EOnation: More comments on national paper

[John Logue <jlogue@kent.edu>]

Three more ideas for the national paper:

1.  Tax excessive private pension plan administrative costs

One of the shocking things to me that have come out of the Industrial
Heartland Investment Forum discussion is the degree to which pension fund
administrative expenses have been burdening the working people.  Unlike
Social Security – that has very low administrative costs –
company-sponsored pension plans have exorbitant administrative costs, most
of which are connected with the churning of mutual fund investments.

My recollection of the number is that it is about $300 billion annually --
which is probably on the order of 5% of assets under management.  As
Dirkson used to say, "a billion here, a billion there, and pretty soon we
are talking about real money."

How about a progressive levy on pension plan administrative costs
(including their investment costs) that exceed – say – 2% of assets under
management to provide funds for a national fund to broaden ownership of
productive assets?  (It would be technically easy to provide a credit for
pension funds which actually beat market indices through active trading in
the years that they do so.)  It should be levied on the companies managing
pension assets, not on the pension fund.

In addition to funding a pool to broaden ownership of assets, such a levy
would have at least two other desirable consequences.  (1) It would
penalize money managers who wasted pension assets through exorbitant costs.
 (2) It would probably reduce churning of pension fund assets.
Consequently it should increase funds available for worker pensions.

For the sake of fairness, of course, this levy should also be applied to
ESOPs with excessive administrative costs.

2.  One time events

Russell Long used the nationalization of five bankrupt Eastern railroads as
the vehicle for the first Federal ESOP bridgehead in 1973.  We bailed them
out and there was a quid-pro-quo for employees.

Why didn't we do the same with the Resolution Trust Corporation?  Here we
had a case in which the Federal government spent ½ a trillion dollars of
taxpayers money on cleaning up the Savings and Loan debacle.  

Imagine for a second that every RTC transaction included a small employee
ownership plan.  Think of the leverage. Wouldn't it have been nice to get
something back for an $500 billion expenditure in addition to stabilizing
the American financial system?

Now where are we likely to face major problems in the next few years?
Energy deregulation?

Remember, large scale public bailouts of private sector financial
institutions are part and parcel of modern capitalism.  Look at how many
countries have done just that.  Sweden is a classic case.

Why shouldn't working people get a quid pro quo when their taxes are used
to save the hides of financial speculators?

3. You may want to grab the language on Federal matching funds for state
programs and for a national employee ownership extension service comparable
to the agricultural extension service from Chapter 6 of the Real World of
Employee Ownership manuscript.



John Logue
Ohio Employee Ownership Center
Kent State University
Kent, OH 44242
(330) 672-3028
(330) 672-4063 fax
jlogue@kent.edu
http://www.kent.edu/oeoc/