Now we find people who don't know squat about the economics of the nation they have put on the "eve of destruction" ~ as stated in a 1960s protest folksong ~ who charge headlong into the same old policies that created the problem in the first place. One such know-nothing is ex-President George W. Bush who in his 2008 State of the Union Address, repeated his call to make permanent the temporary tax cuts for the American aristocracy that made far worse the economic problems Ronald Reagan started. In his final press conference before leaving office Bush claimed it was only his bad luck that the present economic debacle just happened to occur on his watch, when in fact it was created on his watch by him and his congressional lapdogs.
It's time for the American public to understand that right-wing economics don't work, and the national mainstream media must stop pretending that the present economic disaster "just happened" and start reporting the cause as conservative policies and actions. It should also be time for progressives in the Democratic Party to start saying just that, if they ever get up enough bravery to address the issue and begin labeling the disaster what it is, the "Reagan-double-Bush Voodoo Depression". And it's time to try something new, just as Franklin Delano Roosevelt tried something new amid the Great Depression after right-wing economics began the mess and right-wing politicians did little about it as it grew progressively worse.
Right-wingers have the idea that government exists only to keep the have-it-all elites atop the social pyramid and the have-nots "kept in their place" at the bottom, and power must be used only to protect the privileged and never used to benefit the marginalized or excluded. They use government to facilitate the top, who lives like kings at the banquet table while the rest of us exist like dung beetles to scrounge up what the elites have dropped. That righties don't support the society they sponge from has been borne out by the fact that no Reagan or Bush has ever missed the opportunity to shape government policy to enrich themselves, family or friends while no Roosevelt or Kennedy ever used their powers for that purpose. Plus, Roosevelt and Kennedy children served their country militarily in World War II ~ some died ~ no Reagan or Bush children, have served in either Grenada /Lebanon or Iraq/Afghanistan.
Government spending in a "stimulus" package may help jump start the sagging economy but it won't sustain a vibrant and lasting economy. America needs to try something new ~ the Honest Deal of Democratic Capitalism ~ to save this once-great nation before in becomes permanently mired in hopelessness as we evolve into a country of Alice Tinkers and Baldricks,* but without the charm of either.
How the Honest Deal's Democratic Capitalism would address the budget crisis created by the political right was addressed in Part II of this series. We now look at several issues that could be solved or eased by Democratic Capitalism without heavy-handed government.
BASIC STRUCTURE OF DC :
Eliminate both the income tax and payroll tax ~ they have been so distorted by special-interest exemptions that they are no longer useful or fair ~ and institute a profits tax. No profits, no taxation. Also, no profit, no executive enrichment. Every employed person gets a base income ~ tax free to meet housing and sustenance requirements ~ and profit sharing from their employment. When employees create profit, they should share in the distribution of that profit.
Taxes on employee profits pay for Social Security and health insurance for all. When we can match other advanced countries with universal health coverage spending only 10% of GDP on health, we will free up hundreds of billions of dollars to circulate in the economy. That will create growth.
Tax corporate profits to pay for government operations, including national defense and homeland security. If they dislike such a situation, they may stop doing those things that make government grow; such as polluting, which requires billions of tax dollars for cleanup. That the majority of corporations pay no federal taxes only underscores that they are the classic freeloaders in a nation that has made their profits possible. If the corporations yield enough revenue for government operations, profit of local small businesses, mom-and-pop enterprises and family farms would not be taxed by the federal government, other than the profits tax on employment. This would strengthen local small business that the corporate takeover of America is threatening to destroy.
Keep the gasoline tax and taxes from other sources of transportation to create and maintain the interstate highway system, railways, airport, ports; but all revenues collected must be kept and budgeted for only those purposes.
