Albert's America

Outsourced: Why Jobs Leave The U.S.

Albert — Sat, 07 Jan 2012 02:47:35 +0000

American jobs for decades now have been outsourced, destroying numerous communities which relied on manufacturing jobs. Many blame NAFTA and the lack of tariffs, but the real culprit is our government. For those that blame NAFTA, let me remind you that NAFTA was passed by Bill Clinton and it added more jobs than it lost in the 90s. After its passing, unemployment continued to fall at a steady pace during the 90s¹, despite the “disaster” of NAFTA. All statistics will show that NAFTA helped grow our economy and there has been no evidence of it being the main cause of U.S. jobs being outsourced. Most of those jobs which have been outsourced have been outsourced to China, Japan, and India; not Canada or Mexico.

The reason jobs have been outsourced from the U.S. is very simple. The U.S. has the largest corporate income tax in the world, we have some of the most excessive taxation on earth, our laws are unfair and unpredictable, we have too many government fees and mandates, and low skilled labor in the U.S. is too expensive. The corporate tax rate in the U.S. is 39.5%, while China has a rate of 25%. Nations across the world have been slashing their corporate tax rates; some of these nations include Japan, Germany, and South Korea. China doesn’t even have a capital gains tax and their labor is much cheaper. The U.S. tax code is overly complicated and unattractive to businesses, but 20 other nations (like Russia) have simplified their tax codes by issuing one paged flat rate taxes.

The reason jobs leave the U.S. is very simple: America is no longer a business friendly place. We just don’t have the competitive advantage over China, Japan, or Germany. It’s easier and more affordable to do business in those countries. Until the U.S. dramatically reforms its laws and tax system to make the U.S. more attractive to business and manufacturing, you will not see jobs flowing into the U.S. from around the world. Simple reforms, like issuing a one page flat rate tax, or cutting the corporate tax rate in half, or abolishing/reforming the capital gains tax, or even abolishing the minimum wage would help bring jobs to the United States. It really is that simple.

Sources:

1. Bureau of Labor Statistics Historical Unemployment Statistics: http://www.bls.gov/cps/prev_yrs.htm

Learning from the Strength of the 90s

Albert — Sat, 08 Oct 2011 07:31:25 +0000

With the apparent failure of today’s leadership in Washington, it’s hard for me to see how people can ignore the policies which propelled us into prosperity during the Roaring 90s. Under the leadership of President William Jefferson Clinton, and especially the leadership of Newt Gingrich and the Republican Congress, we saw the longest period of economic expansion in American history. But how was such prosperity achieved?

President Clinton remains a hero to the left wing and an enemy to the right wing. For the left wing, President Clinton was the first real successful Democrat since John Fitzgerald Kennedy. For the right wing, President Clinton stopped the seemingly unstoppable Reagan conservative movement which gave America the largest economic expansion in American history. Clinton was also plagued with scandals, many of which were based around moral issues. Yet surprisingly, both sides have an incorrect view of Clinton. In fact, conservatives should embrace Clinton; while liberals should wake up to the reality that their policies do not work and were certainly not in play during the Clinton years.

Under President Clinton’s presidency we saw the largest entitlment reform in U.S. History, the passing of NAFTA, the last deregulation bill, the largest capital gains tax cut in American history, spending was cut by 3.5% of GDP¹, and we saw a balanced budget and a surplus for three years¹. The Clinton presidency is nothing but a resounding example of Supply-side economic success! I still find it puzzling that conservatives hate Clinton and liberals are blind to the fact that Clinton was the most conservative democrat since JFK. Clinton did however raise taxes across the board, but he did this during economic expansion. It is perfectly fine to raise taxes moderately during economic expansions. Reagan himself allowed moderate tax hikes in 1984 and 1987, which were also during an economic expansion. Clinton even signed the Financial Services Modernization Act of 1999, which allowed banks to diversify. This deregulation bill helped many banks stay afloat during the Great Recession of 2008. Contrary to common liberal mythology, the Financial Services Modernization Act of 1999 was the last deregulation bill to be passed. There was no deregulation under President George Walker Bush.

