Via FICA both Social Security (more accurately defined as Old Age and Disability INSURANCE) and Medicare are funded by payroll deductions on the U.S. working class, the philosophy being the current working generation supports the needs of the prior one. Exporting jobs without compensating by some means for the FICA revenue lost "short-circuits" this well-designed mechanism as fewer jobs means fewer income streams for FICA to deduct from and less FICA revenue, resulting in the Social Security and Medicare solvency concerns. This decreased revenue stream also exacerbates the deficit and educational issues as well, requiring an ever smaller "upper class" to devote ever more revenue to meet these needs. Ultimately democracy itself becomes compromised as politicians begin to pay more attention to a "financial aristocracy" and less attention to securing the welfare of the general populace. The middle class then is effectively eliminated. So if we keep letting our jobs go overseas who will pay YOUR Social Security?
One idea often discussed is to supplement the FICA funds lost by switching from those who work to those who consume with a value added tax. But with fewer living wage jobs in the USA this becomes ineffective due to a decreasing average tax base value.
There is another way though, achieved by enacting the National Employment Recovery Act (NERA) and the Bring Jobs Home Act (BJHA). NERA and BJHA are game plans to be addressed more fully in committee but this DOES provide a sound starting point, something we need to demand from all candidates, Republican, Democrat or Independent, instead of blindly shuffling the deck. If you are a business owner do you not issue "Requests for Proposals" to all prospective contractors then review their "Preliminary Response" documents before deciding to award contracts? In a democracy the citizens in fact "own" the business of government and need to do much the same before voting candidates into office. So now is the time to be proactive by requiring candidates to submit game plans about how to resolve our country's major economic issues rather than just "slapping the competition".
We must take care of our own affairs first. We can be of no help to others if our own house is in disorder, especially in this era of global economic uncertainty. The key to keeping Social Security and Medicare solvent is to remove the "short circuit" in FICA revenue caused by jobs being off-shored. As well off-shoring our jobs is hurting younger Americans and hinders our ability to pay off the deficit. We are of no help others if we are unstable ourselves.
Budgeting, economic and tax issues, including the "How To Pay For It All" questions will all be addressed if we can enact the National Employment Recovery Act (NERA) and the Bring Jobs Home Act (BJHA - for more on BJHA see WV Senator Manchin's comments).
WHAT IS THE GAME PLAN? Here's how to fix it along with a plethora of other problems.
Before we get into a revenue discussion let me make this statement and here my Republican background is going to come out. Yes. there is a lot of spending fraud, waste and abuse in our governments at all levels that needs to be streamlined and optimized out. For example, many once valid expenses for our taxes are trivial or obsolete now and need to be optimized out. We need intelligent and practical streamlining and re-appropriation in this budget optimization process without cutting vitally needed programs such as Social Security, Medicare, unemployment insurance, labor laws and farm programs. Off-budget items added to "must pass" bills should not be allowed but instead submitted as unless spending emergencies exist that require them (Why instead are they not SEPARATE bills?)and all such cases need to be deleted in the next year's budget. At one time tracking all this was very difficult, but that need not be so in the digitalized world we have today. The President should be given a line-item veto ability because he is the one who "policies" such off-budget spending, not just for his own party but for the country as a whole and this is the way for him to draw such spending to the public's attention. Line item vetoed bills then go back to Congress for renegotiation and always of course such vetoes can be overridden by 2/3 majority. Another idea, many spending ideas can be left to public discussions and referendums so that public opinion may be solicited before the proposed program is enacted. Let the particular congressmen sponsoring the idea state the need to their constituents as well as to the general tax base. Some Federal spending can be eliminated by interstate information sharing and cooperation, e.g. driving licenses. The states by and large run this between themselves with the Federal government acting at most as an arbiter and overseer. Think of this interstate cooperative as a kind of "shadow government" that augments and substitutes for specific spending at the Federal level. All this is fine and well but needs to be addressed as a separate exercise but to avoid being sidetracked and simplify this discussion we will consider a new revenue stream independent of existing ones.
BASIC PREMISE: Additional revenue to be realized from the four pronged approach (and other means) mentioned below.