Make executive profit compensation dependent on the number of American employees at the business. As a company increases its workforce, the executive share of profits would increase. If a CEO needed one or two or more employees in order to increase the CEO compensation, those few employees would be hired, but leadership would not be inclined to overhire which would diminish the CEO's total income. During periods of economic slowdowns, corporations would not be inclined fire large segments of their workforces because that would not alter the percentage of income going for salaries and profits. The result will be ideal balance with management wanting more workers and employees wanting fewer in order to have greater profit income. And, if executive income were dependent entirely of economic success of the company, and not on a manipulated stock price, there should be no more speculation that created the present financial mess and enriched top-level executives as they drove their corporations to bankruptcy.
Salary and profit compensation for the top executives could be capped at ten times that of the lowest-paid employee. This would not impose a cap on compensation, the amount of CEO income would rise or fall with the success or failure of leadership. There should be no restrictions on bonuses for executives other than the proceeds would have to come from either the employees's profits or the shareholders's profits and must be approved by vote by members of those two groups. When executives treat employees and shareholders right, they may get bonuses. Mistreatment would most likely mean no bonuses.
HEALTH CARE AND SOCIAL SECURITY:
There are two things wrong with the common proposal to have a single-payer healthcare program: 1) President Barak Obama has taken that off the table, proposing instead to work through existing insurance companies that are at the heart of the healthcare problem in this nation and; 2) such a proposal would bring out hundreds of millions of dollars from many sectors of the health industry to defeat a single-payer plan, as happend to the Clinton plan in 1993.
It is important to have two sources of healthcare financing in a universal system rather than one. The proposals to mandate everyone buy insurance won't contain costs. A single-payer system by the federal government will likely be cumbersome, although less expensive than the present system. If states enroll and finance all residents in Health Maintenance Organizations (HMOs) whose duties are preventive medicine, diagnostics and minor outpatient care, there is an incentive to keep everyone as healthy as possible, and out of hospitalization care, which would result in lower taxes to pay for the federal system. And, the fewer Americans hospitalized because of treatment by a program for preventative medicine or maladies the lower malpractice insurance premiums should be for all medical practitioners.
The federal part of universal coverage would concentrate on hospitalization, cures, recuperation and rehabilitation, which would eliminate much of the Medicare program now in existence. And the stiff Medicare premiums now levied on retirees's Social Security income can be eliminated. All other medical treatment not covered by state and federal programs, such as elective procedures, would remain in the private sector where individuals are free to seek out and buy private policies as they wish. And, the federal program can offer rebates to state HMOs for success in keeping their clients out of hospitalization.
When states enroll all residents in HMOs and meet the cost because Democratic Capitalism frees up billions of dollars for state taxes on individuals to pay for HMO coverage, the present Medicaid program can be eliminated. And the double-payer system allows corporations such as Blue Cross-Blue Shield the opportunity to shift into HMO business, lessening the chances they will spend premium money best spent on health treatments to lobby against reform.
Many proponents of a single-payer system assail the "greed" of HMOs while ignoring the "greed" of insurance giants where one CEO paid himself $125 million in one year while his company was denying payment for medical treatment for thousands of policy holders. Single-payer proponents also forget that even in a single-payer system most Americans would still get their health care from HMOs because that system only transfers the obligation to pay medical bills from an insurance company to government; it does nothing about the quality of care offered. The dual-payer system can reform HMOs. Obama's proposal to work through insurance companies only transfers payment of premiums from employers or individuals to government.
An added bonus of the dual-payer plan is that HMOs in small towns don't need to be staffed by licensed physicians ~ even though that is preferred ~ but by physicians's assistants who are already capable of overseeing preventive health care like physical exams and exercising, diagnostics and minor outpatient care. They also would have instant contact with a physician in a larger town and could transfer patients to hospitals for further diagnosis and treatment, assuring that even small out-of-the-way towns will have some form of health oversight where today they have none.
There are also financial matters to consider such as the disparity between divergent economies as in the expensive-and-affluent New York City and the modest Opp, Alabama. Why should the Alabamans be taxed for premiums at the same as the New Yorkers when the New Yorkers will get much-more-expensive care than would the Alabamans? Let New Yorkers pay for New York HMOs while Alabamans pay for Alabama HMOs. This is one area where leaving something to the states makes considerable sense and is handled better by a dual-payer system than by a single-payer arrangement.