With all that said, conservatives should embrace President Clinton’s presidency because it truly is yet another example of conservative supply-side success. While liberals, like Obama, should actually learn from the success of their hero.

Sources:

“Revenues, Outlays, Surpluses, Deficits, and Debt Held by the Public, 1969 to 2008.” Congressional Budget Office. N.p., Mar. 2009. Web. 3 Feb. 2010. http://www.cbo.gov/ftpdocs/100xx/doc10014/March2009_HistoricalTables.pdf

Tax Theory 101: Tax Revenue is Relative to Economic Growth

Albert — Sun, 18 Sep 2011 23:12:22 +0000

An economy in recession will provide a drop in revenues to the government, whereas an economy in expansion will provide an increase in revenues to the government. When an economy shrinks, so does the tax base. Businesses start to close down, leaving fewer businesses to collect revenues from. More people are unemployed and left without an income, this leads to more people collecting unemployment benefits from the government. This leads to a smaller tax base and increased outlays for the government, which is a double-negative. With a shrinking economy also comes a lack of investing, savings, and spending. More businesses, people, and capital begin to move out of the country and the incentive to avoid any means of taxation goes up. All of which shrinks the tax base, because of the shrinking economy. When an economy is expanding, the tax base also expands. Businesses start to open, more people have jobs and incomes, the incentive to avoid taxation is less, more people invest, save, and spend their money, and more people, businesses, and capital enters the country. This all leads to a larger tax base which increases revenues. Tax revenue is relative to economic growth.

Example: In 2001 the 9/11 recession hit, made worse by the Clinton Business Cycle Recession (Dot-Com Bubble Bust). The Bush Tax cuts were passed before the 9/11 recession, therefore rendering them ineffective (Principle 2 of Tax Theory). As the economy shrunk, so did revenues. In 2003 when the second wave of the Bush tax cuts took effect, the economy began to recover. Revenues went up as the economy began to expand.

CBO Historical Tables: http://www.cbo.gov/ftpdocs/100xx/doc10014/March2009_HistoricalTables.pdf

Bureau of Labor Statistics Historical Unemployment Statistics: http://www.bls.gov/cps/prev_yrs.htm

For a complete list of the Seven Principles of Good Tax Policy/Theory, click here.

A Constitutional Balanced Budget Amendment

Albert — Sat, 27 Aug 2011 03:35:10 +0000

To ensure the long-term fiscal security of the United States, it is vitally important to pass a Balanced Budget Amendment to the Constitution. As we’ve seen in our recent past, the federal budget was balanced from 1998 to 2001. But due to unforeseen events, and a lack of fiscal responsibility with our leaders, we ended up in debt throughout the last decade. We ended up fighting two wars, without accounting for the increase in spending brought by those wars. There was no real tax reform, or spending reform. We must not allow history to repeat itself. To ultimately secure our fiscal future we must pass a Balanced Budget Amendment which would not allow congress to ever pass a budget which was not balanced, while setting clear spending caps. This would force government to always live within its means, no matter what. We must ensure our fiscal future by passing this amendment, for it is the only true way to permanently keep our federal government fiscally accountable. This truly is the simplest solution for helping us reach a balanced budget. There’s no deep economic rhetoric needed here; it’s as basic as not spending money you don’t have. I see no reason to reject a Balanced Budget Amendment to the constitution. In fact, any argument against such an amendment is ludicrous. If we had a Balanced Budget Amendment in place ten years ago, which capped spending and forced congress to pass balanced budgets, we wouldn’t be in a debt crisis today…

More Solutions to Balance Budget:

1. Social Security Reform,

2. Defense Spending Reform,

3. Flat Tax

All of these links above are links to previous posts in my blog. They all have to do with the same topic, which is balancing our federal budget. I hope you enjoy them, if you haven’t read them already. I hope to have more written soon.

