John Edwards' Stump Speech Comes to Life
| Sun Jan. 6, 2008 6:15 PM PST
MANCHESTER, NH — For weeks, John Edwards has been invoking the personal stories of three people. Nataline Sarkisyan was a 17-year-old girl whose family fought with their insurance company to get Nataline covered for a critically needed liver transplant, only to have it agree too late to save her life. James Lowe is a man who couldn't speak for the first 50 years of his life because he didn't have the health coverage he needed to fix his cleft palate. And Valerie Lakey is a young girl who was injured on a swimming pool drain that the manufacturer knew was dangerous. Edwards fought the company in court on behalf of the Lakey family, and won.
Today, the families involved in those stories campaigned with Edwards and his wife Elizabeth in New Hampshire. Though they undoubtedly appeared with the best of intentions, they became pawns in a political game of back-and-forth before the day was out.
The emotion in Manchester's Franco-American Centre in the early afternoon was tremendous. The Edwardses tried to describe the effort the Sarkisyans had gone through to save Nataline's life before ceding the microphone to, in order, her mother, her older brother, and her father. Nataline was diagnosed with cancer when she was 14 years old, said Nataline's mother Hilda. Insurance companies sent them to multiple hospitals and were hesitant to cooperate, but eventually her cancer went into remission. After a joyous sweet sixteen party, doctors told the family there was a complication: Nataline needed bone marrow. Her brother could donate, and did. A week after the operation, it looked like everything would be fine. Once again, a complication. Nataline had turned yellow; she had jaundice.
Nataline spent three weeks in ICU, but the insurance company, Cigna, twice declined to pay for a liver transplant. Multiple doctors told Cigna (motto: "A Business of Caring") she needed the operation. Her nurses helped picket Cigna's offices, along with members of the Sarkisyans' church and members of their Armenian community. Nataline's father said he spent Nataline's last day on earth in front of Cigna's offices, pleading.
"She loved Christmas," said Hilda. "I promised her she'd be home for Christmas." Nataline didn't make it. On December 20th of this past year, Cigna agreed to "make an exception" for Nataline, but she died later that day. Her voice breaking, standing next to her family and the Edwardses, Hilda told the crowd, "I feel empty inside. My heart is a hole."
She pointed out that Nataline shouldn't have been "an exception." "We fought them, but what about the other parents that cannot speak, they don't have the community, they don't have the churches to back them up?"
Continues Below
Continued From Above
And this was the point the campaign repeatedly tried to make: Nataline's story is only one of many examples. "It could be easy to think this is Nataline's story. But what they believe, what we believe, is that it is all of our story," said Elizabeth Edwards. "It is a story of what could happen to any one of us, unless we have the willingness to change."
Said John Edwards, gesturing at the Sarkisyans, "You see in real ways what is sometimes abstract."
James Lowe also tried to speak, but the combination of his tears, his modesty, and the speech impediment a lifetime of being medically unable to speak had left him with kept him for speaking long.
Sandy Lakey, the mother of the girl who was caught on the swimming pool drain, spoke last, saying that when she met Edwards, it was the first time after her daughter's accident that she felt hope. "He is our champion," she said. "He is our hero. He will stand up for you the way he stood up for us."
Across the room, people wiped their eyes as the families told their stories. They reached out and held hands. They repeatedly stood and applauded, almost surging towards the stage in collective sympathy. It felt like a huge group hug.
And yet, the day descended into petty politics by four pm.
Obviously, politics were present from the beginning. Edwards began the day by trying to marginalize Hillary Clinton. "Iowa caucusgoers—voters across America—have already made the decision on the status quo versus change. There is no decision to be made there," he said. "The status quo is history in America." He repeatedly called for a debate between the "two agents of change," he and Senator Obama.
And he tried to make the case that middle America's problems were "personal" to him but only "political, philosophical, or academic" to Obama. Obama had the right "ideas and philosophies," but not the "fight."
But it was between the first and second events that Edwards and his advisors decided to respond to a statement made by a Clinton campaign spokesman that seemed to dismiss the people Edwards had been using in his speeches. "In order to be president, you need to do more than read articles about people who need help and talk about them," said the spokesman. We need as president "somebody who's actually going to help people and not use them as talking points."
The campaign pulled the press aside before Edwards' second event at Keene State University to have it film Edwards standing in front of his bus saying, "[the Clinton] campaign doesn't seem to have a conscience."
"Somehow everything is about them," said Edwards. "It's an indication that they have no conscience about what's at stake here. These families are what this is about. It's not about them nor is it about me."
Conflict and mudslinging between the campaigns is catnip for the national press, and the sharp words between Edwards and Clinton (particularly the "doesn't seem to have a conscience" line) will almost certainly dominate whatever time is left over after the press covers the growing spat between Obama and Clinton. Maybe that was Edwards' intention; currently holding third in New Hampshire polls, Edwards might have felt he needed to engage one of the frontrunners to draw attention to his events. It's a shame. Rarely do campaign events carry such poignancy or so thoroughly illustrate why progressives fight. By making sure the press heard him say that the Clinton campaign treats real people as part of the political game, Edwards was playing that same game. The events today, and the families showcased in them, deserve greater exposure than they will get and more respect than they received from the candidates.
