Solution - The Adams Institute For the Preservation of the Democratic-Republican Model of Government

The Solution

The people have a right to alter the government, and to take measures necessary for their safety, prosperity, and happiness.

Government is instituted for the common good, for the protection, safety, prosperity, and happiness of the people, and not for the profit, honor, or private interest of any one man, family, or class of men; therefore the people alone have an incontestable, unalienable, and indefeasible right to institute government, and to reform, alter, or totally change the same when their protection, safety, prospertiy, and happiness require it.

From the Preamble and Article VII of the 1780 Massachusetts Constitution, which preceded the Federal Constitution by seven years, drafted by John Adams.

To preserve the democratic-republican model of government:

We must empower the Constitution to rebuild our middle class.

The Constitution established the United States as a new democratic republic when the Old World was ruled by kings and nobles. But it was not the political genius of our Founding Fathers that reawakened democracy from its 2,000-year slumber. It was the political independence of our founding middle classes. And it was not the artful division of political authority that has kept democracy from slipping into mob-rule and authoritarianism. It was the rejuvenation of our middle classes after the Second World War.

As the ancient Greeks discovered, the revolutionary Americans rediscovered, and our statement of the problem elaborates, the democratic share of government is summoned by one agency alone: an upright and independent middle class. And sure enough, despite slavery, America was born middle class. It was for this reason above all others that America was exceptional. In 1776, America’s richest household owned less than 1,000x the national median household net worth.

THE CONSTITUTION ONLY EVER GUARANTEED THE LEGAL FORM OF A DEMOCRATIC-REPUBLIC.

But the Constitution was never perfect. Like America itself, it is a work in progress. Setting aside its most conspicuous inconsistency with America’s first words that all men are created equal, the Constitution’s greatest surviving shortcoming is that it only ever guaranteed the legal form of a democratic republic. The present corruption of democracy, the arrival of mob rule, the intensification of political faction, the rising tide of authoritarianism: these all prove that the Constitution was never designed to preserve the political substance of a democratic republic.

In that light, it’s no wonder democracy now unravels before our eyes. Whereas America’s top household once owned less than 1,000x the national median household net worth, by 2022 that figure exceeded 2,000,000x. The top 1% now owns more wealth than the entire middle class. And whereas the common sense of ordinary Americans agrees with the genius of Aristotle that the middle should own half, the middling share today stands at less than one-third of our national prosperity.

Our immediate challenge is therefore simple: if America is to preserve the democratic-republican model of government, its Constitution must now be empowered to preserve the political substance which sustains it: an independent middle class, continually refreshed by productive, upward mobility.

TO EMPOWER THE CONSTITUTION TO REESTABLISH OUR MIDDLE CLASS, A CONSTITUTIONAL AMENDMENT IS NEEDED.

In his second inaugural address, Thomas Jefferson suggested a constitutional amendment that would have distributed the proceeds of a luxury tax to the States. To achieve our purposes, what is needed now is not altogether different from that idea.

We propose to compute such a tax based on the mathematical relationship between the top and median household net worth. This will enable America to reestablish the middling social conditions essential for a democratic republic. The goal: roll back America’s social aspect ratio to 10,000:1. The method: tether the outcomes of America’s top households to the median such that their outcomes rise and fall lockstep in proportion to the middle class. The mantra: no gains for the middle, no gains for the top.

Anchoring the top to the median would ensure that, going forward, the top households enjoy no future gains except in reasonable proportion to those of the median. For example, the current $143k median (average of 2019-2021 Census Bureau data) sets the cap at $1.43 billion. At 10,000:1, every $1 increase to the median raises the cap by $10,000, every $10,000 by $100 million, every $100,000 by $1 billion. Median-top household wealth tethering would incentivize markets to raise the median, because the outcomes of those with the greatest market power would now be anchored, or chained, to the median. Our proposed amendment in force, future legislators must simply determine the optimal mathematical ratio between the top and median by which to backsolve for a middle class of any desired target size.

To raise the median, those beneath the median must also be raised. Indeed, the further beneath the median any given household subsists – for instance the Black median is less than one tenth the White median – the greater the incentive on the top households to raise them. At 10,000:1, eliminating Black household wealth disparities alone would raise the cap by around [$440 million] to over [$1.6 billion]. Yet median-benchmarking cannot not raise the median merely by reallocating wealth among and between ordinary households. This mathematical reality ensures that everyone’s outcomes must be increased, whether they are descended from slaves or slaveowners. That is to say, this approach will raise the outcomes of Black Americans while taking nothing away from White Americans.

THE STATES HAVE BOTH THE POWER AND THE INCENTIVE TO ACT.

Article V of the Constitution empowers 34 States to convene a constitutional convention. 38 States must ratify proposed amendments. To incentivize the States to ratify this Amendment, all direct revenues arising from ratio enforcement should be divided equally among those States timely voting for ratification.

Roughly 660 households today exceed 10,000x the national median. Existing fortunes should be grandfathered (provided only they are repatriated back to the United States) but if the next generation of top households stepped into the same wealth as the current generation, direct revenues could approach $4 trillion. If all States ratified, this amendment could deliver up to $4 billion in value per State annually. With around 19 million state and local employees, 33 million retirement system participants, and around $6 trillion held in pension and university endowments, mostly allocated to precisely the type of securities covered by this tax, the incentive to the States is clear and powerful.