Cutting Meaningless Defense Spending

Albert — Sat, 27 Aug 2011 02:22:43 +0000

Defense spending takes up about 19% of the budget, making it tied with Social Security as the largest or second largest part of the federal budget¹. In the fiscal year of 2011, the Defense department spent above $721.3 Billion dollars². The vast majority is spent on Operations and Maintenance, which cost the nation $312 Billion² dollars in 2011. So how can we cut Defense spending without harming our own Defense? There are several things we can do. To cut Operations and Maintenance, we can simply close down U.S. bases in Europe and in Japan. Such bases are no longer needed. The current policy of the U.S. Navy is one of Constant Global Presence. In fact the U.S. has over 63 bases worldwide. One can say the U.S. has a presence on every single corner of the globe. There is not a place where the sun does not shine, and there is no American influence. We do not need bases in Italy, Germany, Japan, or in Kosovo. The Soviet Union no longer exists! There is no need for bases in Europe or Japan. Closing bases in the Philippines would also be a great idea, since there really isn’t a real need to have bases stationed there. Closing bases in those countries would cut costs dramatically, and it would keep more of our men and women home. This type of cut in Defense spending is not anti-patriotic, nor is it a slap to our men and women in uniform. Benefits would not be taken away, nor wages be lowered. This is a great solution to help balance our budget.

Sources:

1. . ”Revenues, Outlays, Surpluses, Deficits, and Debt Held by the Public, 1969 to
2008.” Congressional Budget Office. Federal Government, n.d. Web. 9 July
2011. http://www.cbo.gov/ftpdocs/100xx/doc10014/March2009_HistoricalTables.pdf

2. Downsizing the Federal Government. CATO Institute , n.d. Web. 9 July 2011.
http://www.downsizinggovernment.org/

Debt Crisis: Social Security Reform

Albert — Mon, 22 Aug 2011 04:04:56 +0000

It is obvious from the start, and painful to accept, that we must reform and cut Mandatory/Social Entitlement spending. Mandatory or Social Entitlement Spending is Social Security, Medicare, and Medicaid. All three programs take up more than 41% of the Federal Budget¹. It is obvious that if you want to put a dent in the deficit and debt, you will have to make cuts and reforms to Entitlement Spending. Social Security alone takes up 19% of the federal budget¹ and is the largest section of our budget. According to the Congressional Budget Office (CBO), Social Security is predicted to run out of funds completely by 2039 and is considered to be unsustainable².

The best solution for reforming and fixing Social Security is increasing the retirement age. This by far is the best solution to make Social Security permanently solvent. In combination with the increase in the retirement age, preserving Social Security benefits for those ten years within the retirement age (55 or older) is also a great solution. Offering workers under the age of 55 the option of investing over one third of their current Social Security taxes into personal retirement accounts, similar to the Thrift Savings Plan available to Federal employees, is also a great solution. Sound familiar? These solutions are in the old Paul Ryan Plan³. Another good solution would be to deny Social Security benefits to those making more than $100,000 dollars a year. The people who truly depend on Social Security do not make more than $100,000 dollars! It’s like offering welfare to Bill Gates; it isn’t necessary and it’s a waste of money! With that said, raising the retirement age for Social Security is the best solution. The average life expectancy of American citizens has gone up, and will continue to go up with the advent of future medicine and technologies. It’s time we raise the retirement age, to help make Social Security permanently solvent. The solution to also allow workers under 55 to invest their FICA taxes into IRAs, or personal retirement accounts, is also a great solution. We have to reform Social Security to save it, whether we like it or not. It’s a hard pill to swallow, but I can personally say the solutions I mentioned are a lot better than increasing FICA taxes or Individual Income Taxes to pay for the growing, unsustainable costs of Social Security. Raising revenues will not solve the problem – Social Security is insolvent and unsustainable and it needs to be reformed. It’s a spending problem, not a revenue problem.

