Just before the recent election a friend of mine who is a
Republican and a good man, sent me an article that had a number of gloomy
scenarios of what some strategist thought would happen over the next 2 years
even with a Republican landslide. This
was my response, written before the election but still true.
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None of those scenarios sound good to me. But I would like to see someone (either
party) win a clear majority so that we can make some progress. I like to think of myself as an independent
with probably more liberal leanings than conservative. I'd like to see us live within our budget if
we could agree on a budget. But I also
know that we have to do extraordinary things to try and increase the job market
so that more people can work.
When I hear Republicans talk about cutting taxes to
increase jobs I look at NC and see that our unemployment is above the national
average even though we've enacted all of the tax cuts that the Republicans
wanted. I have not seen this huge rush
of new jobs. Maybe it will come to pass
over time. I just don't know. But what I do know is that right now, today,
we have so many people without work who still have to eat and have a place to
live and with the cuts made to our current budget we can't provide enough help
to those people. I saw first-hand during
the two months I was unemployed what the level of support was and it is not
much!
I don't want to encourage people to stay on government
programs but I also know that you can't just shut them off until there are jobs
available for them to do.
Someone told me the other day that he believes that there
are 92,000,000 people unemployed in the United States. I think his number is wrong but he was
shouting at me so loud we couldn't communicate.
But here is what I know from the Census Bureau (2013 estimate):
US Population: ~316M
<18: ~
72.7M (23%)
>65: ~44.2M
(14%)
Nominal population
In workforce: ~199M (I know that there are
some number of
people who are stay at home Mom's or Dad's, older and
younger people working etc.)
So if my friend was correct and there are 92M people out
of work that would be an unemployment rate of 46% which I think is pretty
unbelievable. And that is with an inflated number of working people!
The Bureau of Labor Statistics says the unemployment rate
is currently 5.9% or 9.3M people. Theirs is based on age 16 and above so these
numbers are close.
There are also 47M people living below the poverty level
(15%). If we assume all the unemployed people are in that group then there are
38M people living below poverty some of whom are in the job market (part of the
199M). I presume some of the ones not in
the job market are children, elderly, mothers of young children, disabled, etc.
Historically, even during Republican administrations, full employment assumed
4-5% unemployment. In other words we
would always have somewhere around 8.9M not working. Based on the 2010 Census
there are 2.61 people per household so that means there could be, in the best
of times, over 23M without income except what the American people decide to
provide for them mostly through taxes and the programs those taxes fund.
Now here is what I believe. First, business is not the enemy. Business, in most cases, is the sum total of
people investing to improve their lives.
Those investments provide jobs. Even for businesses that
are privately held, those investments provide jobs so they also are not the
enemy.
Government is not the enemy either. Government exists to provide order to our
society and to do those things that individuals cannot do efficiently - like,
police, fire departments, building roads and bridges (although here in NC you
could make a case that the State has abdicated!), the military, relationships
with other countries, and supporting those within our society who have no other
legal means of support. Part of that
support should be helping them reintegrate into the workforce but, if history
is a guide, there are about 23M who are not going to get back into the
workforce because the workforce cannot sustain them.
Let’s add the US Budget to the discussion. We know we
have a limited amount of money to spend.
It
flows mostly from individual and corporate taxes. For 2014 the revenue the US government plans
to take in is $3.03T. The budget for the
programs and projects approved by Congress is $3.78T. So we have a deficit of $744B.
Let's look at some of the highlights:
|
Budget Category
|
Discretionary Spending Approved
|
Mandatory Spending by Law previously
signed
|
Amount that could be cut without new law
|
|
Social Security
|
$866 Billion
|
$ 860 Billion
|
$ 6 Billion
|
|
Defense
|
627 Billion
|
9 Billion
|
618 Billion
|
|
Income Security Items
|
542 Billion
|
475 Billion
|
67 Billion
|
|
Medicare
|
531 Billion
|
524 Billion
|
7 Billion
|
|
Other Health Programs
|
443 Billion
|
385 Billion
|
58 Billion
|
|
Interest on Debt
|
223 Billion
|
223 Billion
|
0
|
|
Veteran Benefits
|
148 Billion
|
86 Billion
|
62 Billion
|
There are other categories but these are the biggest.
Total: $3.38T Approved / $2.56T
(~76%) Mandatory by Law / Could be Cut $818B (~24%)
And of the discretionary spending $618B of the $818B is
defense related. I don't see us cutting that too much while we are embroiled in
the Wars on Terror. So $200B of the
$3.38T can be adjusted without some major legislative changes. Now, my guess is that there is room to
improve in all these areas if we really took a business-like approach. For example, in all my years doing budgets
for the companies I worked for we did one of two things - either we did a bottom build each year with
everything on the table or we started with the current budget and cut it 10%
just because we were better at what we do.
The problem here is that most of the US budget is not
about producing widgets better or faster.
