Post Pandemic, US States and Cities Need Better Plans to Reduce Income Inequality

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 had 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 have also weighed in on the fast-growing income inequality in the US. Senator Bernie Sanders talked about "Tax on Extreme Wealth" with a proposal for an ultra-wealthy tax ranging between 2% and 8%. Andrew Yang, another presidential candidate, ran on implementing a universal basic income of $1,000/month for every American adult over the age of 18. 

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 good 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 meaningful economic opportunities. One-size-fits-all economic model does not work there; instead, 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 impoverished villages in third world countries, it has tremendous potential for our inner cities. 

  

2. Let the Private Sector Develop a Fair and Equitable Property Tax Assessment System –- Property tax is often the primary 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. Therefore, the growing and prospering cities and towns around the country must consider outsourcing this crucial public task to the private sector or developing 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. An unfair system uproots seniors and minorities and often pushes the middle class off the cliff. 

3. 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. The young and reinvented cities around the country should rethink and redefine crime and punishment from a moral high ground. The lack (perhaps the absence) of economic opportunities often forces poor people to commit petty offenses, resulting in additional 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, juvenile detention centers' building does not pass the muster of moral hazards. 

4. 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. Students must compete and qualify for the available seats to get into the free STEM programs, ensuring the best and brightest acceptance. 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. 

  

5. Richest 1% Needs to Accept the Generational Reset – The wealthiest 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 to society, pulling tens of thousands out of abject poverty each year. In other words, the success or failure of this country is now mostly dependent on them. If they are honest and honorable enough to accept this harsh reality, the citizenry's advancement will gleefully continue; absent this, millions more will continue to drift away in utter poverty. 

Of course, the 99% must also learn to put the country's interest ahead of their own. So, the rich and poor alike must come to terms with the generational reset, voluntarily returning a big part, if not all, of overall wealth to society. 

-Sid Som

homequant@gmail.com

Post Pandemic, Developing Countries must Improve Existing Economic Models

Income inequality has been growing by leaps and bounds in developing countries. While some of those countries are creating more billionaires every year, millions and millions of people are stuck in utter poverty, without any light at the end of the tunnel. They can break out of this vicious cycle by revisiting and renewing the existing economic models, emphasizing exploring and inventing forward-looking growth and income opportunities for the so-called 99%. 

To properly explore growth opportunities, developing countries should start at the national level, gradually drilling down to the state, local, and individual (yes, individual) levels. The onus is on all of us. A renewed "private-public partnership" economic growth model would be ideal for developing countries... 

1. Develop Basic Infrastructure with Private Cooperation. A developing country with well-developed infrastructure can attract more high quality foreign and domestic investments than their counterparts who are struggling to ramp up their infrastructure. Therefore, instead of selling out their natural resources, developing countries should intensify the development and expansion of necessary infrastructure by enticing private companies (well-known local and foreign) to provide the leadership in that sector. For example, those companies could be encouraged to build new toll highways and bridges, railroads, metro, and light rail, ports, airports, rural electrification, telecommunications, etc. shouldering all costs in return for all revenues (at pre-negotiated resell rates) from those projects for the first 15 to 20 years. 

2. Entice Neighbors to Follow the Successful Example. Of course, with the rising prosperity comes the border issue. A good leader sets examples that the neighboring countries spontaneously follow. Today, we live in a world of economic cooperation and free trade, so building a Chinese wall around the country's border does not lead to lasting economic prosperity. Instead, the prospering countries must encourage the weaker neighbors to follow the successful example and shore up their necessary infrastructure, paving the way for a concerted regional revitalization and growth by avoiding the refugee problem from the neighboring countries.