Sources:

2. “CBO Budget Outlook.” Congressional Budget Office. Federal Government, n.d. Web.
9 July 2011. http://www.cbo.gov/ftpdocs/115xx/doc11579/06-30-LTBO.pdf

3. A Road Map to America’s Future. GOP Republican Budget Committee, n.d. Web. 9
July 2011. http://www.roadmap.republicans.budget.house.gov/Issues/Issue/?IssueID=8521

American Solution: The Flat Tax

Albert — Tue, 12 Jul 2011 14:46:29 +0000

Today our tax system is an outdated and flawed tax system; the tax code alone has more than 9000 pages filled with numerous loopholes. The best solution for our nation would be to pass a one paged, low flat rate income tax which would increase revenues while keeping the tax burden low. With a flat rate tax, all means of tax evasion would be eliminated. Since 45% of Americans pay no income taxes¹, you would see an instant increase in revenues. This would lead to a vastly increased tax base. If you set the flat rate tax to be 13%, then you would effectively lower tax rates across the board. For those who say a flat tax is “regressive”, let me remind you that any tax on the poor is regressive. A flat rate, or proportional tax, is the fairest you can get when it comes to taxes. I personally do not like the progressive tax system we have here in America, because it forces the wealthy minority to pay for the benefits of the vast majority. It is a well known fact that our government collects more than 49% of its tax revenue from the top 10% of American society². A tax system should not be based on an “ability to pay” concept, where the wealthy minority pays more than the majority. A good tax system ensures that everyone pays the same burden. With that said, a flat rate income tax of 13% would still be a 2% tax cut for the lower class in America. This tax cut would benefit the middle class and the upper class the most, since the tax cut would effectively be more than a 10% cut. The economy would bounce out of the recession and it would begin to expand and boom. Then one can increase the flat rate tax, moderately, to 15% (Which would be back to the original rate for the lower class.). The result would be economic recovery and a massive increase in revenues. It’s simple tax theory 101; a good tax system has a large tax base and a low tax rate. The flat tax has worked in Russia, where it increased revenues by 25% with a tax rate of 13%³. Other countries like Bulgaria and Macedonia have implemented flat taxes with great success. The success of the flat tax is all about eliminating tax evasion. Who needs higher and more taxes, when you can get more tax payers? Not only has the flat tax worked in several nations, it truly is the fairest tax system we can have. Everyone pays the same rate, no matter what. With a larger tax base, we can afford to keep current tax rates lower, thus improving economic conditions. So it truly is simple; if you want to maximize revenues, and cure our economy, just issue a simple, one paged, low, flat rate income tax!

Sources:

1. Hodge, Scott, and J. Scott Mody. “The Growing Class of Americans Who Pay No
Federal Income Taxes.” The Tax Foundation. N.p., n.d. Web. 10 July 2011.
http://www.taxfoundation.org/research/show/206.html

2. Hodge, Scott. “Tax Burden of Top 1% Now Exceeds That of Bottom 95%.” The Tax
Foundation. N.p., n.d. Web. 10 July 2011.
http://www.taxfoundation.org/blog/show/24944.html

3. Stacey, Kevin. “Study separates russian flat tax myth and fact.” EurekAlert!
N.p., n.d. Web. 10 July 2011. http://www.eurekalert.org/pub_releases/2009-06/uocp-ssr061609.php

Helping American Business Prosper: Capital Gains Tax Reform

Albert — Tue, 14 Jun 2011 00:07:05 +0000

The Capital Gains Tax directly effects and influences investment decisions and the ease or difficulty experienced by new ventures in obtaining capital. The capital gains tax increases the risk of obtaining financial capital itself, thus increasing the difficulty as well. The capital gains tax impedes investment and risk taking, both of which should be encouraged in our economy, not reprehended. This is simple tax theory 101: If you tax something, you get less of it. If you tax something less, you get more of it. With this simple and understandable logic, it is easy to see that the capital gains tax is nothing but a burden on our economy.