Taking the cost of healthcare off our businesses and corporations will give them some financial leeway in competing with foreign corporations that do not have to pay for healthcare. Removing the payroll tax from the corporations and businesses will give more leeway to confront foreign competition.
Social Security need no longer be funded with payroll taxes that hit the lowest-paid Americans the hardest. The political right has long favored a "flat tax" on income, but since Democratic Capitalism eliminates an income tax we will have to give a flat tax to fund Social Security by taxing all profit income and eliminating the ceiling, presently capped at slightly above $100,000, for the highest-paid earners. And since the first-earned dollars are not taxed, we free up billions for other economic purposes. With even those retired contributing to Social Security as if they were employed everyone contributes to the system that will benefit everyone and there will never be a "Social Security crisis" because it wouldn't matter what ratio of employed-to-retired there is.
The result is that those individuals who use healthcare and Social Security retirement, workman's compensation or other social programs pay for those programs. A corporation, even given the status of a person by the United States Supreme Court years ago, does not use these programs and is not a person in that sense, so should not pay for them.
HOW IT WOULD ADDRESS ILLEGAL IMMIGRATION:
Apparently many in the Republican Party believe that the matter of "illegal immigrants" to the United States has gotten out of hand and our southern border needs to be secured with a 700-mile fence to keep aliens out of the country. That the Republican Party has been responsible for the national borders for the past eight years and most of the past three decades may be why the matter has gotten out of hand. While part of the party has its panties in wedgies over the issue the other part of the party brought about the situation in order for business to pay cut-rate labor wages, which helped suppress wages for everyone. In building the fence, private property rights, that the GOP claims to adore, are being breached as the structure cuts across property making much of it unusable. And it blocks wildlife migratory patterns further endangering the natural order of the world.
It's all so unnecessary. With employers required to pay a fixed amount in wages and salary and employees entitled to a specific portion of the profit they create, there is absolutely no incentive for any employer to seek out illegals in order to drive down wages with cheap labor. There will be no way to add a dollar to the profit margin by flimflamming employees. Employers will soon learn that their best interest is in hiring labor that will do the best job to increase profit and when a leader's profit compensation is tied to the number of Americans employed, Americans will be the first hired and the last fired. Both management and labor should soon learn that the best method of gaining profits is cooperation between the two, not confrontation. There should be no restrictions on the number of aliens, legal or illegal, a business hires except that illegals will not count in calculating the CEO's compensation. That will insure that Americans will be hired first and there would be opportunities for immigrants for jobs Americans "really don't want."
One downside is that it weakens unions by taking from organized labor the power it has to confront management over salary and wages. But, it also takes away from right-wing politicians the devious methods they use to enact policies that show their hatred for the working-class of America. And union busting will just be a wasted exercise because nothing can be gained.
Another downside is that without an income tax, donations to charities will fall off because there would be no income-tax write-offs, but that can be overcome by providing deductions for donations to charities in the inheritance tax.
AGE, GENDER AND RACIAL DISCRIMINATION:
The provision that would remove illegal immigration as a negative force on workers's incomes also will make discrimination based on age, sex or race less of a problem. There will be no incentive to hire younger workers at lower pay after firing older workers because they have earned higher pay. The total compensation for the work force must be the same regardless of whom is employed. Therefore, ability to earn a profit for the business will be the only consideration on employment matters. If a woman or a racial minority is better capable of providing commercial income, they will be hired and paid as well as any white male.
THE GAP BETWEEN HAVES AND HAVE NOTS
Recent reports show that the top 1 percent of Americans receive 20% of the national income ~ up from 9% at the beginning of the Reagan Revolution ~ the widest disparity since 1928. And the nation is beginning to experience the economic meltdown that followed the 1928 condition, and that needs to be reversed just as it was reversed by the programs that ended the Great Depression. The answer lies not in seeing the top 1% have less, but seeing that the other 99% have more.