It's about providing people or projects direct support. Look at social security. $866B for ~44M people over 65 equals about
$19,700 per year or $1640 per month. I
guess we could cut that, but in this case people have paid into the program and
are entitled to get the payout - like an annuity. We can change the law going
forward like many companies have done with their retirement plans, but we pretty
much have to cover those people who are too old to change to a new plan. So fixing that would be a long term
project. Something worth doing if we can
come up with a formula that the majority can accept. However, there will be risk. The only thing that makes any sense are 401K
or similar accounts that people self-fund and cannot touch until they are some
pre-determined age. Perhaps the
government will contribute. Maybe the
employer will contribute. Those individual accounts could support incredible
economic activity but if we have an economic meltdown what happens to the
people who have retired or are near retirement when the money they planned to
live on goes up in smoke? Do we let them
all starve and be kicked out of their homes?
Of course not. At least with social security the entire government has
to fall before we get to an apocalypse.
There is another alternative. Since social security is
something that I am paying into for myself and for others, is there a reason
why we stop at $116,000 of income? If we
just kept paying then the fund would be able to sustain the ebbs and flows of
population growth. And that's just an
example. It could be that everyone pays
to $116,000 and then anyone making over some higher number kicks in some
more. Better minds than mine have to
figure that out. It is not so much a tax as it is a premium increase.
Let's look at income security. I think that is a code for unemployment,
welfare, etc for all those poor and unemployed people. There are around 47M of them. So that $542B
is spread out among those people and that gives them about $11,500 per year or
$960 per month. We can fix some of that
by getting people to work. Here's my thought on that. Unless we intend to allow people in our
country to starve to death then why don't we take the able-bodied and put them
to work for the money they are already getting?
It will provide training for some and some degree of self-worth to all
of them.
Some of them can repair roads and bridges. We provide incentives for contractors to take
some number of them on as part of the contract terms for repairing the roads
and bridges. They get skills while the
government pays the salary and once they are trained perhaps the contractor will
convert them to a regular employee. If
someone doesn't work out, they get moved to a different type of work. Some could staff day care centers for the
single mothers who want to go back to work or school. At least it puts a plan in place to get some
of the people off the program and back to work.
I don't think anyone should get money from the government without
providing some service in return if they can. All of us make up the government
and any of us could at some point need to rely on the rest of us for help for
some period of time. That's what a
community or society is supposed to do.
But there should be an end in sight.
Medicare is the last topic I'm going to preach on. $531B for ~44M people.
Basically, this is government provided health insurance
and it costs about
$12000 a year per person for the government (or
"employer") side and then there are premiums the individual pays
based on income. My wife, for example,
has to pay around $250 a month for her share. I think that's a pretty good
price for insurance for people who presumably have the most ailments. The only thing I can think of to do there is
try to make sure that we treating them with the most efficient methods and
perhaps do some means testing. I suppose
we could, for younger workers, take the money they are paying into Medicare and
put it into health savings accounts that are set aside until they are 65 and
then use that money to fund private health insurance policies. I suspect that the 2% we pay now would have
to go up.
My parents were immigrants to the US. They came over after WWII and started with
nothing but the education they brought with them. My Dad had worked for the UN
in Germany helping with displaced persons and my Mom was a nurse in one of the
camps. When they came here my Dad worked
in a textile mill and Mom continued nursing. When I was born we were poor. But
my parents both worked and with that education they were able to improve their
positions over time. We were never rich
but we were solidly in the middle class.
I'm sure that there were government programs that helped them along the
way. My brother and sisters and I all
had student loans and we all paid them back. Three of the four of us served in
the military. My sister retired as a Colonel in the Air Force. I went to college using the GI Bill. When I
first got out of the service I had to use state subsidized housing to put my
family into a place where they were safe. My first job after the Army was found
by the State Employment Commission. When I got hired by AT&T I got my first
promotion because the government set quotas on various things and Vietnam Era
Veterans was one of them. I used a VA
loan for my first house.
Government does good things more often than bad. When I see someone drawing unemployment I
don't see a freeloader. I see someone
who through no fault of his own has lost his job. When I see a welfare Mom I
think that here is a person who could, if they had a chance, make something of
herself but she doesn't know how to do it.
Now, I'm not stupid and I know there are people gaming the system. Guess what, there are people gaming the
system all the time - they are called crooks.
So, we need to figure out a way to find them and fix those problems. But I choose to believe that most of the
country is just like you and me. We are
a couple of guys who have worked hard, been relatively successful and haven't
been asking for handouts. We've paid our
taxes and we'd like to think the people we send to government look out for us
by spending it wisely. We both know that those people are human just like us
and some of them are also crooks. So we
have regular elections to pick people who can be the best stewards of our
money. But they should also be
compassionate and try to use those dollars to improve the lives of the people
their work touches. Being poor or
un-employed, or a single mother, or handicapped shouldn't be a crime. It's a
condition that we should as a nation try to address as best we can. There will be screw ups. But there will also be success stories just
like my family.
Anyway, reading the article you sent me made me think
about these things.
The guy who wrote it must not be a very happy guy. There is nothing one sided about government
and to say the democrats are the problem or the republicans are the problem is
wrong. We have morphed into a country
that sees everything as adversarial. I don't agree with a lot of stuff you
believe in but I like you as a friend just the same. I hope you feel the same. But I also think
that if people like you and me can discuss issues and find common ground, then
our representatives should be able to as well.
In fact, they have to. It's what
we pay them to do. I expect this is more of a response than you expected from
your email so I'm sorry if I imposed on you.
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