Considering this additional revenue as a single pool here are the suggested ways to divvy it up, based on liquidating shortfalls and restoring solvency being taken care of first. Note that this excludes existing revenue sources and is "event" rather than time driven.
PHASE I (INITIAL) 1/2 to pay down the deficit to get it under control, 1/4 to pay off Social Security IOUs and 1/4 to provide educational needs for the next generation.
PHASE II (assumes deficit paid off at least 75%) 1/3 to pay off deficit remainder, 1/3 to pay off Social Security (and Medicare) IOUs and 1/3 to provide educational needs for the next generation.
PHASE III (assumes deficit liquidated, assumes Social Security IOUs paid off with more jobs increasing FICA revenue) 1/4 to insure Social Security (and Medicare) stay solvent with any surplus funneled into individual tax reduction, 1/2 to provide education needs for next generation and 1/4 for individual tax reduction.
PHASE IV (Ultimate objective; assumes Social Security and Medicare now solvent and funded through FICA revenue, assumes no deficit and hopefully a surplus) 1/3 to provide educational needs for next generation, 1/3 for individual tax reduction (low income citizens should now see ZERO tax, high income citizens smaller amounts) and 1/3 to build up a surplus for buffering the treasury for emergencies, for to-be-approved other spending and for corporate tax reduction.
HOW TO PAY?
This four-pronged idea brings in the revenue to fix Social Security and Medicare by removing the "short circuit" in FICA revenue, pays down the deficit and helps educate the next generation. It is a game plan that uses new revenue sources and seeks to minimally disrupt existing revenue flows.
PRONG 1 - The Core of the Solution is the National Employment Recovery Act (NERA):
THE SIX ECONOMIC PROBLEMS TO BE SOLVED NERA WILL ADDRESS:
- Uncertainty in the long-term solvency of Social Security and
- Uncertainty in the long-term solvency of Medicare due to the "short-circuit" in FICA revenue;
- The increasing national deficit and
- The reduction in well-paying living wage middle class jobs;
- Stagnant or declining educational standards insufficient to properly equip the next generation with the skill sets required to meet future economic requirements, all of which are resulting in:
- The "watering down" of the American Standard of Living to a global substandard as opposed to the elevation of the global standard to an American benchmark.
NERA works by giving another tool to the FED, allowing it to impartially impose actively monitored surcharges on items produced outside this country to keep them within a "free market trading range" window of what it would cost to produce the same items within the U.S. and must be administered without regards to politics using raw economic laws. THIS IS PRO-LABOR LEGISLATION, think of it mechanically as a flywheel governor on the free trade process to keep it from spinning out-of-control. Effectively we "tax away" any advantages of foreign subsidies, currency manipulation, "dumping" and using cheaper overseas labor thereby keeping our U.S. businesses from being overwhelmed and our economy from being "watered down" to the lowest global denominator. Since we only establish free trade "windows" note that U.S. companies still have to compete within those windows, surviving ideally on quality of product and service as they should but the playing field is level now. This also allows an entity such as the FED to "tune" national production and keep our U.S. businesses from growing fat and lax, as well as damps political influence by an upper class affluent "aristocracy". Increased FICA revenue will then take care of the Social Security and Medicare solvency concerns. Use the direct revenue to pay off Social Security IOUs, to improve education for the next generation (e.g. restore the "High" in high school) and to pay down the deficit. NO OTHER SPENDING UNTIL THESE SHORTFALLS ARE TAKEN CARE OF AND WE ARE BACK ON A SURPLUS FOOTING, after which individual tax rates are to be reduced followed by corporate tax rates.
- Use carefully placed and actively monitored surcharges on foreign products to negate labor cost advantages and currency manipulation to bring the labor costs of imports that could be made here near what it would cost to make those products here. This is an economic regulatory mechanism, NOT protectionism, that could be another tool of an independent body such as the Fed.
- Apply the revenue of said surcharges towards the national deficit, paying off Social Security IOUs and providing the education needs of the next generation, then lowering individual tax rates for all citizens then all corporations.
- Exclude products and services originating in the U.S. from foreign companies who choose to locate plants in the U.S., hire U.S. labor and abide by our nation's labor laws. (We may import products but not labor needs.)
