The Morning Joe Rebuttal for February 12th, 2010
1) The Morning Joe show has again forgotten the substance behind the jobs issue. Except for a glancing blow to candidate McMahon by Joe Scarborough, rolling tape on the various angles pursued to get to the bottom line of the day’s jobs news, that effort was unsuccessful. There needs to be a rule of thumb that when in doubt, create a new idea. The synthesis of a talk show and this particular issue is how can the show be, itself, an agent of innovation. What happens instead is a glancing of the issue that results in nearly zero consumable substance on the what, when, why, where, and how mechanics of how to replace 20 million lost jobs, along with a sustainable marginal employment market superiority.
Funny, no one ever puts it in those terms. Not Joe Scarborough, not the President, not the heckling hacks trying to sponge popularity off of the disenchanted American population. And the entire population is affected and disenchanted on this issue currently, no matter their view on abortion or torture. We will at some point need to actively prioritize the national agenda, government and media alike, to reflect that jobs and health need to come first, litmus du jour subsequent.
Anyone pointing to the payroll tax discussion with candidate Blumenthal today as substantive, or his aid to states for capital projects, or McMahon’s generic tax comments on the matter, are just encouraging pandering and placation. Now, I’m not ready to throw that as a direct accusation towards either appearing candidate. This is in fact an indictment of the show’s cast for being unprepared to lead the charge.
The show has successfully made what amounts to a platform that works for healthcare, although they’ve never published a checklist that you could find, it exists as running consensus. (private market, non monopolistic, nationwide, insurers bound by pro consumer mandates like pre existing and 90% flow through). The show needs to have this same preparation in order to be as effective as their subscribers need them to be on the jobs issue.
2) The road forward for jobs is as simple as health care should be. The broken Senate doesn’t help, but dangling the solution to the jobs conundrum alongside the solution to the health conundrum on one side of the senate, and the voters on the other, might actually fix all three broken systems.
I published a laundry list of necessity-based job creation projects a while back, that may or may not be adoptable, but indicate what a public works package should look like from our government, in concert with private industry. There is no need to update it or guess what projects exists that wind up in production. The point was that none of them were in the original stimulus, which is a shame, and that there is still an equal need to think that way. There is unfortunately significant doubt that we have enough political will to do any of them.
I also published the economic equivalent of the Laffer curve for jobs. A tax plan that uses capital gains as it’s tool to effect the jobs market. That plan is in fact worth restating and updating for this current market condition, and I’ve started to hear the President state parts of that plan as part of his assembly of a jobs solution.
Capital gains is currently at 20% no matter where you invest your money. People in mutual funds really know this because they get an annual tax bill due to the tendency to lock in gains at each periods end. It’s not bank loans that we should be using to fund business innovation that breeds jobs, it’s the vast, investable wealth of the nation. The previous incarnation of my plan included reducing capital gains to near zero for domestic investment, leaving it at its current rate for foreign investment (to avoid the protectionist tag), and to raise it to 40% for the market damaging elements of proprietary trading and inefficient speculation in financial markets.
Additionally, the same determination would be applied to taxes on corporations and the schedule c small businesses out there, using an old term to a new positive fashion. We all know that President Clinton used Alternative Minimum Tax to fight loopholes amongst wealthy individuals, until its threshold became obsolete and it affected too many people and hampered the economy. I would propose a new version of the same concept that is a two way street. A three way street actually. Businesses that don’t outsource to India, that do revitalize old manufacturing infrastructure, that create long term domestic jobs based investment would be subject to an Alternative Maximum Tax, companies that lay people off, use bankruptcy to void pensions, disallow shareholder control of executive pay, avoid taxation via offshore financial strategy, or any other action that attacks the domestic jobs economy or personal income tax base would be subject to an ‘Alternative Minimum Corporate Tax’. The business who doesn’t participate either negatively or positively or at least achieves equilibrium would be taxed under the current rates.
Even the meanest corporate raiders out there, like Bain Capital, would have to give something back to the economy in their activity in order to avoid that punitive version of AMT. Currently the system rewards business that hurt the middle class. Their stocks go up, their executives get rich, and even when their company is in flames, they can get a government handout on the basis of the effect on a middle class that they just pillaged.
Bottom line, I would love some public works, but I think we’ve squandered that opportunity. A 25 billion dollar jobs bill is a broke guy talking to you. That is literally the per capita equivalent to the coins you have in your pocket right now.
What’s worth harnessing is the economic powerhouse of the private sector of the United States of America. I am a reformer, so by harness I mean unadulterated, unobstructable, applies to everyone rules that go ten years with extension debated at eight years. The Laffer curve will tell you that lower taxes will bring more governmental revenue in the long run. That taxation beyond some point leads to diminishing returns like many other economic phenomenon. What you may not yet realize is that the Laffer curve can be compartmentalized into market segments: domestic, foreign competitors, inefficient markets.
Wall Street will hate this idea because it cuts to the core of our current crisis. We need to reward tangible domestic economic creation. Wall Street has figured out this thing called proprietary trading. It wants your money for itself, not to invest in America. They have a lot of your money right now and can affect elections. Change now or they will own you outright.
3) Lets add a ‘pay-go’ element to this. We need tax revenue, we need to cut spending, we need this at both the state and federal level like no other time in our lifetimes. Thus, one thing I would not do is reduce any revenue source from 98% of personal income tax or payroll tax as it currently exists. It undermines the already ballooning problems of entitlements and budget deficits. If we use the might of private industry it’s actually far less expensive. Corporate taxes are less than 15% of federal revenue. State corporate taxes would remain unchanged and in effect. If you call 5% unemployment full employment, the delta effect of increasing payroll and income taxes by 5% calculated and 10% real reemployment is an 8.4% increase in your biggest revenue source at constant personal income tax rates.
You would, I’m sure, make the nominal assumption that 15% lost corporate tax revenue versus 8.4% increase in income tax revenue is a net negative. Those percentages are completely unassociated. In actuality, the net reduction of collected corporate tax would affect the overall rate of revenue collection by less than 1%, probably less. With small changes in a bohemeth economy, that’s as close as youre gonna get to invisible. But it’s not a small change, it’s a sea change in how our companies look at the path to profitability going through main street, not around it.
As with any economic theory, there are boundless assumptions. But I am making the point that income tax will rebuild the financial standing of the US in a recovery, investment can be a better tool than speculative small business lending, and corporate behavior can be harnessed in an equitable way bringing American companies back into the fold as the solution, not the chief exporter of our jobs and middle class wealth.
4) Lastly, the last part of this equation is government spending. Somewhere along the way, we will need to get our fiscal house in order. The legislature is completely incapable of fiscal restraint, and a negative of any economic solution to our current problems is the short sighted ‘money solves everything’ phenomenon would prevent the federal government from tackling this horrendous giveaway of tax dollars.
In a perfect world, the government would act within the boundaries it is going to make the health care industry work under. 90% flow through. Currently the budget of the US is 20% of GDP. It needs to be 10%, plus interest and entitlements. But I don’t want to lead anyone on, most industrialized governments are nowhere close to this figure, but we are way off, out there with Greece, and we should at least begin to educate ourselves as to how we get better and where our money is going. Like Oprah says, we should be signing each check ourselves to prevent the outright theft that’s going on now.
I may start to research the budget now so that I might be ready to fix it at some point in this lifetime.
That’s all for today, see you Monday.