Photos: Top, Edwards stands with his wife Elizabeth on stage in Manchester, NH; Middle, Edwards does a "press avail" between events; Bottom, Edwards campaigns in front of a massive American flag in Keene.
Comments
Submitted by Matt L. (not verified) on Sun Jan. 20, 2008 10:39 AM PST.
The U.S. jobs market is broken. The causes of the breakdown are readily identifiable, and there are simple cures that would go a long way towards fixing them without undermining the general benefits of a free market. The Shared Economic Growth proposal (explained below and further at www.sharedeconomicgrowth.org) would be particularly helpful. As with antitrust enforcement, product safety regulation, and other facilitators of an efficient market, these steps would increase wealth for everyone, but particularly for middle class and working class people, helping our nation to deliver on the promise of the American dream. Further, like those other basic underpinnings of the success of the U.S. economy, they do not require "Big Government" interference, but rather just some simple common sense changes to address basic problems.
There is plenty of data showing that the growth in the U.S. economy over the last 30 years has flowed almost exclusively to the top few percent of the population. That is an unfortunate thing in a democratic society, for wealth translates into power and human nature is such that those with power tend to use it to help entrench themselves, their children and their friends. It is also inefficient. It has been a very long time since the U.S. was a capital constrained economy. Our growth is limited primarily by consumer demand. The wealthy do not spend all of their money, or even close to it. The middle class and working class, on the other hand, pretty much spend what they get ? and often more. Thus, an American economy with income concentrated at the top has less consumer demand, and hence less growth and strength, that an economy with better income distribution. No very good purpose is served by having a group of people with more money than they can ever spend, so this inefficiency in income distribution is a bad thing overall.
What produces it? It's hard to believe that the top 1% of the population really drives all the value creation in our economy. It feeds the vanity of those at the top to think so, but speaking as a corporate manager I can state with confidence that such a view is not consistent with the facts. I am good at my job, but I couldn't do much without the 43 other people who report to me. Any time we have a poor hire at any level it's a big drain on the group. If I can't trust the judgment of those below me and I have to look over their shoulders, then my ability to spend time and energy on cutting edge thinking falls to zero. I have lived through repeated examples of all of this, and am absolutely convinced of the value of the contributions of every member of the group. The same holds true at the level of the CEO and top officers. If they could not rely on the people below them, they would not accomplish anything. Special talent is important and logically commands a premium. But special talent does not explain the skewed distribution of income in America today. Something is wrong.
It's not hard to figure out where the problem lies. Despite having a relatively high employment rate, and certain fields that are going begging for employees, we have an effective oversupply of labor. This flows from several sources. The increase in women entering the workforce, whether voluntarily or out of perceived economic necessity, has added competition. Increases in employee productivity through automation, the information technology revolution, and ? let's face it ? just working people harder has increased supply and reduced demand. But layered on top of these developments are the effects of globalization, which hit on two levels.
At the low end of the spectrum, we have had the huge and unceasing influx of unskilled immigrants, mostly illegal, desperate for even minimum wage or lower work. (Read on, immigration backers. My point here is not nationalistic, it's just structural, and the solution would help everybody.) Defenders say that they do the work "that Americans are unwilling to do", but this is just code for saying that such immigrants can be hired for a wage that native born Americans are unwilling to accept. But this undercuts the market power of unskilled Americans. There will always be someone willing to take that unskilled job for minimum wage or less, so why should an employer pay more?
This problem is greatly aggravated by the other side of globalization, job export. The tradition blunt instrument that America uses to deal with over-competition among unskilled workers is minimum wage laws. The problem with such legislation is that it fails to distinguish between two very different classes of jobs ? mobile and inherently local. Many jobs, such as manufacturing or any type of service than can be provided over the internet, are mobile. If the government raises the minimum wage for those, they really do move to some other country where wages are lower, assuming that labor costs are a major concern for the employer. This movement may be direct ? a decision to put a plant elsewhere ? or indirect, through a company being forced out of business by a lower cost foreign rival. In any event, it happens, leaving the former employees looking for other unskilled jobs. The result of this is that minimum wage tends to become target wage for mobile jobs.
There are many jobs that are inherently local ? food service, child care, nursing, public security, harvesting crops, brick and mortar retail, etc. Minimum wage laws work for such jobs, within limits, because they cannot be shipped away. But with competition from unskilled immigrants and from unskilled native-borns who have lost jobs in mobile industries, it becomes difficult to drive wage increases in these jobs above the statutory minimum. And, again, because raising the minimum for mobile jobs creates more unemployed workers, minimum wage tends to become target wage for the unskilled segment of these inherently local jobs as well.
OK, but we have all be told ad nauseum that globalization was going to fix this problem by replacing the low-skill, low-wage jobs exported to developing countries with high-wage, high skill jobs here in America. We're told that all the U.S. employees who lose jobs will get new training and move happily up the scale. But that's not happening for the most part. Why? That brings us to the second flaw.
