Friday, November 25, 2011

Deficit Reduction

Why don't we let the the Bush tax cuts expire for everyone? That would raise a whopping $4 Trillion, which is 2 1/2 times what the Super Committee was trying to cut the deficit. Why limit the expiration of the Bush tax cuts to those making more than $250,000 a year; that only raises a comparatively much smaller $800 Billion? Adding $4 Trillion to the $1.2 Trillion of automatic domestic and defense cuts, now set to take effect in 2013, would make a significant impact on our deficit and debt.

Frankly I didn't think taxes were so crushing for everyone under Clinton and the Bush's early years. The country prospered during those years.

Some agree, but think that letting the tax cuts expire for everyone will exacerbates the income gap problem, which may be a problem even more serious and dangerous than the debt problem. I have been very concerned about growing income gap for a quite while; long before OWS. I'm still waiting for solutions (in addition to the ones I offered in my last post) other than taxing the rich. Just taxing the rich won't solve that problem.

Also, I don't completely understand the "tax the rich" solution reasoning since all statistics on the growing income gap are stated in gross income; not net after tax income.

While it may not make complete sense to use gross income comparisons, that is the way it's done; presumably because that way makes the gap bigger. The reason why using gross income rather than net income makes the gap appear bigger is that, notwithstanding what most believe, the rich do pay a lot of taxes.

Therefore by calculating the gap using gross income, raising taxes on someone who makes $1,000,000 a year gross does not reduce his income for purposes of making an impact on the income gap. Tax him all you want, he still makes $1,000,000 ( maybe more since he'll say he needs more to pay his taxes). Therefore that won't narrow the income gap.

Also raising taxes on the rich doesn't raise the income of the middle class . My guess is rolling back the Bush tax cuts for everyone won't raise taxes for the poor, period.

As to our deficit and debt problems, it's amazing to me how relatively easy it would be to really go a good long way towards solving these problems simply by going back to 2001 tax rates. Our tax rates today are near historic lows . I bet Europe wished it had problems that could be solved that easily. That's why I get so upset with Republicans for their "no new taxes" mantra .

Both parties agree, to a lesser or greater extent, that the defense budget needs to be cut significantly; especially with our two wars winding down.

Democrats need to compromise as well by cutting ineffective domestic spending and simply raising ( beginning years down the road) the eligibility age for Social Security and Medicare a couple of years, slightly adjusting cost of living indexes, and implementing other comparatively painless entitlement tweaks.

Because many Americans seem to be healthier and living longer, adjusting entitlements shouldn't be much of a practical problem. The trend towards a longer and healthier life is hopefully only likely to continue. What's so magical about 65 for Medicare anyway? Means testing is another solution. I would personally forgo receiving Social Security payments beyond the amounts I paid in.

Letting the Bush tax cuts expire for everybody, making meaningful cuts in general and defense spending, and rationally adjusting entitlements would actually result in the goal we, and the markets, have had for our government -- "putting our fiscal house in order"

Let's do all of this now, and insure our children and grandchildren's financial future before it gets much tougher to do.


Tuesday, November 15, 2011

Occupy Wall St. Action Plan

It's time to do more than "occupying" and start coming up with ideas to narrow the growing income gap. That issue seems to be the one that most supporting OWS concerns seem to agree needs to be addressed.

The best way to begin to narrow income gap is through (i) a reformed corporate governance system which reins in runaway executive compensation and compensates executives based on actual merit and value added and (ii) a reenergized and reformed union movement to enhance middle class wages.
>1. Reformed corporate governance.

The current system is not effectively dealing with excessive executive compensation. We need a system that appropriately rewards actual value.

This principle also applies to entertainers and professional athletes.

> Shareholders need a much greater and effective voice; after all it's their money that being used to pay these sky high salaries and bonuses.

Over 60% of Amereicans, directly or indirectly, own stock in the market and some of the largest shareholder are union and employee pension funds.

Directors need complete independence from executives, and they need to exercise that independence in the best interest of the shareholders.

> Consultants who advise on compensation shouldn't base recommendations on comparables ( it becomes self fullfilling and circular), but rather develop a metric for determining actual value. They should be hired by the independent directors.

All this can be accomplished within the confines of our current legal system.

2. Reenergized and Reformed Union Movement.
> A. Private sector unions need to be strengthen by being more pro growth and less obstructionist. Union employees should in some way share in enhanced profitability.

Unions need to focus on their primary goal of protecting workers wages and benefits and preventing ownership from unfairly increasing ownership's profits at the workers expense.

However to be more effective, and garner general public support, unions need to reform in order to shed the image much of the public has of them.

Most of the public seems to view unions as self-serving obstructionists, with seemingly silly and unproductive work rules, whose leaders all too often unfairly enrich themselves in a variety of ways, and sometimes are outright corrupt.

Work rule must make sense and enhance, rather than retard profitability; while legitimately protecting workers health and safety.

Unions also need to be more responsive to competitive pressures from lower cost foreign labor. Leadership compensation and benefits need to be more transparent.

Unfortunately unions give their critics ample ammunition to attack them which results in discrediting much of the whole movement.

By being more pro growth, and working with, instead of against, management, the union movement can become a driver for increasing middle class income. By operating in a way that enhances the success of the companies for whom their members work, they can better insure the employees share fairly in that success.

B. As to the public sector, where the taxpayers are the owners, State and Local public employees should all be handled the same way the Federal government and the military are.

Maybe most people are not aware, but the Federal government employee unions have very limited rights. Pretty close to what the Governor of the State of Wisconsin would like. Pay and benefits are not negotiated by the union. Why no public outcry here?

First of all, let's remember that government is not in the business of making a profit, unlike the private sector. Therefore the concept of exploiting the workers to enrich the owners simply doesn't apply to the public sector.

Yes, we need State and Local employee unions to protect employees rights, but they should operate the same way as Federal government employee unions.

There is too much room for undue influence and abuse through political contributions, union leadership featherbedding and pension abuses. As we read in the newspapers almost every day, this kind of abuse occurs often on the state and local levels.

Another principle concern is that with government officials (it's not their money) negotiating with the unions (who make political contributions to those officials), there really is no one looking out for the interests of the taxpayers.

This differs from private industry where management is closely aligned with ownership in negotiations against unions and the concept of making contributions to the guys setting your salary doesn't exist.

As another example, retirement age should be same as private sector. Why the difference, except for police and fire?

As to police and fire, perhaps, they should be handled the same way as our all volunteer military. They are way too important to be affected by politics and union actions. However, given the nature of their work, they should be entitled to retire earlier than ordinary employees.

Finally, unlike the private sector, pubic sector costs are paid by taxpayers and therefore are a big part of our financial and debt crises, especially at the state and local levels.

> All that being said, I believe a revitalized union movement is crucial to narrowing the income gap. Reform is critical to making that happen.

In summary , these are areas where OWS or other activists should get involved to get actual results. Demonstrating is all well and good, but it's time to do something.

By raising workers wages through responsible union action and lowering executive compensation through increased shareholder participation and director independence, we can narrow the income gap within the parameters of a free and open democratic society.