A solution to excessive inequality will require that we stop fueling the source of the problem, and restore America to economic and social health and vitality.

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More on Inequality

Nearly all essays and articles on the subject of wealth inequality in America and around the world fall short of setting forth a solution about how to solve it. While it is true that we must first acknowledge that a problem exists before we can begin to solve it, the issue of gross inequality of wealth and incomes in America is an undeniable fact. Reliable data from many sources support its existence, observations confirm it, while honorable men and women from many disciplines and walks of life encourage a solution. It is an issue that transcends many regions, many classes, and many ideologies. It is contentious because it portends change. Nevertheless, if we can lay out a framework that contains the elements for solving this issue, one that is eminently fair, concerned citizens from the rest of the world might also support us and then adopt those parts of it that make sense to them. It is in that spirit that this essay is written.

Wealth is defined as assets minus debts, or net worth. Assets are financial securities and real estate. Financial assets are the more liquid of the two classes. I will limit this discussion to just those assets.

U.S. residents own about $70 trillion in financial securities (stocks, bonds, money market funds, and their derivatives). Most of that wealth (approximately $63 trillion) is owned by the wealthiest 10 percent of residents. Securities also comprise the largest portion of wealth assets. This pool is the main source of inequality in America. Its distribution is extremely skewed. Excessive amounts are held by a few. This distribution reflects how greed and oppressive laws can and do come together to guarantee an opulent lifestyle for the few—and for their offspring, perhaps in perpetuity—while it prevents nearly all of the remaining population from upward mobility in the pursuit of their goals. It is that simple, yet because this issue is so entrenched in laws, a solution must be able to find ways to change the laws in a manner that is consistent with our values, our history, and our honor. This essay will reveal many of the elements in that wealth chasm, why it exists, and how it can be fixed in a manner that is fair to all.

More than any other asset, stocks reflect the composite efforts of us all in building and storing the financial value that is America. Stocks rise in value for the same reasons. Virtually none of those reasons has anything to do with skill, expertise, just due, or reward for effort on the part of the wealthy owners of stock certificates who inherited them. Inherited wealth is at the core of this problem. Let’s expand on the reasons why.

Stock markets are the means by which shareholders buy and sell shares of stock. The price is determined by composite perceptions of value held by buyers and sellers based on the economic health of the nation in general, on the health of a particular industry, and on a specific company. These perceptions also reflect future growth prospects including present and new products, on the skills of the workforce in producing them; on their education levels; on their loyalties to each other, to the company, and to the nation; on how well or poorly they are paid; on their health, on the security of their families; on their retirement income; on the strength of the infrastructure that supports getting products to market; on how well the local, state, and national laws come together to maintain a healthy environment and a level playing field for all industries; on the health and vitality of supporting educational and health care delivery institutions; on the extent to which this particular company is a good “corporate citizen” in its respect for and to the community in which it flourishes; in its employment practices; in its treatment of minorities, all genders, colors, and propensities; in it’s policies for the growth of its employees; in the general health of the economy; in our trade policy; in the value of the dollar in foreign exchange; in the prospects for war; in global warming changes; in shortages of raw materials; in energy costs; in the comparative advantage of this company in its world market; in our immigration policies; in the political stability of various markets and regions around the world where this company does business; and in how all these factors reduce and crunch down to a price today, at this moment. Buyers and sellers evaluate all these factors in some manner.

The preceding array of facts and their interrelatedness is deliberately intended to show that an entire population contributes to stock values. If you or I inherit one or thousands of stock certificates, we had very little to do with their present value or will have in their future value. Yet the law compels that all present and future value accrue entirely to the owner of that piece of paper. Therein lies the heart of the problem.

Inheritors of stock certificates contribute virtually nothing to the preceding elements of value. In any case, they do not constitute 90 percent of the health or vitality of those factors. But a nation does. We do. All of us. Why should they and their offspring hold title to all that preceded them, all that now exists, and all that will occur in the future—for as long as they hold that paper? Any reasonable, sensible, intelligent person would ask “why?” And the answer is equally simple: Because the inheritance laws say so. And because ownership laws say so.

