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IssuesThere are answers to every problem facing our country. Unfortunately, they usually aren’t easy answers. Instead, solutions are challenging and take hard work and compromise. Finding a solution takes both sides acknowledging the validity of the other side’s opinions and concerns, and both sides working to find a middle ground that will address everyone’s concerns, at least in part. Solutions almost always involve compromise in a democratic country.
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Change Employer FICA
Our country has slipped away from this Democratic Capitalism, with proposed new laws and regulations often based more on ideology, on an arbitrary set of beliefs, than on maintaining the compromise we made in the 1930s. Getting back to Democratic Capitalism doesn’t require a transformation or re-imagining of government. Instead it requires a different examination of proposed laws and a re-examination of our existing laws, to ensure they are still improving the lives of Americans.
The vast majority of the laws that have been passed by Congress were designed to address specific challenges or opportunities, and most, when passed, did improve the lives of Americans. But we live in a fast paced, constantly evolving world, and often as the world changes our laws don’t keep up. Over time the laws and how they are implemented can slip out of alignment with our economy and society. Sometimes they stop fulfilling their intended purpose. Sometimes how they are implemented contributes to new challenges for society.
The Employers Contribution to Social Security and Medicare are examples. They are two of the most consequential and successful government programs in our history, and a great tradeoff for workers and for companies. Both Social Security and Medicare are income transfer programs. Americans pay 7.65% of their income into Social Security and Medicare, to cover the monthly payments to seniors and their medical costs. In return they have the comfort of knowing when they retire, their Social Security and Medicare costs will be paid by the current generation of workers.
Employers also pay a tax equal to 7.65% of their payroll into Social Security and Medicare. In return, they get the benefits of Seniors with the money to buy their products and a more stable economy with less severe recessions. Again, Social Security and Medicare have been two of the most successful government programs in our history; we greatly reduced senior poverty, stabilized consumer demand and have lessened the severity of recessions that could have turned into depressions.
When Social Security and Medicare were passed in the 1930s, who paid matched up with who benefitted. Foreign trade was limited and pretty much every part of our economy required lots of people to get the job done, whether that was producing a car, maintaining records at a bank or routing a telephone call from one home to another. Basing the employer’s portion on its payroll was a simple way of making sure that all businesses paid their share for the benefit they received.
The world has changed. A significant percentage of what is sold to American consumers is no longer produced by American workers. Computers route phone calls and keep track of bank balances. Increasingly cars are produced by robots. Human labor is a much smaller part of creating economic value in our economy.
This change in our economy has caused a disconnect in the tax burden; many of the companies that benefit from the government’s economic stabilization and Seniors being able to buy their products pay very little for that benefit. Essentially the companies that employ US workers are subsidizing those that don’t.
The structure of the taxation also increases the cost of hiring a US worker by 7.65%, an average of about $4,000 per worker annually. This makes US labor less competitive with foreign labor, increasing pressure to move jobs offshore and to replace jobs with robots. It also gives employers a reason to turn employees into contractors or gig workers. The structure of taxation is undermining US employment – it is harming people in our country.
The vast majority of the laws that have been passed by Congress were designed to address specific challenges or opportunities, and most, when passed, did improve the lives of Americans. But we live in a fast paced, constantly evolving world, and often as the world changes our laws don’t keep up. Over time the laws and how they are implemented can slip out of alignment with our economy and society. Sometimes they stop fulfilling their intended purpose. Sometimes how they are implemented contributes to new challenges for society.
The Employers Contribution to Social Security and Medicare are examples. They are two of the most consequential and successful government programs in our history, and a great tradeoff for workers and for companies. Both Social Security and Medicare are income transfer programs. Americans pay 7.65% of their income into Social Security and Medicare, to cover the monthly payments to seniors and their medical costs. In return they have the comfort of knowing when they retire, their Social Security and Medicare costs will be paid by the current generation of workers.
Employers also pay a tax equal to 7.65% of their payroll into Social Security and Medicare. In return, they get the benefits of Seniors with the money to buy their products and a more stable economy with less severe recessions. Again, Social Security and Medicare have been two of the most successful government programs in our history; we greatly reduced senior poverty, stabilized consumer demand and have lessened the severity of recessions that could have turned into depressions.
When Social Security and Medicare were passed in the 1930s, who paid matched up with who benefitted. Foreign trade was limited and pretty much every part of our economy required lots of people to get the job done, whether that was producing a car, maintaining records at a bank or routing a telephone call from one home to another. Basing the employer’s portion on its payroll was a simple way of making sure that all businesses paid their share for the benefit they received.
The world has changed. A significant percentage of what is sold to American consumers is no longer produced by American workers. Computers route phone calls and keep track of bank balances. Increasingly cars are produced by robots. Human labor is a much smaller part of creating economic value in our economy.
