Tag Archives: tax policy

The Black Death, a killer of 20 million, had its good points

7 Feb


Being the progeny of immigrants, I’m sympathetic to their cause. Still, I’m convinced large-scale, legal immigration has hastened the withering of the middle class.

There have been other causes, including changes in tax policy and the global economy. But I was surprised to learn recently how significant an impact immigration had on the downward spiral of wages.

With thousands and thousands of Baby Boomers leaving the work force for retirement, wages should be going up. That’s the simple law of supply and demand. Immigration, however, has provided a counter balance and prevented this. Indeed, opening the borders sometimes seems like a purposeful antidote designed to help labor-intensive corporations. This is mostly likely why the U.S. Chamber of Commerce is a strong advocate of robust immigration.

Congress, perhaps responding to appeals by business, has frequently and consistently raised the level of legal immigration. In 1965 it was at 290,000 annually. Today it is about 1.1 million. This is legal immigration, and it is four times higher than any other country.

how-many-is-too-manyPhilip Cafaro, author of “How Many Is Too Many? The Progressive Argument for Reducing Immigration Into the United States,” gives a thorough accounting of all this in a recent edition of the Chronicle of Higher Education.

Cafaro sites studies by Harvard University economist George J. Borjas, a leading authority on the economic impact of immigration. Borjas found that in the 70s and 80s, a 10 percent increase in the number of workers in a given field decreased wages there by 3.5 percent. A more recent study showed that such an increase reduced wages of African-Americans by 4 percent, lowered their employment rate by 3.5 percent and increased their incarceration rate by almost one percent.

It’s good at least that today there is a great deal of talk about the withering middle class. Even Republicans now recognize it will be a critical issue in the 2016 presidential race. In an attempt to get in front of the issue, candidates like Jeb Bush are already saying they want to reverse the trend, although they provide few details.

If politics were not a factor, a solution could be easily found.

The strong post-war middle class in the U.S. was created primarily by tax policy. This policy was heavily graduated, meaning you paid a lot more if you made more a lot more. That policy no longer exists. Returning to it would easily restore the middle class, but it is unlikely the Republican Congress will choose this route.

Jeb-bushThere is, however, a consensus that a middle class, if one is desired, must be created, otherwise there will only be rich and poor. One was created in Europe during the 14th and 15th centuries. Unfortunately, the creative force was the Black Death — the bubonic plague that may have killed one out of every three Europeans (about 20 million). With the labor force devastated, there was upward pressure on wages and the ability of farmers to earn a much better living. Some reports say farm income increased by 50 percent.

In addition to creating the middle class, the plague often is credited with spawning the cultural rebirth known as the Renaissance.

The Black Death is a high price to pay for a middle class, even if it is accompanied by a renaissance. Changes in the tax and immigration policies might be a better way. But because government move in micro increments, this is unlikely. Any significant change probably will have to come through some unseen, forced hand.

If this is true, let’s hope it’s a kind one.

By Lanny Morgnanesi

Those who benefit from Hillary Clinton (and others) should pay more to Washington

20 Jan

Hillary Clinton

Here is what I think is a logical, no-nonsense tax policy: Those who benefit most from the government should pay the most.

Let’s say I own land on which I plant corn for ethanol. If the government decides to restrict the importation of sugar cane – which if allowed kill my sales– then I am indebted to the government in a big way. I’m a Great Benefiter.

I should not be able to get off just by contributing to the political campaigns of the few congressional leaders who pushed my bill through. I should have to pay more for the actual government, since it is working directly for me. I’ve got to pay more salaries, more electric bills, more for everything that keeps it running.

The same would be true for Amgen, the largest biotech company in the world. The New York Times recently reported that a few paragraphs in the “fiscal cliff” legislation give Amgen a two-year delay on Medicare price restraints for a drug it makes. This was its second delay, God bless them. Amgen is willing to pay 74 Washington lobbyists to get what it wants, but is it willing to pay more in taxes?

It should be.

It’s a Great Benefiter.

I’m glad our 430-ship Navy protects the sea-lanes so I can purchase imported products. That, however, is only an indirect benefit. What about the people and companies who profit from safe shipping?

They’re Great Benefiters. Charge them!

A couple weeks ago there was a somewhat surprising article in Bloomberg Businssweek. Well, maybe not so surprising. It was about Secretary of State Hilary Clinton, but the headline was: “Secretary of Commerce.” The underline was, “How Hillary Clinton turned the State Department into a machine for promoting U.S. business.”

It begins by recounting her 79th visit overseas, which took her to the Czech Republic. She discussed foreign policy but also found time to ask Prime Minister Petr Necas to choose Westinghouse Electric for a nuclear plant contract worth $10 billion.

The article says she regularly makes personal pitches to world leaders on behalf of businesses.

What is that worth? Whatever it is, it’s a lot more than the $50,000 Westinghouse might later pay Hilary to speak for an hour at a corporate retreat.

Westinghouse needs to pay more.

So, have I come up with the answer to our budget and debt problems? All we need is some accountant to figure out what is owned, and for Congress to do the right thing and pass legislation that taxes the Great Benefiters. Of course, the Great Benefiters should have the option of not paying in exchange for the not benefiting. In such cases, the government would have to permit, say, an attack on Exxon tankers by Somalian pirates.

That is an option the Great Benefiters are unlikely to choose. Hence, we have found a way to balance the budget. See, things aren’t as bad as they seem.

By Lanny Morgnanesi

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