorities and often
pushes the middle class off the cliff. On the other hand, a fair and equitable
system spontaneously entices property developers, both residential and
commercial, to explore those markets. Likewise, the major developers tend to
avoid cities and town with unfair and/or unpredictable assessment systems.
5. Develop a Competitive yet
Investment-friendly Business Climate –
States down to cities and towns must develop
an investment-friendly business climate and learn to compete with one another
in order to entice significant domestic and foreign investments, leading to
persistent and long-term economic prosperity and an ever-expanding job base.
Political leaders must also realize that a marketable local economy requires a
marketable labor force along with an attractive business climate comprising
lower corporate taxes, growth-friendly corporate and environmental regulations,
separation of church and state, developed financial institutions, low crime,
cooperative and functional government, etc. Furthermore, in order to attract
major corporations to help take the city/town to the next level and reshape the
economic landscape, local governments must be as forthcoming and accommodative
as is economically possible, considering such an event could bring
about epoch-making economic impact locally; Case in point: In 2018,
we noticed the absolutely astounding reactions from many cities and towns
across the country to the proposed development of Amazon’s HQ2 and the regional
centers.
6. Build
more Long-term Care Facilities, not Jails and Prisons – People
committing the so-called “serious crimes” must be sent to high-security long-term
care centers under the care of qualified psychologists and psychiatrists. If we
decide to move to a “merit-based immigration,” the top-notch psychologists and
psychiatrists from around the world must top the merit list alongside the STEM
professors and highly qualified researchers. This humane approach will help
save a ton of taxpayer dollars, finding ways back into those poorer
communities. The young and reinvented cities around the country should rethink
and redefine crime and punishment from a moral high ground. The lack (perhaps
absence of) of economic opportunities often forces poor people to commit petty
offences, resulting in unnecessary jail terms. Instead of sending them to jails,
they should be assigned to the local clergies, rabbis and imams to perform
community service. Similarly, in a civilized world, the building of juvenile
detention centers does not pass the muster of moral hazards. Those kids should
also be supervised by the local spiritual leaders. This holistic approach will
be a much better deterrent than the traditional jail terms. They will thus
remain as normal and productive citizens without the useless stigma of jails
and detentions. In return, the participating religious institutions must
receive government aids and grants for maintenance and conservation of their
facilities.
7. Make
College Education Free for STEM Students – This country needs to
emphasize science and technology education to maintain global championship.
Government colleges must provide free STEM education to all qualified poor
students. In order to get into the free STEM programs students must compete and
qualify for the available seats, ensuring the acceptance of the best and
brightest. Students pursuing other essential disciplines like nursing,
teaching, etc. must receive tuition subsidies as well. All other majors (e.g.,
business, humanities, etc.) irrespective of the students’ financial needs must
pay full tuition, thereby forcing the otherwise needy to pursue vocational
education in line with the market demand. Again, vocational education must
carry full financial aid for the needy. While the local governments must always
ensure that the financially disadvantaged students are never left behind, they
must simultaneously understand the marketability of the labor force. Taxpayer
dollars must never be squandered on education that is contrary to the market
demand.
8. Richest 1% Needs to Accept the
Generational Reset – The richest 1% now owns 50.1% of the
world’s wealth. Given this absurd concentration of wealth, we need this 1% to
be self-convinced (like Mr. Warren Buffett) that they are just temporary
custodians of their wealth. They must therefore come to terms with the
generational reset meaning, at the end of their lives, they must return a
sizable portion, if not all, of their wealth back to the society, pulling tens
of thousands out of abject poverty each year. In other words, the success or
failure of this country is now largely dependent on them. If they are honest
and honorable enough to accept this harsh reality, the advancement of the citizenry
will gleefully continue; absent which, millions more will continue to drift
away in utter poverty. Hopefully, this voluntary return of wealth – and not
forced redistribution of wealth – will become a self-fulfilling prophecy in
arresting the ever-widening income disparity and mitigating poverty. We just
want them to be more humane in feeling the pain and anguish of millions of
mothers watching their children go to sleep hungry.
9. Apply
the Same High Moral Standard to the other 99% – We must learn to put the
interest of the country ahead of our own. So, the rich and poor alike must also
come to terms with the generational reset, voluntarily returning a big part, if
not all, of our wealth back to the society. Perhaps, we need a universal
ring-tone ‘Mom, I am hungry, I can’t sleep’ which will constantly remind us
that millions of children are hungry and that their mothers are starving. That
nightly cry is the Via Dolorosa for those mothers – that just never ends. We
must never forget that these are our children and their mothers are our
daughters and sisters. They are inseparably part of us!
- Sid Som, MBA, MIM
President, Homequant, Inc.
homequant@gmail.com
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