3. Develop Regional Economic Zones. As the regional renewal gains momentum, countries must work together on creating their economic zones, letting goods and services flow freely across borders without the costly and unnecessary taxes, tariffs, and other financial barriers. With economic zones in place, it would be easier to convince corporations to build toll-ways, bridges, waterways, etc. across borders, offering better scalability and enhanced economy of scale. Developing countries must experiment with and use (macroeconomic) growth models that are sustainable. G-7s down to BRICS must aid and cooperate with the developing countries that become signatories to an international economic model emphasizing regional growth, renewal, cooperation, and development of industrial zones.  

4. Create Tax and tariff-free Enterprise Zones. With the rapid growth and expansion of the necessary infrastructure, countries will need to set up tax-free or, at least, tax-abated enterprise zones around the country. It does not make sense to build all infrastructures around a handful of big cities, making them even more overcrowded. It must be a distributed and decentralized economic model, emphasizing enterprise zones, including affordable housing. 10-15 year tax abatement is an excellent incentive to attract an array of significant and diverse groups of companies worldwide, vertically integrated with the growing infrastructures. A decentralized model would help people live close to their roots – an ideal way to keep employee turnover and absenteeism low, with morale always high. 

5. Invite Private for-profit to Build Institutes of Higher Technical Education. As those countries start to develop the service sector (atop the manufacturing industry), a steady flow of qualified employees with higher technical education would be needed. Again, instead of the local governments getting involved and controlling this layer of education, the private for-profit companies could be invited to build and run the institutes, with initial concentrations in enterprise zones, as an added enticement. While the acceptance must always be merit-based, governments must significantly subsidize all economically disadvantaged students to avoid implementing a quota system down the road. 

While local governments should refrain from running all non-essential services (which they should outsource to the private sector), they must be involved in properly managing their natural resources and all essential services like military, law and order, taxes, primary education, healthcare, clean water, etc. The developing countries built on moral (not religious) high grounds are more attractive to investors. For example, in many third world countries in Africa, Asia, and Latin America, young women do not have equal access to education (which is a crime against humanity!). "Equal access to education" is a primary metric all foreign companies must use in evaluating the investment climate of a developing country. 

Stay safe!

-Sid Som

homequant@gmail.com

Post Pandemic, US States and Cities Need Better Plans to Reduce Income Inequality

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 had 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 have also weighed in on the fast-growing income inequality in the US. Senator Bernie Sanders talked about "Tax on Extreme Wealth" with a proposal for an ultra-wealthy tax ranging between 2% and 8%. Andrew Yang, another presidential candidate, ran on implementing a universal basic income of $1,000/month for every American adult over the age of 18. 

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 good 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 meaningful economic opportunities. One-size-fits-all economic model does not work there; instead, 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 impoverished villages in third world countries, it has tremendous potential for our inner cities. 

  

2. Let the Private Sector Develop a Fair and Equitable Property Tax Assessment System –- Property tax is often the primary 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. Therefore, the growing and prospering cities and towns around the country must consider outsourcing this crucial public task to the private sector or developing 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. An unfair system uproots seniors and minorities and often pushes the middle class off the cliff. 

3. 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. The young and reinvented cities around the country should rethink and redefine crime and punishment from a moral high ground. The lack (perhaps the absence of) of economic opportunities often forces poor people to commit petty offenses, resulting in additional 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, juvenile detention centers' building does not pass the muster of moral hazards. 

4. 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. Students must compete and qualify for the available seats to get into the free STEM programs, ensuring the best and brightest acceptance. 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. 

  

5. Richest 1% Needs to Accept the Generational Reset – The wealthiest 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 to society, pulling tens of thousands out of abject poverty each year. In other words, the success or failure of this country is now mostly dependent on them. If they are honest and honorable enough to accept this harsh reality, the citizenry's advancement will gleefully continue; absent this, millions more will continue to drift away in utter poverty. 

Of course, the 99% must also learn to put the country's interest ahead of their own. So, the rich and poor alike must come to terms with the generational reset, voluntarily returning a big part, if not all, of overall wealth to society. 