At the moment, the highest marginal capital gains tax rate is at 15%. If you believe helping business to prosper is the key to economic recovery, you will agree with me when I say the capital gains tax rate needs to be lowered dramatically. I believe we should have a simple flat rate capital gains tax rate of 8%. This solution would close any loopholes, tax shelters, and would eliminate any other means of avoiding taxation, thus increasing the tax base and revenues. But lowering the capital gains tax has also had a historical record of increasing revenues collected by the government. In 1981 the capital gains tax was cut and it led to an increase in revenues ¹. In 1997 the capital gains tax rate was once again lowered and once again revenues increased, due to the fact that more people were investing and taking risks (increased tax base.)¹. With that said, lowering the capital gains tax and issuing a flat rate capital gains tax is one solution which can help our country reach economic recovery. It will also give us a competitive advantage internationally, and it will help business here in America prosper by spurring investment, risk taking, and savings. Another solution could be to abolish the capital gains tax, which would lower revenues slightly, but increase economic output in other sectors of the economy by spurring investment, risk taking, and savings. This could also result in more revenues being collected elsewhere, simply because the economy and tax base would be expanding, while the amount of capital in the country would be increasing at amazing rates.

Sources:

CBO Capital Gains Historical Tables: http://www.cbo.gov/doc.cfm?index=3856&type=0

Reducing Poverty: A Simple Solution

Albert — Tue, 10 May 2011 15:11:59 +0000

How can one reduce poverty in America? We already have more than enough government programs which are designed to help those in poverty cope with the difficulties of life. We have plenty of government agencies and programs which are designed to help those in poverty get out of poverty. Yet it doesn’t seem to help much, since the poverty rate itself is at 14.3% (43.6 Million people)¹. But here’s a shocking FACT: Those in poverty, if they have an income, must and do pay income taxes. Ten percent in taxes, to be exact ². If you truly want to reduce poverty, you must first lower the cost of living. Taxes are nothing but a fixed cost for people – if you reduce them, you thus make the cost of living lower. You also make the individual wealthier, because you thus end up taking less of his or her hard earned money. By pursuing economic policies which lower the cost of living, you thus end up reducing the poverty line itself.

For example, lowering the corporate income tax (highest in the world) and abolishing the minimum wage could lead to the overall reduction in prices for goods and services, since production costs would be lower. Lower prices would lead to more demand for goods and services, which would also help increase overall business production which usually leads to an increase in wages/salaries. Such a policy could also lead to the creation of many more jobs. The increase in wages can lead to many people being pulled out of poverty. Expanding off-shore drilling and allowing companies to drill freely in Alaska could also lead to a reduction in energy costs and the reduction in prices for many goods and services. Such a policy could reduce the cost of living and create many more jobs. It is hard for the government to truly cure poverty, but the government can always reduce poverty by pursuing policies which reduce the cost of living, thus reducing the poverty line itself – while pursuing economic policies which increase wages and create jobs.

The truth is, is that there are plenty of government programs to help those in poverty move up. We have a public school system, which is the best way of getting out of poverty. Ultimately it is up to the individual to get him or herself out of poverty. But the government can always help by issuing economic policies which reduce the cost of living, thus reducing the poverty line. Government can also help businesses become more productive, which could help pull many out of poverty. The result of such policies would be the reduction of poverty itself. We don’t need more government programs, we just need smart economic policies.

Sources:

1. U.S. Census Bureau Poverty Rates, Income Distribution 2009: http://www.census.gov/prod/2010pubs/p60-238.pdf

2. U.S. Income Tax Facts, Wikipedia: http://en.wikipedia.org/wiki/Income_tax_in_the_United_States

Abolishing the Minimum Wage: Helping Small Business, the Consumer, and Unskilled Labor.

Albert — Sun, 06 Feb 2011 23:52:16 +0000

What good does increasing the minimum wage bring to American business and consumers? It sounds like a great idea doesn’t it? We should increase the minimum wage, this way the standard of living “increases”. People will have more money to spend, thus increasing demand and helping business. It also “helps” the poor cope with the cost of living, while it also provides more incentive to look for a job. But in the real world, increasing the minimum wage does not increase the standard of living, nor does it help business and the worker.

The end result of increasing the minimum wage rate has several unintended consequences. The first being higher prices for goods and services. The second consequence is quite ironic. With a higher minimum wage rate, the cost of employment is higher. This leads to several having a job, with a “good” income, and several with no job at all. Since this hurts small business, which employs more than 50% of the American employed population¹, it’s easy to see how a higher rate can cause unemployment to rise. Sadly, this is the truth. The standard of living does not increase, as prices increase and unemployment increases. The resulting price increases can even hurt business production/profits. And we should all know that when prices are higher, people have less money in their wallets when they good shopping. This leads to less overall demand in the economy (unless wages increase in relation to the increases in prices.) In real life, when the minimum wage is increased, the standard of living actually decreases.