- DO NOT exclude products and services originating overseas from U.S. companies which export their labor needs outside this country then bring their products made there back here to sell. (We may export products but not labor needs.)
- Provide tax credits to those companies which increase national employment, impose additional tax penalties on those who offshore jobs.
Prong 2 - The Bring Jobs Home Act (BJHA and My letter from WV Senator Manchin:
The Bring Jobs Home Act would prevent U.S. companies relocating to another county from deducting their moving expenses and provide a 20% tax credit for a company to eliminate its foreign operation and expand its U.S. operations. As Senate bill S2.569 this failed on a 54-42 vote January 14, 2013, needing 50 votes to pass (http://thehill.com/blogs/floor-action/senate/239029-republicans-blocked-the-democrats-insourcing-bill). BJHA needs to be revived, perhaps as a part of NERA. Both NERA and BJHA are tools for achieving the same goal, the economic recovery of our country. Then in 2017 Republicans AGAIN filibuster the Bring Jobs Home Act.
Prong 3 - A National Severance Tax On All Oil, Gas and Petroleum Product Exports:
It is projected the USA will have more oil and gas than OPEC with the new technology being used and so this could mount into the $ BILLIONS. Present law does not permit oil and gas to be exported but this can be changed to allow these exports PROVIDED we apply a National Severance Tax on such exports like most of the states have (e.g. 5%). Use the revenue FIRST to pay down the national deficit, THEN along with NERA revenue to pay off all Social Security IOUs then to lower the nationwide individual tax burden and properly equip the next generation with the skill sets required to meet future economic requirements (e.g., restoring the "High" in public high school education to bring it up to a two year non-specialized college/technical level). This severance tax also has the desirous effect of encouraging keeping our oil and gas products here to use in the USA rather than shipping them overseas.
Prong 4 - A transport/conveyance tax on projects like the Keystone XL pipeline based on units of medium moved; use it the same way to lower our deficit and to soften objections.
Combining these four prongs forms the new source of revenue to enact the above game plan. In addition, the re-patronizing offshore funds back into the U.S. should only be allowed if the funds brought in are used to generate employment here. That could be a part of NERA or BJHA and can be implemented in the form of tax credits. This is the effective way for our government to unilaterally handle its economic problems.
WANTING DEBT FREE COLLEGE?
OK, then by "debt free" are you saying the taxpayer needs to foot the higher education bill, at least through the junior college level? That is not going to happen without first addressing how to pay for it which is what these new tax revenues will do.
President Obama's suggestion of providing free two year community college is a very good starting point, but ultimately we need to integrate that into our high schools (making it what some refer to as "prep" school). Drop the subject matter of grades 10, 11, 12 back to grades 7, 8, 9; then teach the two year junior college curriculum over grades 10, 11, 12, stressing students discovering where their aptitudes are along with private-public partnership work-study programs during summer months. Thus when a student graduates he/she has broad exposure to career possibilities and a firmer idea of what they want to do next in their life, be it full college or vocational, with the time and cost of remedial education largely eliminated.
When one hears the word "taxes" one naturally thinks about their own income taxes but IT NEED NOT BE SO. By enacting the National Employment Recovery Act (NERA), the Bring Jobs Home Act (BJHA), with a national severance tax on exported petroleum products and a per barrel medium moved transport tax on projects like the Keystone XL pipeline. This multi-pronged approach by the way also pays down the deficit, keeps Social Security and Medicare solvent and eventually can reduce all individual tax rates!
Let's Fix This Once And For All! Sign the petition to enact the National Employment Recovery Act along with the Bring Jobs Home Act with a similar petition on the White House site and yet another one here.
For more about NERA and BJHA, see the NERA Facebook page at: http://www.facebook.com/NationalEmploymentRecoveryAct (and you may make comments here) and http://rncox.newsvine.com/_news/2015/05/31/33059022-time-to-be-proactive-by-requiring-candidates-to-submit-game-plans-about-how-to-resolve-our-countrys-major-economic-issues-before-being-considered-for-office.
Feel free to network this around. I am an Independent by the way, which lets me talk to both sides :-)!
Independent member, WV Senator Manchin's Project Weirton task group