The U.S. tax system pushes corporations ? the primary source, directly or indirectly, of high paying jobs ? to move their best operations abroad. U.S. law currently provides that most income earned abroad is only taxed by the U.S. when you bring the cash home. So, if you make $100 in America you only keep $65 after the U.S. 35% corporate tax, but you keep the full $100 if you earn it in the Dominican Republic. When you reinvest that $100 of D.R. cash you can use the full $100 if you invest abroad, but only $65 if you invest in America, due to the U.S. tax bite. So you invest in new foreign operations, not American ones. This effect is strongest for the highest value operations, because they have the highest taxable profit margins. The U.S. became a net importer of high technology goods for the first time in 2002, and that deficit has increased each year since. So, the set of operations that would NOT more jobs abroad to chase cheap labor ? the operations that have a high profit ratio relative to labor costs ? flee abroad for tax reasons, and once they flee they become subject to an addictive need to reinvest their earnings outside of America.
This is not a theoretical problem. I am the head of tax for a large U.S. multinational. It is my job to advise that high value manufacturing and research should, from a tax point of view, be located outside of this country. I advise that it is better to invest cash in foreign operations than in American ones. If the recent tax proposal of House Ways and Means Committee Chairman Rangel becomes law, I will advise that good administrative jobs should be moved out of the U.S. I don't like giving that advice, but under current law that's what the numbers dictate. I want to change that.
This flaw also has indirect effects. Those of us who work for multinationals are now used to moving things abroad. Allow me to explain how this has affected my own function. There is a shortage of good accountants in this country. That is partly because no child says "gee, when I grow up I want to be an accountant and decide how to book things properly!" It is also partly because the infamous Sarbanes Oxley legislation and several unfathomable recent dictates by the accounting authorities have created a huge amount of new, mostly totally useless, work for accountants. That should make salaries rise, right? Not so fast. The first response has been to get rid of most of the less skilled jobs. Companies outsource these all over the world. My company moved them to Costa Rica, where there were plenty of bright, hard working, conscientious people happy to get the work. That increased the effective supply of accountants in the U.S., but there is still a shortage. Now what?
Well, we have the same problem in Tax, and I can tell you what I am doing. Good tax people are in even shorter supply, but companies are not offering us 20% budget increases to address that problem. What can I do? Well, I found that we could hire good people pretty easily in our European office, so I did. Last year, one of my managers went out on maternity leave, and the only person on the planet who knew enough to backfill her job is a former international intern of ours now based back home in Argentina. I tried to bring her in temporarily, but U.S. Immigration blocked it, declaring (wrongly) that she was not unique. So we had her do the work in Argentina, and it went just fine. So now I am looking to source employees in various foreign locations, where I will get reasonable cost, good language skills, geographic convenience, and diverse talents. And I am not raising average U.S. salaries by more than inflation for my highly skilled workers. I am pleased for my non-U.S. employees, who are quite good and are happy to have this opportunity to have exciting, highly development roles in a U.S. multinational, but at the same time I realize that this is not a good thing for America.
And it is going to get worse. The U.S. government has been trying to attack companies that shift U.S. developed technology abroad. What's the response? The companies, not surprisingly, are rapidly shifting their R&D operations abroad, so that they do not have to worry about U.S. developed technology. There are plenty of well qualified foreign researchers out there, so why not? The IRS has issued new regulations seeking to increase the tax on U.S. administrative activities, and Chairman Rangel has proposed a law that would substantially boost the tax on U.S. administrative jobs connected to foreign operations. Guess what the response will be? I will certainly have to advise my employer to push administrative jobs to a foreign holding company. Those direct effects have indirect effects. Similar to my tax hires in our foreign offices, lots of skilled jobs will flow abroad in response to these issues, undercutting the market power of middle class Americans. They may not be thrown out on the street, but good luck to them in negotiation for salary increases above inflation, no matter how quickly corporate profits grow.
Now factor in the other issues in our economy, such as our foreign debt of over $9,000,000,000,000, our maximally indebted consumers, our rising unfunded entitlements that have just caused Moody's to issue a caution on the triple A credit rating for U.S. government debt, the rise of foreign engineers, etc., and a bleak picture emerges. Our economy will inevitably slow, and all of the usual government tricks for trying to boost it are tapped out. The government is already running a huge deficit, low interest rates and the falling dollar are causing the foreign investors who have been propping up our credit markets to start pulling out, the phantom consumer funds from unsustainable mortgage debts are gone ? we're out of gas on government stimulus. If middle class wages have been struggling to rise in good times, what will they do as our consumer economy fades? If wages fall towards developing country levels, what kind of a spiral will we enter as our consumer economy contracts? Keynes was no dope. In the modern world, economies feed on themselves, for good or ill. As ours shrinks, everyone will suffer.
So what's the cure? Start with the Shared Economic Growth proposal, explained in detail with lots more background at www.sharedeconomicgrowth.org . Shared Economic Growth would allow corporations a deduction for the dividends they pay out, but otherwise would leave the current corporate tax in place at current rates. This means that corporate operations conducted in the U.S. could be effectively tax free, creating a huge incentive to move high value operations to America. This would overnight become the best place to conduct R&D, headquarters operations, high tech manufacturing, and everything else that tends to provide high value jobs. As corporations responded to those incentives, they would need to hire employees. This would give employees market power, effectively eliminating foreign competitive pressure until U.S. wages reached an equilibrium level offsetting the tax benefit of being here.
