A Conservative Revolutionary Economic Proposal: Withdrawing Money From the Economy 

By Stephen Yearwood
Guest Columnist

With a democratically distributed income (DDI) and all government funded by creating money as needed, this proposal would generate a constant flood of money into the economy. No one has to study economics to know that money would have to be withdrawn from the economy for it to be functionable for very long. 

I have referred to this as the ‘rice paddy’ economy. There would be a surfeit of money in the economy, ensuring that there would be enough everywhere, with the excess ‘drained away’ (to be recycled, actually, in funding the DDI and government, decreasing the amount that would need to be created for funding those). 

First, in the absence of taxation I don’t see any way to ensure that any money could be justly collected from any person. That means that the money would have to be collected from corporations. That isn’t being ‘anti-business.’ It is being ‘pro-people.’ Besides, no money would be collected before it could be used for purchases/investment. 

Corporations would be paying no taxes and no limit would be imposed on revenue, investment in the business itself (plant, equipment, and integral intellectual properties), or the compensation of any/all employees (though bonuses of any kind would be disallowed as compensation for anyone). A limit (based on profits) would be imposed on the accumulation of cash and extraneous assets (i.e., beyond plant, equipment, or integral intellectual properties: so stocks, bonds, real estate, etc.). Accumulated cash could equal, say, the annualized amount of the most profitable quarter in the history of the company and extraneous assets some multiple of that amount (based on the price paid for them, disregarding any changes in their monetary value over time). Other outlays would be restricted to legitimate business expenses (however those might be defined). The I.R.S., with nothing else to do, would enforce compliance. 

With this proposal in place (and once the absence of taxes had been absorbed) rates of profit would not be increasing (at least not due to the structure and functioning of the proposal itself). Still, with no taxes to pay and a steady flow of money being constantly created as needed to fund a DDI and all government, corporations would be accumulating huge amounts of profits over time, even though their rates of profit had not changed. 

It is important to understand that their revenue would not be increasing, either, as a result of this proposal (once the transition period was complete—addressed in Part VII). A corporation might increase its revenue by traditional means (increasing sales, market share, etc), but this proposal would not in itself lead to increased revenue for any corporation because it would not be increasing the incomes of potential consumers (once the transition was completed). 

Still, it is easy to understand the effect that a constant flood of money coming into the economy would have on the prices of assets-purchases that (it is expected) will be worth in the future at least as much money as was paid for them. It’s not just that those prices would be going higher. They would be going up like rockets: they would obtain ‘values’ that put them in economic outer space. Imagine a single share of stock with a price in the millions. And even that wouldn’t be the limit—for the simple reason that there would be no limit. Keep in mind, also, that with this paradigm in place there would be no periodic recessions to ‘correct’ (knock down) the prices of stocks (and other assets, too, for that matter). 

We can say, for present purposes, that there are two kinds of businesses in this world. In one type of business the profits of those enterprises become income for the owners of the businesses, i.e., ‘proprietorships’ (which can include partnerships). As is now the case, in this proposal the profits of proprietorships would be the income of the owners of those enterprises. Here, “corporations” refers to enterprises in which the profits belong only to the businesses. Those are publicly traded corporations, the stocks of which are available for purchase by the general public. No individual on the planet can have any claim on the profits of any such corporation. 

The ‘brain trust’ of the corporation decides what to do with those profits on behalf of the business. Most broadly, there is only one thing to do: accumulate; hold some of it in cash and buy ‘extraneous’ assets (assets having nothing to do with the functioning of the business) with the rest. So, in this proposal corporations would be limited in the amount of cash and extraneous assets that they could accumulate. Once those limits had been reached all profits still accumulating would be remitted to the administrator of the currency. 

A few further issues related to the proposal are the topics of Part VII.