When the facts change, I change my mind. What do you do? -- John Maynard Keynes

Monday, April 21, 2014

Unemployment Still Terrible, How to Fix

The unemployment rate does not count workers who have given up and are not actively seeking work. A better measure is the labor participation rate -- and it still looks very bad:

chart of U.S. Labor Participation Rate (source: BLS, US Dept of Labor, 4/5/14)
U.S. Labor Participation Rate (source: BLS, US Dept of Labor, 4/5/14)

The Unemployment Puzzle: Where Have All the Workers Gone? - WSJ.com: "... Baby boomers can't be the whole story, though, since the participation rate has declined for younger workers too. This part of the drop is a function of various factors, including simple discouragement, poor work incentives created by public policies, inadequate schooling and training, and a greater propensity to seek disability insurance. Globalization and technological change have also reduced employment and wage growth for low-skilled workers—which raises questions about whether current policy is focused enough on helping workers to achieve the skills necessary to work productively and earn decent incomes...."

You want to increase employment? Increase self-employment. How?

1. Repeal the self-employment tax or at least reduce it to the same rate paid by regular employed workers (payroll tax): 7.65%.

2. Comprehensive income tax reform: a flat tax of 17.35% on all income, of whatever kind, from whatever source -- corporations, individuals, capital gains, etc., wages, dividends, interest, pensions, etc. -- with the first $30,000 in income exempt from income tax. No personal deductions -- tell Congress to quit playing games with the tax code. The present tax code, thanks to Congress, is FUBAR.

3. Comprehensive entitlements reforms: get the US off welfare -- including corporations, farmers, et al, and stop incentivizing government dependency -- if you do not know what I am talking about, go here.

4.  Remove all caps on the payroll tax in order to pay for our out-of-control health, disability, social security, and public pension welfare state. Everyone should pay the same rate: 7.65% for employee, 7.65% for employer on ALL compensation (including, e.g., CEO stock options etc.).

5. Abolish all public pensions for those not within 15 years of retirement -- the private sector has, for the most part, already abandoned pensions. Include everyone on Social Security. In addition, allow all individuals to self-fund, if they so choose, up to 15% of their annual income into a tax sheltered retirement account (exempt from creditors), administered by a US government regulated financial institution and guaranteed by the US government (this would replace 401Ks, IRAs, etc.). For police, military, and others qualifying for early retirement (before eligible for social security retirement), each responsible governmental entity would have to fund severance pay, in the interim, for those so qualifying, until they became eligible for social security.

6. Pass real health care reform: the Affordable Care Act [sic] is FUBAR. Remove all employer provided health insurance. Merge Medicare and Medicaid and provide 3 coverage levels: 1) comprehensive coverage for children and youth until age 18; 2) basic/catastrophic coverage for those between the ages of 18 and 65;  3) Comprehensive coverage for those 65 and older. Individuals could supplement government-provided health coverages with their own private health insurance. All health providers would have to publish their fee schedules--full transparency. Take employers and the states out of the health insurance scheme--they cannot afford it.


The Big Picture

Financial Crisis - The Telegraph

JohnTheCrowd.com | The Sailing Website

Craig Newmark - craigconnects