Would this be a corporate giveaway ladling cash out to the wealthy and boosting the deficit? No. Corporations would only get a benefit to the extent that they paid out their cash within 2 years after earning it. (If you are naturally inclined to dislike corporate power, think about the implications of corporations having to cough up their cash and ask investors to give it back again.) Since corporations currently hoard most of their cash, if they instead maximized this tax benefit (as their shareholders would surely press them to do) the proposal would be largely self funding, since the incremental dividends would be taxed at the individual level. Some incremental offset would be needed, and I recommend two particular things, though others would be possible. First, I would eliminate the special tax rates for capital gains and dividends. This would take a huge amount of game playing out of the tax system that causes billionaires to be taxed at lower effective rates than their secretaries, and would reinforce the intended operation of the proposal in important ways.
That in itself would be the only necessary offset if it wasn't for the fact that much stock is held by non-taxable pension funds and charities. Most people do not realize it, but a primary effect of the corporate tax is to impose a hidden 35% tax on their IRAs, 401(k)s, and other supposedly tax free investment vehicles, and Shared Economic Growth would eliminate that hidden tax. To offset the lost revenue on dividends flowing to such nontaxable holders, I would impose a 7.5% incremental tax on individual income in excess of $500,000 a year. That would still leave individuals in that bracket with a marginal rate well under 50%, it would do much to address our looming retirement problems without gimmicks, and it would help to ensure that the flow of direct benefit from lifting the corporate tax wouldn't flow too heavily to the group of fortunate individuals that hold most of the stock outside of pension savings.
That's it. Simple, easy to enact, easy to administer, doesn't open up new loopholes, but the benefit to America and American workers would be huge.
Proposal number two is on the immigration side. The argument that keeps being raised for not just stopping illegal immigration by really going after employers (you don't need a fence if illegal immigrants can't find a job ? they will just go home) is that America needs them to "do the jobs that Americans won't do". So, let's test that proposition by allowing guest workers for jobs (not requiring a college degree) where the sponsoring employer agrees to pay them at least three times the U.S. minimum wage. If we really want those jobs done that "nobody will do", surely we can pay three times the minimum wage to make it happen. And if you, dear reader, wouldn't do that job at that price, then I suggest that you should not object to paying someone else that much to do it. What's the effect of that change? Suddenly, there would no longer be a race to the bottom for inherently local jobs. Employers would desperately try to recruit native-born Americans to replace the guest workers at somewhat lower wages. But, unlike a minimum wage change, this would have no impact on wage-intensive mobile manufacturing or service jobs, other than through the general increase in demand for labor. If a U.S. manufacturing job moves abroad because all its workers were attracted to above-minimum wage jobs at another company, that's OK. This would not be a panacea for the low-skill part of the job market, but it would be a well tailored, free-market friendly big step in the right direction.
Shared Economic Growth and smart immigration would make a huge difference at a time when America really needs it, but neither one will happen unless people help to spread the work and force such proposals into the public conversation. The Powers That Be won't do it. Neither political party will do it. It has to come from Americans who care about reforming our country for the sake of all Americans and our children. Be part of that awakening to the possibilities for real, simple, effective change. Spread the word.
Matt Lykken is the Vice President, Tax for a Fortune 250 multinational and the Director of SharedEconomicGrowth.org.
Submitted by Matt L. (not verified) on Sun Jan. 20, 2008 10:39 AM PST.
The U.S. jobs market is broken. The causes of the breakdown are readily identifiable, and there are simple cures that would go a long way towards fixing them without undermining the general benefits of a free market. The Shared Economic Growth proposal (explained below and further at www.sharedeconomicgrowth.org) would be particularly helpful. As with antitrust enforcement, product safety regulation, and other facilitators of an efficient market, these steps would increase wealth for everyone, but particularly for middle class and working class people, helping our nation to deliver on the promise of the American dream. Further, like those other basic underpinnings of the success of the U.S. economy, they do not require "Big Government" interference, but rather just some simple common sense changes to address basic problems.
There is plenty of data showing that the growth in the U.S. economy over the last 30 years has flowed almost exclusively to the top few percent of the population. That is an unfortunate thing in a democratic society, for wealth translates into power and human nature is such that those with power tend to use it to help entrench themselves, their children and their friends. It is also inefficient. It has been a very long time since the U.S. was a capital constrained economy. Our growth is limited primarily by consumer demand. The wealthy do not spend all of their money, or even close to it. The middle class and working class, on the other hand, pretty much spend what they get ? and often more. Thus, an American economy with income concentrated at the top has less consumer demand, and hence less growth and strength, that an economy with better income distribution. No very good purpose is served by having a group of people with more money than they can ever spend, so this inefficiency in income distribution is a bad thing overall.
What produces it? It's hard to believe that the top 1% of the population really drives all the value creation in our economy. It feeds the vanity of those at the top to think so, but speaking as a corporate manager I can state with confidence that such a view is not consistent with the facts. I am good at my job, but I couldn't do much without the 43 other people who report to me. Any time we have a poor hire at any level it's a big drain on the group. If I can't trust the judgment of those below me and I have to look over their shoulders, then my ability to spend time and energy on cutting edge thinking falls to zero. I have lived through repeated examples of all of this, and am absolutely convinced of the value of the contributions of every member of the group. The same holds true at the level of the CEO and top officers. If they could not rely on the people below them, they would not accomplish anything. Special talent is important and logically commands a premium. But special talent does not explain the skewed distribution of income in America today. Something is wrong.