Democratic Capitalism will begin to reverse this harmful condition by rewarding with profits those people who create the profits instead of enriching only those who control distribution of profits, mainly to themselves.
OUT SOURCING OF AMERICAN JOBS:
Sending American jobs to low-wage foreign nations tends to reward only those at the top and really does little for the consumer class. Even though consumers may have access to some foreign goods that are cheaper, they aren't better off because the incomes of consumers have been suppressed by the outsourcing of jobs. Millions of jobs of consumers have been eliminated and millions not eliminated pay far less than would be normal because of the foreign competition that creates labor surpluses and job shortages in America results in lower consumer income.
By tying to profit compensation of the top leaders to the number of Americans employed, management would hire just enough Americans to raise the executive's compensation without hiring so many that the compensation is diluted. If those hires require bringing some jobs back from overseas, American workers win and CEOs will think long and hard about shipping jobs to foreign lands if it cuts into CEO pay significantly.
LOW PRODUCTIVITY GROWTH:
American business has long suffered from a climate of master and servant in the workplace that relies on fear of losing a job if master dictates aren't successful. Democratic Capitalism offers the opening for management and labor to learn that cooperation between the two is the best road to profitability. And management attempting to increase productivity by driving labor to the point of exhaustion often is not beneficial because it leads to shoddy products and industrial accidents. Labor is best equipped to determine the amount of output it is capable of handling and labor would produce just the right amount of productivity to assure itself proper profits while management would concentrate on the proper number of employees needed for maximum efficiency. A simple rule here is that if labor profits from increased productivity, labor's productivity will increase. And we may start to the end the class warfare the elites have waged against the rest of use that was begun by Reagan and exacerbated by the Bushes.
If more than half a person's income came from profit sharing, each and every one of them would keep an alert eye on the shenanigans of the executives to keep them honest. That would reduce the need for government to do so. Shortchanging employees on profits would be considered theft and tax subversion by the employer since a employee receiving less than legally entitled would not be taxed on the stolen money. Corporate tax cuts the right constantly champions will do nothing to address the present mini-depression corporate tax cuts helped produce because most corporations pay little or no taxes to the United States existing as freeloaders in a society that enriches them.
We should have had enough of the likes of Enron, WorldCom, Adelphia, Tyco, HealthSouth and other corporations where insiders treated the companies as their private piggy banks while stockholders and employees were left with nothing when the cheating was uncovered. An honest business is a solid business and likely to be a profitable business.
A SMALLER INTERNAL REVENUE SERVICE:
Democratic Capitalism based solely on a profits tax should result in more than 100 million fewer tax returns sent to the Internal Revenue Service, making it more efficient. The IRS can be divided into the branches overseeing each type of taxation (individual, business, corporation and excises) and will have plenty of employees freed up from processing returns who can turn to examining compliance.
There is something amiss in an economy where a professional baseball player thinks $25 million (minus agent's commission) for a few months of playing is insufficient and a football team can lay off dozens of moderately paid employees only to turn around weeks later to shell out $100 million to one football player who had been paid several million during several preceding years. Democratic Capitalism might mitigate that situation somewhat.
American businessmen may be the most lame-brained people in our society. They pay themselves for poor performances millions of dollars, which they use to support political parties and candidates (Republicans Reagan and Bush) who then implement economic policies that harm or destroy the businesses that enriched the businessmen in the first place. Then they turn around and adamantly oppose any government effort to right the economy and rescue their businesses that were established, nurtured and made profitable by someone else while decrying policies under which businesses fare best (Democratic). This after chasing bigger profit by suppressing wages and salaries which, when done throughout the economy, only destroyed the ability of consumers to purchase their products.
* Alice Tinker and Baldrick were characters in two excellent British television sitcoms. The delightful Miss Tinker in "The Vicar of Dibley" and the captivating Baldrink in Rowan Atkinson's "Blackadder." Both put a major "duh" into dunce.