This change in our economy has caused a disconnect in the tax burden; many of the companies that benefit from the government’s economic stabilization and Seniors being able to buy their products pay very little for that benefit. Essentially the companies that employ US workers are subsidizing those that don’t.
The structure of the taxation also increases the cost of hiring a US worker by 7.65%, an average of about $4,000 per worker annually. This makes US labor less competitive with foreign labor, increasing pressure to move jobs offshore and to replace jobs with robots. It also gives employers a reason to turn employees into contractors or gig workers. The structure of taxation is undermining US employment – it is harming people in our country.
Revenue-Based Social Security and Medicare Contributions
Basing a company’s Social Security and Medicare contributions on its US revenue instead of its US payroll would be a much fairer approach to taxation. It would again ensure all companies that benefit from the programs pay their share of the cost of the programs. It would also make US labor more competitive with foreign labor and robots, and remove some of the cost advantages of hiring contractors or gig workers instead of employees.
The change could be revenue neutral, not a tax cut or tax hike. Businesses already record and report revenue, minimizing the additional paperwork burden. As with any change in tax policies, there will be winners and losers. The losers will be the companies that have minimized their US employment by shifting jobs offshore or to contractor status, that currently get the benefit of the government’s efforts to stabilize consumer spending and our economy but don’t pay for it. The winners will be the companies that employ US workers, working Americans themselves and our country as a whole. We all benefit when there are more jobs available for American workers.
The change could be revenue neutral, not a tax cut or tax hike. Businesses already record and report revenue, minimizing the additional paperwork burden. As with any change in tax policies, there will be winners and losers. The losers will be the companies that have minimized their US employment by shifting jobs offshore or to contractor status, that currently get the benefit of the government’s efforts to stabilize consumer spending and our economy but don’t pay for it. The winners will be the companies that employ US workers, working Americans themselves and our country as a whole. We all benefit when there are more jobs available for American workers.
Returning to Democratic Capitalism
Social Security and Medicare are still two of the most important, impactful programs in the United States. But how we collect those taxes from businesses is a legacy of a different time and a radically different economy. It is unfair to US producers, makes US workers more expensive to hire and hurts our ability to compete internationally. Ending the employer portion of Social Security unemployment insurance and moving to a revenue-based tax would be a fairer approach that would benefit our country.
This isn’t a grand transformation of our economy; it’s a re-examination and refinement of government to ensure it benefits our country and doesn’t cause unintended harm. It’s an example of how we can move our country back to Democratic Capitalism. The change won’t be overnight. But this, along with many other incremental changes, will eventually again ensure our capitalist economy benefits all Americans.
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This isn’t a grand transformation of our economy; it’s a re-examination and refinement of government to ensure it benefits our country and doesn’t cause unintended harm. It’s an example of how we can move our country back to Democratic Capitalism. The change won’t be overnight. But this, along with many other incremental changes, will eventually again ensure our capitalist economy benefits all Americans.
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Compromise
As both of the parties have become more extreme, Compromise has become a dirty word. Both sides seem to think that they and they alone have the one true answer, and any compromise is somehow giving in to evil. But nobody has the one true answer. And recognizing and respecting the humanity of others isn’t evil, it’s the strength of our country.
We need to get back to respecting everyone’s opinions. We need to get back to compromise. And the starting point needs to be a more honest conversation.
A More Honest Conversation
The extremism of both parties hasn’t just undermined our conversation, but has also undermined the truth. It’s not so much that each party is telling lies. More accurately, each side only says the part of the truth that supports the extremism of their party. Both sides ignore the parts of the truth that undermines or disproves their extremism. Neither side looks at the whole picture.
We need to get back to the whole truth, no matter how messy or inconvenient, or even painful. Our country can’t make progress unless we start from an honest accounting of our challenges and problems. We can’t arrive at the right answer, the right direction for our country, based on a partial truth.
Over the course of this campaign, we will be highlighting the way both parties distort the conversation. We will be offering policy proposals which are based on a more honest look at our challenges, and what both sides get right. Most of these positions will involve compromise. Because finding common ground in the middle really is the only path forward for America.
The divisiveness is undermining our country.The United States, in many ways, has gotten off track. We have stepped back from civil society. We have stepped back from respect for everyone. We have stepped back from the core idea of our Constitution, that every person has a right to their own opinion, and a right to be respected as a human being.
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About Blake
Blake Ashby lives in Ferguson, Missouri, with his wife Dara (and dogs). He was previously a member of the City Council of Ferguson, representing the 2nd Ward. A longtime entrepreneur, he has helped start numerous successful businesses. He writes the occasional commentary for the St. Louis Post-Dispatch and other publications and is an occasional talk radio guest.