It's not hard to figure out where the problem lies. Despite having a relatively high employment rate, and certain fields that are going begging for employees, we have an effective oversupply of labor. This flows from several sources. The increase in women entering the workforce, whether voluntarily or out of perceived economic necessity, has added competition. Increases in employee productivity through automation, the information technology revolution, and ? let's face it ? just working people harder has increased supply and reduced demand. But layered on top of these developments are the effects of globalization, which hit on two levels.
At the low end of the spectrum, we have had the huge and unceasing influx of unskilled immigrants, mostly illegal, desperate for even minimum wage or lower work. (Read on, immigration backers. My point here is not nationalistic, it's just structural, and the solution would help everybody.) Defenders say that they do the work "that Americans are unwilling to do", but this is just code for saying that such immigrants can be hired for a wage that native born Americans are unwilling to accept. But this undercuts the market power of unskilled Americans. There will always be someone willing to take that unskilled job for minimum wage or less, so why should an employer pay more?
This problem is greatly aggravated by the other side of globalization, job export. The tradition blunt instrument that America uses to deal with over-competition among unskilled workers is minimum wage laws. The problem with such legislation is that it fails to distinguish between two very different classes of jobs ? mobile and inherently local. Many jobs, such as manufacturing or any type of service than can be provided over the internet, are mobile. If the government raises the minimum wage for those, they really do move to some other country where wages are lower, assuming that labor costs are a major concern for the employer. This movement may be direct ? a decision to put a plant elsewhere ? or indirect, through a company being forced out of business by a lower cost foreign rival. In any event, it happens, leaving the former employees looking for other unskilled jobs. The result of this is that minimum wage tends to become target wage for mobile jobs.
There are many jobs that are inherently local ? food service, child care, nursing, public security, harvesting crops, brick and mortar retail, etc. Minimum wage laws work for such jobs, within limits, because they cannot be shipped away. But with competition from unskilled immigrants and from unskilled native-borns who have lost jobs in mobile industries, it becomes difficult to drive wage increases in these jobs above the statutory minimum. And, again, because raising the minimum for mobile jobs creates more unemployed workers, minimum wage tends to become target wage for the unskilled segment of these inherently local jobs as well.
OK, but we have all be told ad nauseum that globalization was going to fix this problem by replacing the low-skill, low-wage jobs exported to developing countries with high-wage, high skill jobs here in America. We're told that all the U.S. employees who lose jobs will get new training and move happily up the scale. But that's not happening for the most part. Why? That brings us to the second flaw.
The U.S. tax system pushes corporations ? the primary source, directly or indirectly, of high paying jobs ? to move their best operations abroad. U.S. law currently provides that most income earned abroad is only taxed by the U.S. when you bring the cash home. So, if you make $100 in America you only keep $65 after the U.S. 35% corporate tax, but you keep the full $100 if you earn it in the Dominican Republic. When you reinvest that $100 of D.R. cash you can use the full $100 if you invest abroad, but only $65 if you invest in America, due to the U.S. tax bite. So you invest in new foreign operations, not American ones. This effect is strongest for the highest value operations, because they have the highest taxable profit margins. The U.S. became a net importer of high technology goods for the first time in 2002, and that deficit has increased each year since. So, the set of operations that would NOT more jobs abroad to chase cheap labor ? the operations that have a high profit ratio relative to labor costs ? flee abroad for tax reasons, and once they flee they become subject to an addictive need to reinvest their earnings outside of America.
This is not a theoretical problem. I am the head of tax for a large U.S. multinational. It is my job to advise that high value manufacturing and research should, from a tax point of view, be located outside of this country. I advise that it is better to invest cash in foreign operations than in American ones. If the recent tax proposal of House Ways and Means Committee Chairman Rangel becomes law, I will advise that good administrative jobs should be moved out of the U.S. I don't like giving that advice, but under current law that's what the numbers dictate. I want to change that.
This flaw also has indirect effects. Those of us who work for multinationals are now used to moving things abroad. Allow me to explain how this has affected my own function. There is a shortage of good accountants in this country. That is partly because no child says "gee, when I grow up I want to be an accountant and decide how to book things properly!" It is also partly because the infamous Sarbanes Oxley legislation and several unfathomable recent dictates by the accounting authorities have created a huge amount of new, mostly totally useless, work for accountants. That should make salaries rise, right? Not so fast. The first response has been to get rid of most of the less skilled jobs. Companies outsource these all over the world. My company moved them to Costa Rica, where there were plenty of bright, hard working, conscientious people happy to get the work. That increased the effective supply of accountants in the U.S., but there is still a shortage. Now what?