An inheritor today who inherits $100 million in stock certificates can reasonably expect their value to double every 10 years given a compound annual rate of return of 7.2 percent. This means that his or her portfolio value will rise from $100 million to $800 million in just 30 years. And what would he have done to create that enormous growth in value? Nothing. Repeat this scenario for just a tiny fraction of the population (just the big inheritors), and you will have circumscribed $63 trillion of wealth, or 90 percent of our financial wealth.

Those who approve of this arrangement are fond of repeating “We are a nation of laws.” In this case that means “don’t you dare do anything whatsoever to upset or interfere with this outcome or the full wrath and fury of the law will come down on you.”

OK. Let’s change the law. But not arbitrarily. Let’s use some compassion and some common sense where everyone who contributes to value also benefits from it. How about this?…

A Law to Restore Economic Vitality and to Reduce Social Injustices in America: “No person shall inherit more than $1 million dollars in the value of financial instruments, nor shall any benefactor bequeath more than $1 million of such value. The value of all securities in excess of $1 million at the death of the owner shall become the property of the United States to be held in a Trust Fund, and then to be liquidated on a measured basis and used only to reduce the public debt; to reduce our foreign debt; to pay for new and improved infrastructure (highways, bridges, railroads, airports); to restore the long range solvency of Social Security and Medicare; to provide for four years of education (academic or technical) beyond high school for any resident who desires it; to provide for health insurance for all in a single payer system; to raise incomes above the poverty level for those at the low end of the income curve via tax credits; to support research and development for new and renewable energies; and to maintain a viable and fair economic system with the primary objectives of securing full employment, price stability, and to further the objectives of life, liberty, and prosperity for all residents. This Trust Fund shall be administered by a board of no more than 12 members including 3 each from the Treasury Department, the Federal Reserve, from private corporations, and from academia. All hearings by this board shall be transparent and open to the public, with input from many individuals. All proceedings and records shall be accessible to the public.

The Trust Fund may not to tapped or altered for any other purposes, nor shall this provision of law be changed for the next 30 years; nor shall it be changed thereafter except by a concurrence of two-thirds of the Congress and signed into law by the President."

With such a change we can reasonably expect stock prices to continue to rise in value but at a decreasing rate; we can expect to see the public debt eliminated in 10 years or so; our foreign debt eliminated even sooner; the dollar to strengthen significantly in foreign exchange; education levels and literacy rates to rise; poverty to decrease significantly; a substantial improvement in our infrastructure; home ownerships to rise; health issues to abate; incomes to rise; social issues such as crime, incarcerations, suicides, mental health issues, obesity, and teen pregnancies to fall; and goal achievement a realistic expectation among all residents.

If we liquidated approximately $1 trillion of stock per year over 30 years, we could reasonably achieve all the foregoing objectives without significantly affecting the lifestyles of the wealthy. Their wealth would continue to grow but at a slower pace. But might it all revert back to the same inequalities of today? Probably not. Education is a great impediment to oppression. Rights gained can and will be fought for with a greater intensity than those only longed for.

There is and there will remain a small but very powerful number of very wealthy people who will oppose every element set forth in this essay. They will fight it “tooth and nail” with every means at their disposal. This essay will not stop them. But a thousand essays that are widely read will slow them down. And a million concerned residents will slow them further. And 10 million more can stop them. It will take knowledge, organization, fortitude, a willingness to stand up for yourself and for your country, and the unrelentingly good feeling that comes from doing something about a cause that you know puts you on the right side of history. You deserve it, your children deserve it, your country deserves it, and justice is counting on you to deliver. In that same spirit It is worthwhile to recall the words of Thomas Paine written in 1776:

THESE are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands by it now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value.