-Sid Som

homequant@gmail.com

Post Pandemic, Developing Countries must Improve Existing Economic Models

Income inequality has been growing by leaps and bounds in developing countries. While some of those countries are creating more billionaires every year, millions and millions of people are stuck in utter poverty, without any light at the end of the tunnel. They can break out of this vicious cycle by revisiting and renewing the existing economic models, emphasizing exploring and inventing forward-looking growth and income opportunities for the so-called 99%. 

To properly explore growth opportunities, developing countries should start at the national level, gradually drilling down to the state, local, and individual (yes, individual) levels. The onus is on all of us. A renewed "private-public partnership" economic growth model would be ideal for developing countries... 

1. Develop Basic Infrastructure with Private Cooperation. A developing country with well-developed infrastructure can attract more high quality foreign and domestic investments than their counterparts who are struggling to ramp up their infrastructure. Therefore, instead of selling out their natural resources, developing countries should intensify the development and expansion of necessary infrastructure by enticing private companies (well-known local and foreign) to provide the leadership in that sector. For example, those companies could be encouraged to build new toll highways and bridges, railroads, metro, and light rail, ports, airports, rural electrification, telecommunications, etc. shouldering all costs in return for all revenues (at pre-negotiated resell rates) from those projects for the first 15 to 20 years. 

2. Entice Neighbors to Follow the Successful Example. Of course, with the rising prosperity comes the border issue. A good leader sets examples that the neighboring countries spontaneously follow. Today, we live in a world of economic cooperation and free trade, so building a Chinese wall around the country's border does not lead to lasting economic prosperity. Instead, the prospering countries must encourage the weaker neighbors to follow the successful example and shore up their necessary infrastructure, paving the way for a concerted regional revitalization and growth by avoiding the refugee problem from the neighboring countries.

3. Develop Regional Economic Zones. As the regional renewal gains momentum, countries must work together on creating their economic zones, letting goods and services flow freely across borders without the costly and unnecessary taxes, tariffs, and other financial barriers. With economic zones in place, it would be easier to convince corporations to build toll-ways, bridges, waterways, etc. across borders, offering better scalability and enhanced economy of scale. Developing countries must experiment with and use (macroeconomic) growth models that are sustainable. G-7s down to BRICS must aid and cooperate with the developing countries that become signatories to an international economic model emphasizing regional growth, renewal, cooperation, and development of industrial zones.  

4. Create Tax and tariff-free Enterprise Zones. With the rapid growth and expansion of the necessary infrastructure, countries will need to set up tax-free or, at least, tax-abated enterprise zones around the country. It does not make sense to build all infrastructures around a handful of big cities, making them even more overcrowded. It must be a distributed and decentralized economic model, emphasizing enterprise zones, including affordable housing. 10-15 year tax abatement is an excellent incentive to attract an array of significant and diverse groups of companies worldwide, vertically integrated with the growing infrastructures. A decentralized model would help people live close to their roots – an ideal way to keep employee turnover and absenteeism low, with morale always high. 

5. Invite Private for-profit to Build Institutes of Higher Technical Education. As those countries start to develop the service sector (atop the manufacturing industry), a steady flow of qualified employees with higher technical education would be needed. Again, instead of the local governments getting involved and controlling this layer of education, the private for-profit companies could be invited to build and run the institutes, with initial concentrations in enterprise zones, as an added enticement. While the acceptance must always be merit-based, governments must significantly subsidize all economically disadvantaged students to avoid implementing a quota system down the road. 

While local governments should refrain from running all non-essential services (which they should outsource to the private sector), they must be involved in properly managing their natural resources and all essential services like military, law and order, taxes, primary education, healthcare, clean water, etc. The developing countries built on moral (not religious) high grounds are more attractive to investors. For example, in many third world countries in Africa, Asia, and Latin America, young women do not have equal access to education (which is a crime against humanity!). "Equal access to education" is a primary metric all foreign companies must use in evaluating the investment climate of a developing country. 

Stay safe!

-Sid Som

homequant@gmail.com