Well, we have the same problem in Tax, and I can tell you what I am doing. Good tax people are in even shorter supply, but companies are not offering us 20% budget increases to address that problem. What can I do? Well, I found that we could hire good people pretty easily in our European office, so I did. Last year, one of my managers went out on maternity leave, and the only person on the planet who knew enough to backfill her job is a former international intern of ours now based back home in Argentina. I tried to bring her in temporarily, but U.S. Immigration blocked it, declaring (wrongly) that she was not unique. So we had her do the work in Argentina, and it went just fine. So now I am looking to source employees in various foreign locations, where I will get reasonable cost, good language skills, geographic convenience, and diverse talents. And I am not raising average U.S. salaries by more than inflation for my highly skilled workers. I am pleased for my non-U.S. employees, who are quite good and are happy to have this opportunity to have exciting, highly development roles in a U.S. multinational, but at the same time I realize that this is not a good thing for America.
And it is going to get worse. The U.S. government has been trying to attack companies that shift U.S. developed technology abroad. What's the response? The companies, not surprisingly, are rapidly shifting their R&D operations abroad, so that they do not have to worry about U.S. developed technology. There are plenty of well qualified foreign researchers out there, so why not? The IRS has issued new regulations seeking to increase the tax on U.S. administrative activities, and Chairman Rangel has proposed a law that would substantially boost the tax on U.S. administrative jobs connected to foreign operations. Guess what the response will be? I will certainly have to advise my employer to push administrative jobs to a foreign holding company. Those direct effects have indirect effects. Similar to my tax hires in our foreign offices, lots of skilled jobs will flow abroad in response to these issues, undercutting the market power of middle class Americans. They may not be thrown out on the street, but good luck to them in negotiation for salary increases above inflation, no matter how quickly corporate profits grow.
Now factor in the other issues in our economy, such as our foreign debt of over $9,000,000,000,000, our maximally indebted consumers, our rising unfunded entitlements that have just caused Moody's to issue a caution on the triple A credit rating for U.S. government debt, the rise of foreign engineers, etc., and a bleak picture emerges. Our economy will inevitably slow, and all of the usual government tricks for trying to boost it are tapped out. The government is already running a huge deficit, low interest rates and the falling dollar are causing the foreign investors who have been propping up our credit markets to start pulling out, the phantom consumer funds from unsustainable mortgage debts are gone ? we're out of gas on government stimulus. If middle class wages have been struggling to rise in good times, what will they do as our consumer economy fades? If wages fall towards developing country levels, what kind of a spiral will we enter as our consumer economy contracts? Keynes was no dope. In the modern world, economies feed on themselves, for good or ill. As ours shrinks, everyone will suffer.
So what's the cure? Start with the Shared Economic Growth proposal, explained in detail with lots more background at www.sharedeconomicgrowth.org . Shared Economic Growth would allow corporations a deduction for the dividends they pay out, but otherwise would leave the current corporate tax in place at current rates. This means that corporate operations conducted in the U.S. could be effectively tax free, creating a huge incentive to move high value operations to America. This would overnight become the best place to conduct R&D, headquarters operations, high tech manufacturing, and everything else that tends to provide high value jobs. As corporations responded to those incentives, they would need to hire employees. This would give employees market power, effectively eliminating foreign competitive pressure until U.S. wages reached an equilibrium level offsetting the tax benefit of being here.
Would this be a corporate giveaway ladling cash out to the wealthy and boosting the deficit? No. Corporations would only get a benefit to the extent that they paid out their cash within 2 years after earning it. (If you are naturally inclined to dislike corporate power, think about the implications of corporations having to cough up their cash and ask investors to give it back again.) Since corporations currently hoard most of their cash, if they instead maximized this tax benefit (as their shareholders would surely press them to do) the proposal would be largely self funding, since the incremental dividends would be taxed at the individual level. Some incremental offset would be needed, and I recommend two particular things, though others would be possible. First, I would eliminate the special tax rates for capital gains and dividends. This would take a huge amount of game playing out of the tax system that causes billionaires to be taxed at lower effective rates than their secretaries, and would reinforce the intended operation of the proposal in important ways.
That in itself would be the only necessary offset if it wasn't for the fact that much stock is held by non-taxable pension funds and charities. Most people do not realize it, but a primary effect of the corporate tax is to impose a hidden 35% tax on their IRAs, 401(k)s, and other supposedly tax free investment vehicles, and Shared Economic Growth would eliminate that hidden tax. To offset the lost revenue on dividends flowing to such nontaxable holders, I would impose a 7.5% incremental tax on individual income in excess of $500,000 a year. That would still leave individuals in that bracket with a marginal rate well under 50%, it would do much to address our looming retirement problems without gimmicks, and it would help to ensure that the flow of direct benefit from lifting the corporate tax wouldn't flow too heavily to the group of fortunate individuals that hold most of the stock outside of pension savings.
That's it. Simple, easy to enact, easy to administer, doesn't open up new loopholes, but the benefit to America and American workers would be huge.
Proposal number two is on the immigration side. The argument that keeps being raised for not just stopping illegal immigration by really going after employers (you don't need a fence if illegal immigrants can't find a job ? they will just go home) is that America needs them to "do the jobs that Americans won't do". So, let's test that proposition by allowing guest workers for jobs (not requiring a college degree) where the sponsoring employer agrees to pay them at least three times the U.S. minimum wage. If we really want those jobs done that "nobody will do", surely we can pay three times the minimum wage to make it happen. And if you, dear reader, wouldn't do that job at that price, then I suggest that you should not object to paying someone else that much to do it. What's the effect of that change? Suddenly, there would no longer be a race to the bottom for inherently local jobs. Employers would desperately try to recruit native-born Americans to replace the guest workers at somewhat lower wages. But, unlike a minimum wage change, this would have no impact on wage-intensive mobile manufacturing or service jobs, other than through the general increase in demand for labor. If a U.S. manufacturing job moves abroad because all its workers were attracted to above-minimum wage jobs at another company, that's OK. This would not be a panacea for the low-skill part of the job market, but it would be a well tailored, free-market friendly big step in the right direction.
