Expropriation as a Remedy

by Tom Kando

I have been worrying about the dual economic disaster threatening America:

1. The skyrocketing federal deficit: In 2018, the federal government is spending over one trillion dollars more than it makes. Its cumulative debt has reached $22 trillion, which is 105% of its GDP. This year, the government spends about $315 billion dollars in interest to finance its growing debt. This is 8% of the total federal budget. Imagine how much our government could do with all this money - schools, infrastructure, health care, scientific research, space exploration, saving the environment, etc.

And of course, each year the finance charge increases. In time, financing the debt will become the government’s largest obligation. Eventually, the (near) TOTALITY of the government’s budget could be spent on interest payments. In sum, utter and total bankruptcy. This happens to countries from time to time - France before its 1789 revolution, Argentina, Greece and other countries more recently, etc. America is in a vicious downward spiral.

2. The country’s obscene maldistribution of income and wealth: We have by far the largest number of billionaires of any country, and also a poor underclass unmatched by most other advanced nations: Among the 36 OECD countries (the countries most comparable to the US), we rank 5th in income equality, as measured by the Gini Index. Only Chile, Israel, Mexico and Turkey are worse than we are! (See List of Countries by Income Inequality).

 So here is how this dual problem could be solved:

The first thing that comes to mind is simple: Raise taxes massively and progressively, so as to bail out our broke government, and so as to place the greatest burden on those who can most afford it. To be sure, this would only have to be temporary- say 20 years or so. Once the government’s $22 trillion debt has been retired, taxes can be reduced.

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But I have another idea.

I have been playing with some numbers:

There are about 560 billionaires and multi-billionaires in the US, plus 11 million (multi-) millionaires.

First, let’s talk about the (multi-)billionaires:
These people’s wealth could be sharply reduced, while still enabling them to continue to sustain lives of unimaginable opulence.
Take Jeff Bezos, Amazon’s founder and chief executive. He is currently the richest individual on the planet, at an estimated $162 billion. This fortune is greater than the GDP of 155 countries, i.e. 80% of the world’s countries. Only about 20 countries in the world have total national economies that are larger than Jeff Bezos’ net worth (See List of Countries by GDP).
Were the government to confiscate 99% of his wealth, it would still leave him with $1.5 billion, certainly a comfortable amount, no?

Now you scream: Horror! Marxism! Communism! Yep. Call it expropriation too, if you wish. Or confiscation. Whatever. Even the ancient Roman concept of Proscription comes to mind. Back then, when Roman dictators such as Sulla and Augustus needed to raise cash to bail out the state, they picked up a few hundred wealthy patricians, expropriated them, and for good measure also murdered them all.

Of course, we don’t want to carry out bloodbaths in the 21st century. We could merely carry out some form of (partial) expropriation. We would treat Bill Gates (Microsoft; $93 billion), Warren Buffet (Berkshire Hathaway, $87 billion), Mark Zuckerberg (Facebook, $78 billion), Larry Ellison (Oracle, $60 billion), the Koch brothers (David and Charles, each $60 billion), Michael Bloomberg ($50 billion), Larry Page (Google, $49 billion), Sergey Brin (Google, $48 billion), Rob, Jim and Alice Walton (Walmart, each worth $46 billion), Sheldon Adelson (Las Vegas Sands, $40 billion), Steve Ballmer (Microsoft, $40 billion) and the other multi-billionaires the same way - let them keep 1% of their wealth.

Take for instance Larry Ellison, founder of Oracle, net worth $60 billion. He owns the island of Lanai, which he bought for $300 million. I have been there, it’s a nice island. Not all that small. There is a town, churches, harbors, a school and maybe some stores, I presume. It’s a bit difficult to see how Larry can own all of this; sort of like a king? But hey, he might as well keep Lanai.

These top 15 richest Americans are together worth a total of $965 billion = nearly 1 trillion = .9% of total American wealth. The combined wealth of all Americans is $110 trillion (See Wall Street Journal) The average net worth of these 15 individuals is $64 billion.

But there are another 545 billionaires and multi-billionaires in America. Their total number is 560.
(See List of Americans by Net Worth).  These remaining 545 (multi-)billionaires are worth another $2 trillion. Altogether, America’s 560 (multi-)billionaires are worth $3 trillion = nearly 3% of all US wealth.

And what about the next wealth brackets? America’s 11 million (multi-)millionaires own 70% of the country’s wealth = $84 trillion (See Wealth Inequality in the United States)

So here is how the confiscation/expropriation/proscription could go:

1. (Multi-)billionaires: 99%. This would leave even the poorest (multi-)billionaire with a wealth of $10 million. Not so terribly paltry, right?

2. As to the 11 million (multi-)millionaires: Here, confiscation could be graduated, with a maximum of 50%. Thus, no (multi-)millionaire would be left with less than half a million, while many would remain far wealthier than that, since this group contains all individuals whose worth ranges from $1 million all the way up to $999 million.

The total expropriation package would deliver $42-$44 trillion into the hands of the government. Presumably mostly in the form of investments.

Now remember, the obligations which the government has been unable to meet are twofold: (A): a $22 trillion accumulated debt and (B) annual deficit spending of $1 trillion.

If the government now invests this windfall and makes an annual profit of, say, 6%, that would amount to $2.5 trillion per year, which could be used as follows:

1. Fully fund a zero-deficit annual budget (no longer suffer a typical annual shortfall of $1 trillion).

2, Use the remaining $1.5 trillion to pay down the debt, wiping it out entirely in 15 years.

Voila, problem solved.

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PS: You may say that this article is delusional, and you may be right.

However, remember this: At this very moment, the British Labour Party is proposing EXPROPRIATING all companies of 10% of their equity, for starters (See The Economist, Sept.-Oct. 2018: 16).

As to INCOME redistribution: Policies at least as drastic as what I propose  have been in effect, and not just under radical Bolshevik regimes, but in the good old USA: By the end of the Great Depression and during World War Two, the marginal tax rate of income above today’s equivalent of $3 million was 94%! (See: When Income Was Taxed at 94%: How FDR Tackled Debt and Reckless Republicans). Today, respectable economists such as Thomas Piketty are perfectly comfortable with redistribution schemes of such a magnitude.

© Tom Kando 2018;All Rights Reserved

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