November 12, 2018

There seems to be an opinion among Republicans and Conservatives that Liberals and Democrats believe the answer to dangerously high inequality and continuing significant poverty in the US is just more ‘handouts’ (welfare). Every time I hear this characterization, my blood boils. I’d like to correct this misunderstanding.

I speak for myself, but I think most of those on my side of the political and social aisle would agree. What our underprivileged citizens need (and want) is good jobs with living wages. I firmly believe the vast majority of our poor would prefer to receive no handouts, would prefer to pay their own way.

I have faith in human nature. I believe only a tiny fraction of our needy want to exist off welfare.  For one thing, our social support budget is lower than that of many other developed nations. It’s almost impossible to “live off” welfare only. For another, it just doesn’t feel good to people to depend on charity. People want to earn their way.

Furthermore, Democrats don’t want to dole out precious government resources on welfare, resources which could go to infrastructure, education, basic research, and much more.

Those characterizations of Democrats, Liberals, and our poor are simply not true and are promoted for political advantage only.

Given that we all agree that handouts are not the answer, what is the problem? Here’s my list:

1-While unemployment is very low, wages remain very low. Recent wage increases fall far short of re-balancing the decades lost in stagnant wages (since the late 70s).

2-Furthermore, a huge skills deficit results in good jobs going unfilled and millions of Americans working at very low minimum wages. A major factor in this is the wage-educations costs gap which has widened dramatically across the last few decades.

3-Creating an economy where there is a healthy balance of good jobs and training to qualify workers for those jobs has not been the focus of this or previous US government administrations. Neither Democrats nor Republicans have presented an agenda to resolve this huge problem. Trump’s government seems determined to focus only on “manufacturing.” Some focus on manufacturing is fair, but there is a much broader set of skills needed, especially in the service and knowledge economy for which the US wage scale is best suited.

My questions to my Conservative friends are these:

1. Since we all agree handouts are not the best answer, why aren’t you offering policy and solutions designed to create those jobs? This would best involve collaboration between local businesses, local educational institutions, and local governments. The federal government is not the best source of solutions and plans, but can be a valuable enhancer with a variety of incentives to boost promising local initiatives. Since nothing like this has been underway to date, it is likely to take years to produce results–but it’s time to get started.
2. What do you propose we do across the years of development toward jobs and skills balance? Isn’t there a temporary (and hopefully diminishing) need for welfare to prevent people starving while we work toward a better economy with opportunity for “shared prosperity”? Do we have to sacrifice a generation?

My guess as to the answers to these questions (why critics of welfare do nothing to solve the jobs problem):

-They  believe such an economic and societal improvement is hopelessly utopian (just a waste of time and money to try)–e.g., let the free market deal with jobs and wages. They believe it is dangerous to try to influence the pure market. They fear unintended negative consequences. But how well has that worked across the last few decades?

-Many Conservatives believe in total self determination. They believe there is ample opportunity for our underprivileged to “make it” if they will just get off the sofa and find the training and the jobs. They believe workers should get themselves trained as plumbers or electricians if they are not able to handle computer science.

-And, I hate to say it, but maybe some just don’t care about working toward shared prosperity. How can anyone not care about our inequality, which is back to robber baron era level?

I have argued for years now that our very high level of inequality is the biggest problem for our United States. It’s not immigrants at the border, not Iran or North Korea, not an underfunded military, not the economic threats from foreign countries. These are among our many problems, but inequality is the worst problem. This is what results in poverty, homelessness, health and longevity problems, despair and much more, including death.

To my surprise, even Tucker Carlson (for whom I have little patience) is quoted as agreeing that inequality is our greatest problem.

An unhappy, under-skilled segment of our voting public went for a demagogue populist who promised to fix their pain from low wages and poor jobs. If he really wants to put America First, then he should focus and thoroughly address America’s First Problem.

http://www.sfexaminer.com/republicans-shown-hand-now-vote-accordingly/

Published in San Francisco Examiner Nov 4, 2018

Republicans have shown their hand, now vote accordingly

By Dale Walker

Republican presidential nominee Donald Trump speaks during the grand opening of the Trump International Hotel on Oct. 26, 2016 in Washington, D.C. (Olivier Douliery/Abaca Press/TNS)
By Dale Walker on November 4, 2018 1:00 am
In Trump’s latest efforts to enrich wealthy people like himself, his administration recently proposed indexing the capital gains’ cost basis for inflation. If successful, this change would cost $100 billion, the bulk of which will go to millionaires and billionaires. On the heels of last year’s tax cuts that are not only exceedingly unpopular but also unsuccessful in promoting wage growth, this latest ploy should be seen for what it is – a payoff to wealthy political donors.

Even President Reagan knew that lowering the capital gains tax rate was completely unhelpful for the majority of Americans, and during his administration the lower rate of taxation on dividends and capital gains was removed, leaving capital gains taxed at the same rate of normal income. This was achieved through the Tax Reform Act of 1986, and while it was only in effect for two years, it proves that it can be done. With the growing concentration of wealth in the hands of an ever-shrinking segment of our population, now is as great a time as any to revive similar tax equity legislation.

This is because, simply put, there’s no real, proven reason to give investors a lower tax rate than workers. It does not spur investments, nor does it grow the economy at a higher rate than, say, tax cuts on the middle class. All it does is penalize Americans who are not wealthy, as the highest marginal income tax rate is 39.6%, while the top marginal tax rate for capital gains is just 20%, and capital gains income is almost exclusively earned by people who are already wealthy. This is clearly an area of our tax code that needs to be reexamined, but when given the chance to do so, Republicans punted. In passing the Tax Cuts and Jobs Acts last December without addressing this inequality, the GOP quietly continued the practice of taxing doctors or professors in the highest bracket almost double that of the investor with the same amount of income.

We cannot allow Republicans to continue chipping away at the donor class’ tax responsibility. Last year’s tax cuts have already contributed to our country’s massive wealth inequality and facilitated an absurd number of stock buybacks. It’s pure gall that Trump’s Treasury Department now wants to do the somewhat sensible act of accounting for inflation on an insensibly halved tax rate. We should not allow them to attempt this half-step forward when they have already taken a dozen steps backward. If anything should be done to the capital gains tax rate, it should be increased so it is those who work for a living that receive the lower marginal rates. After all, investors don’t need an incentive to invest. Chances are, even after taxes they come out ahead by investing rather than letting their wealth remain in a savings account. Plus, investing in the stock market does not normally result in new businesses and new jobs. For workers, however, a tax cut means more expendable cash that will be put back into their communities. With an economy that’s 70% consumer driven, this could mean growth across the board.
Ultimately, we need Democrats to start playing defense. This week, Mitch McConnell outright admitted he’s after Medicare, Medicaid and other elements of our social safety net. With continuous Republican-driven tax cuts for the rich, and a ballooning deficit and public debt, these critical programs are seriously at risk. Republicans won’t cut military spending, so this is the largest bundle of costs to go after. This latest proposal will not be the last, and unless there is consistent, concerted pushback in both the House and Senate, Tax Cuts 2.0 will forge ahead, and spending cuts to social programs will follow.

Dale Walker is a retired financial services executive, having worked for Citibank, Wells Fargo, and AIG, among others. Interested in the impact of globalization on world economies and inequality, he received his MBA from the University of North Carolina and an MSC in Globalization and Economics from the University of London. He was a 2017 Fellow in Harvard’s Advanced Leadership Initiative. Mr. Walker is also a member of the Patriotic Millionaires.