Shared Economic Growth and smart immigration would make a huge difference at a time when America really needs it, but neither one will happen unless people help to spread the work and force such proposals into the public conversation. The Powers That Be won't do it. Neither political party will do it. It has to come from Americans who care about reforming our country for the sake of all Americans and our children. Be part of that awakening to the possibilities for real, simple, effective change. Spread the word.
Matt Lykken is the Vice President, Tax for a Fortune 250 multinational and the Director of SharedEconomicGrowth.org.
Submitted by kate loving shenk (not verified) on Sun Jan. 6, 2008 10:55 PM PST.
The Clinton statement about the Sarkisyans lacked compassion and yes, displayed a lack of conscience.
I watched the Sarkisyan family introduction. It was one of the most moving talks I have seen in recent years.
I am so thankful that the family has the courage to fight for all of us in the memory of their daughter and sister, Nataline.
The lack of restraint showed by the Clintons is typical of people who are driven by power.
Shame on you Hillary Clinton!!
The Democrat campaigns seem to have become divided by class lines: Clinton's upper-crust ladies-who-lunch and a pitch based on 'experience', Obama's middle-class 'respectful tone' and refusal to confront powerful interests or actually change anything fundamental while preaching 'hope', Edwards' working-class combativeness and willingness to confront because his supporters have nothing more to lose. If that's a fair assessment, it would not be surprising to see Clinton and Edwards seriously at odds. Nor Obama unwilling to take a stand of any substance on key issues like climate change, fearing to be identified as part of a movement really seeking deep change rather than feel-good inclusion myths.
While there may be some good reasons for the first female and black candidates that have broad enough appeal to actually win, to pander and inspire rather than commit to difficult deadlines or fixed targets, there are also good reasons to make tough specific commitments as Edwards has done.
Even if they feared for their lives, Obama and Clinton would be best advised to do as Bhutto did and speak their uncensored-unlobbyist-authored truth clearly and loudly. If they secretly agree with John Edwards, they had best say so, or retreat from politics and its risks and terrors and go work for corporate boards.
The war chests alone tell the story. Edwards is doing more with less, owing less to his backers, and that would seem to be a requirement for a President who will inherit a rather disturbing debt.
Im sorry I have to disagree strongly with the author. A great story till we get to the end. My conclusion is different and I think much of America's is too.
Edwards wants Clinton campaign to come up with a different criticsm of Edwards than the fact that all (all) these people want to campaign for Edwards on the very real issues that John has been championing.
It isnt nice to call them pawns. They are campaigning for Edwards, and effectively I might add.
JRE is saying criticize my health proposal, not these people, criticize my plan to end the war, not the survivors, criticize the identification of big pharma and big oil as the obstacles we have to overcome. Dont just identify these people and belittle them and their efforts. I agree with John Edwards, the Clinton campaign didn't display any political or personal conscience here.
John has not misstepped yet. I'm very proud of his campaign, in fact it's brilliant. Go John.
To let my bias be known, I'm an Edwards supporter. And yet, I somewhat agree with the last few lines in this story.
However, I think the press are complicit in this too.
If Iowa and NH (and SC and NV) voters just learned by going to events, reading campaign literature, talking with friends and supporters, and COMPLETELY IGNORING the press, the election process would be fairer.
The press DOES love a small number of story lines and they ignore everything else. So they encourage the campaigns to play along.
If the press would stop trying to manage the campaigns (by only reporting on their time worn memes), we would all be grateful.
Save your analysis for when the nominees are already mathematically evident, when there are no more of these small campaign gatherings feasible.
Submitted by capt (not verified) on Mon Jan. 7, 2008 8:23 AM PST.
"By making sure the press heard him say that the Clinton campaign treats real people as part of the political game, Edwards was playing that same game."
Yes, but like pointing out someones negatives is being negative?
The truth might hurt but if Edwards point is true the counterpoint that he is doing the same is false.
Submitted by BloggerRadio (not verified) on Mon Jan. 7, 2008 10:09 AM PST.
Obviously, the author is anti-Edwards but too slimy (reads:political) to say so more directly (reads:'nad-less).
Media is doing everything in its power to keep the spotlight on the two celebrity candidates.
You can vote for Oprah, you can vote for this to happen: "Bush-Clinton-Bush-Clinton", or you can vote for WE-THE-PEOPLE by casting your lot with John Edwards. That's what I'm doin'. John Edwards for Prez!!!
Submitted by BloggerRadio (not verified) on Mon Jan. 7, 2008 10:22 AM PST.
Ask both Clinton and Obama about their YES votes on the Lobbyist written, secretly composed at the Bush White House, behind closed doors, Peru trade deal that expands the assault on the American middle class and, and what those two have against American Labor.