In 2008, the minimum wage rate was increased from $5.85 to $6.55 an hour². So who are the people commonly on the minimum wage salary? Unskilled workers like teenagers (16 to 19 years of age.). From 2007 to 2008, the unemployment rate for those 16 to 19 years of age increased from 16.3% to 20.7%³. That is a 4.4% increase in teenage unemployment. At the same time, unskilled workers like those without a high school degree also had an increase in unemployment. So with this recent evidence, why should we increase the minimum wage, if the result isn’t all that great?

People who advocate the increase of the minimum wage rate are typically those who think life should be “fair” to those poor, unskilled workers. Most of which are just teenagers and people who flunked high school. So why do unskilled workers deserve to make more than $5 an hour? We were fine under President Clinton, when the rate was at $4 an hour (1996 dollars); why increase the rate more? Let’s explore this subject some more.

Some say that businesses will take advantage of the poor, unskilled workers. They say “Without a minimum wage rate, the cost of living would thrust many into poverty.” Let’s dig deeper into the subject at hand. If businesses offered a minimum wage rate of $1 an hour to clean the floor, do you think people would look for a job like that? Why do you think businesses offer benefits? Why do businesses ask what type of salary you want? It’s simple; businesses compete for workers. Businesses need workers and if workers don’t get a certain salary, they won’t work efficiently nor will they choose to work for that business – there would be no real incentive to work hard. At the same time, people would flock to the business which offers more. This can be seen today, especially in Florida, where everyone wants to work for Publix. Publix pays above the minimum wage rate and it offers great benefits. This is why workers flock to that company. Publix never has a problem hiring new, qualified workers.

BUT, we also need to take a look at the type of job the unskilled worker is applying for. Let’s compare a doctor to a fry flipping, teenager. How much skill does it take to flip a French fry? Not much, therefore the supply of the unskilled worker is high. What about demand? How many businesses need fry flippers? Many do, but since the skill level needed for the job is so low the supply actually surpasses the demand, keeping the income rate of the fry flipper low. Now the doctor is always needed. Therefore there is a high demand for the doctor, but the supply is much lower than the demand. The supply is lower because the doctor has years of training – training most people don’t have. Therefore the doctor is hard to find. That is why a doctor will always receive a higher payroll than the unskilled, fry flipper. What is my point? If the free market can insure the doctor gets the payroll he deserves, what makes you think the free market won’t do the same with the unskilled worker? What makes you think businesses will exploit the worker, if the worker can easily start or join a union – or just leave? My point is that the supply and demand market equilibrium always delivers the right value for any good or service. Simply saying, the minimum wage being abolished won’t hurt anyone!

Even the U.S. Congress’s Joint Economic Committee agrees that the minimum wage does nothing to help our economy⁴. The Free Market should determine the wage/income rate of any job – not the government. Let’s get rid of the Minimum Wage – since it has the same results of the failed Carter and Nixon Price Caps and Price Controls.

Sources:

1. “How important are small businesses to the U.S. economy?” U.S. Small Business
Administration . N.p., n.d. Web. 6 Feb. 2011. http://www.sba.gov/advocacy/7495/8420

2. “Federal Minimum Wage Rates, 1955–2009.” Info Please. N.p., n.d. Web. 6 Feb.
2011. http://www.infoplease.com/ipa/A0774473.html

3. “U.S. labor market in 2008: economy in recession.” Bureau of Labor Statistics .
N.p., n.d. Web. 6 Feb. 2011.http://www.bls.gov/opub/mlr/2009/03/art1full.pdf

4. “50 Years of Research on the Minimum Wage.” Joint Economic Committee US
Congress. N.p., n.d. Web. 6 Feb. 2011. http://www.house.gov/jec/cost-gov/regs/minimum/50years.htm