While the reward to the States is indeed great, the risk to the roughly 7,400 state legislators in whose hands this Amendment ultimately sits is low. As noted, existing fortunes should be grandfathered (subject to a few exceptions). Even without that feature, almost all of the 38 States needed for ratification are home to fewer than ten residents exceeding 10,000x. Which is all to say that almost every State legislature has practically nothing to lose, and everything to gain by ratification.

And while this Amendment makes winners of workers, the middle class, Black Americans, States, state and local employees – including police, firefighters, teachers, and students – and millions of financial and investment professionals, it does create one category of potential losers: a tiny number of covered households who either include convicted criminals, or who try to move their wealth outside of the United States. This Amendment is structured to discourage capital flight and encourage the repatriation of wealth. It carries appropriately severe consequences for all those elite billionaires who would derive such awesome benefits from American laws, American markets, and American infrastructure, yet still act against the interests of the American people.

But don’t just take our word for it:

Property monopolized, or in the Possession of a Few is a Curse to Mankind. We should preserve not an Absolute Equality – this is unnecessary, but preserve all from extreme Poverty, and all others from extravagant Riches.

John Adams, 1765

Legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind.

Thomas Jefferson, 1785

The most common and durable source of factions has been the various and unequal distribution of property.

James Madison, 1787

The alternate domination of one faction over another, sharpened by the spirit of revenge, natural to party dissension, which in different ages and countries has perpetrated the most horrid enormities, is itself a frightful despotism. But this leads at length to a more formal and permanent despotism. The disorders and miseries which result gradually incline the minds of men to seek security and repose in the absolute power of an individual; and sooner or later the chief of some prevailing faction, more able or more fortunate than his competitors, turns this disposition to the purposes of his own elevation, on the ruins of public liberty.

George Washington, 1796

Having thus made the argument for the amendment’s need, here’s how we’d draft it:

A PROPOSED AMENDMENT TO THE CONSTITUTION OF THE UNITED STATES OF AMERICA TO PRESERVE THE DEMOCRATIC-REPUBLICAN MODEL OF GOVERNMENT, CONCEIVED BY A LOYAL CITIZEN.

ARTICLE [__].

SECTION 1. Every census prescribed by the Second Section of the first Article of this Constitution shall calculate and publish the national median Household net worth, accounting for every Household subject to the jurisdiction of the United States, and all factors relevant to the determination thereof.

SECTION 2. Congress shall annually lay and collect taxes on every Household described in the preceding section whose net worth would otherwise exceed a prescribed multiple of the amount last published pursuant thereto, which for all property located within any territory subject to the jurisdiction of the United States shall, in the aggregate, initially be and never increased above [ten Thousand] times, or reduced below [one Thousand] times thereof[; and for all property located in all other territories shall, in the aggregate, be an amount equal to [one-fifth] of the limit established by such preceding multiple as is then in effect and as may change from time to time as described in the following sentence]. Congress shall prescribe such multiple within sixty days after the publication of each census, which multiple will remain in effect until extended or adjusted after each subsequent census. Congress is hereby granted all power as necessary to effect the foregoing Intent and Purposes and punish and deter the evasion thereof, without regard to apportionment among the States, uniformity, any other census or enumeration or any inconsistent provision of this Constitution.

For all Households liable for such taxes Congress shall broadly account for all Property directly and indirectly beneficially owned by or for all natural Persons within such Household without regard to title, but disregard from the calculation of net worth: the appraised value of all Real Property as reflected on the records of any State or subdivision thereof (but not any monies or other Property, other than different Real Property of otherwise like description, at any time and in any manner received in respect thereof); and, unless any such Person shall have been anywhere duly convicted of any felony or financial crime, the value of any corpus of Property existing prior to the date this article (or any reduced multiple) takes effect which: is as of such effective date located within and not thereafter removed from the United States; or cannot actually be located within the United States without regard to any Treaty or foreign law conceived in subversion hereof.

Congress may exempt from any provisions of this article foreign Households not circumventing its Intents and Purposes for the benefit of, or otherwise including, any current or former United States citizens or resident aliens, or any of their respective beneficiaries, heirs, descendants, successors, or assigns.

SECTION 3. The Treasury shall distribute all Revenues collected in accordance with this article equally to each State ratifying this article within [sixty] days after its ratification by three-fourths thereof. Absent manifest error, controversies between States concerning such distributions shall be resolved favoring the more populous claimants.

SECTION 4. This article shall take effect and the next census made within three years after the date of ratification, and every subsequent census every [tenth] year thereafter. Congress shall enforce this article by appropriate legislation. The States may bring suits in any Court of the United States to compel such enforcement. No Treaty shall be made, confirmed, or enforced to the extent conflicting with this article.

SECTION 5. Congress may suspend the tax required by this article during any period that the aggregate net worth owned by the [middle three quintiles by annual income] of all Households described in the first section of this article exceeds [fifty percent] of the entire net worth owned by all Households described in the first section of this article, as determined by the last-published census.

Property monopolized, or in the Possession of a Few is a Curse to Mankind. We should preserve not an Absolute Equality – this is unnecessary, but preserve all from extreme Poverty, and all others from extravagant Riches.

John Adams, 1765