The article misses the whole point when it comes to Edwards! He is by far the best candidate contending for President.
Clinton is to mired in Washington politic & special interest to be a viable agent of change.
Obama maybe the greatest tragedy unfolding in this entire campaign season...He has no platform & his pie-in-the-sky waxing of uniting America is a joke.
Submitted by MickNH (not verified) on Mon Jan. 7, 2008 12:25 PM PST.
I attended the Manchester event and was very touched by Mrs. Sarkisyan but I was wiping away tears when Mr. Sarkisyan spoke.
I attended with my children and I could only imagine what I would do if one of them was ill and I had to choose between being at their bedside or fight to get them healthcare.
God bless them for sharing their experiences. The Cigna executives should face criminal charges and Hillary should be ashamed. I know it makes me ashamed that I once considered voting for her.
Finally, Hillary shows her colors and they are not good either, and Obama paints a rosy picture that he is a uniter for change; I think I have heard that before, and look what we have sitting in the White House now.
John Edwards might be using these people, but they wanted to be used to help get John elected. What better than those who have been through the mill and want to see someone in the White house that will work for them. Some how the voters in New Hampshire need to be guided to, hopefully,the the next president of the United States; otherwise there will be another 4 years of the same crap that the right, the media and corporate America wants.
Go John 08 !!!!!!!
Hear! Hear! Craig Hubley. I agree whole heartedly.
I'm an old fashioned Dem. I want my candidate to roll his sleeves up and throw the punch when it deserves to be thrown and not worry about the consequences. I want a candidate with a heart. I'm tired of slick campaign slogans and check the box stances. I want someone who will fight long and hard for our rights. We have ceded power to them, you guys. We have given up. This is OUR country and if we really love it we won't let it down by letting corporations and their hand-picked candidates rule.
I hope Edwards has the stones to start us down the right path to getting our country back. Right now it's in the hands of the highest bidder.
Having read every post before mine, I'm struck by the unanimity of our responses, both to the article and to Edwards' mission. The politicians talk and talk and talk about change, but there is no doubt in my mind that the only one committed to delivering that change is John. For the author to say that "Edwards might have felt he needed to engage one of the front runners" after edging out Hillary in Iowa is disingenuous. He IS a front runner! We will win this fight. We must. But Edwards can't pull it off on his own. I am a Masters student in secondary ed, and my wife is in school as an EMT, but we have donated over $75 in the last three months. And we have kids! We can afford $25 a month to help him win. And our contributions are doubled by federal matching funds because Edwards won't take a nickel from corporate donors. Join us. Make whatever contribution you can. Be the change you know we need.
I hope that John Edwards will be able to get to be president. We really need someone to be able to fight for the middle class. These were only three cases. There are many more out there. I understand why Ralph Nader spoke up for him.
Ever since the new editor took over for Mother Jones, around the time of the new web page design, this magazine has been running right wing talking points. Enough is enough. Get rid of this editor, or I will stop giving money to Mother Jones.
Everyone in the running for President is a politician: that means they cannot sit in the corner sucking their thumb if they want to be elected. They have to make their points as best they can. I think this hit article by Jonathan Stein is a tad disgusting and I don't agree with his conclusions, but then I am sick of torture, wars for oil and the selling of our democracy to corporate powers that be.
From my small SS check I send a little to Edwards each month now. I think he is our best chance for ressurection.
Giving a face to the type of struggle that real Americans face is hardly using someone as a pawn, especially if they are willing to be that face. It isn't as though these people were hoodwinked into showing up at an Edwards event. They went because they believe in what he stands for. Anyone who thinks that Edwards has done something wrong by having them speak at his events, or hitting back when these people are called pawns, just doesn't like that Edwards has clearly come out on top in this exchange.
For months I've been watching the corporate media attempting to stifle Edwards. They are scared to death of him. He might actually make their world less safe for media mergers.
I've watched Katie Couric challenge an honest response after letting every other candidate slide on the same question.
George Stephanopoulos had no less than Allen Greenspan follow him as a rebuttal and he prompted Greenspan to assert that Edwards was wrong for the economy, only to have Greenspan agree with Edwards' proposal for a fund to bail out homeowners facing forclosure.
NBC likes to show his rallies with reporters in front talking over his speech giving their own spin -- this right after NBC airs a studio interview with Hillary in her pearls.
FNC just has talking heads denegrating those evil "trial lawyers".
Etu, Mr. Stein?
Joe is right; the media is trying to stifle anything good where John Edwards is concerned. It is becoming very obvious as each day goes by. Even online polls do not include him as an option, so I do not answer the online polls if they cannot include the best candidate we have in the running. If America is to see any significant change for the better, in the forseeable future, John Edwards must become the next president. Get him in with Obama as Vice, then we have a real chance of 16 years to fight the now-in-control Government, Inc. If not, our quality of life in the US will continue to spiral downward. Someone has to start representing us regular folks; Edwards is the only one willing to do that. I am going over to his website right after this to make a donation. I challenge everyone else to do the same!
Edwards is running on a populist platform. However, I am concerned about Obama and Hillary ( especialy Hillary) because they have taken large sums of money from lobbyist to run for office. We don't need a President or congress that are beholding corporations. I am glad Edwards stood up for the families at the bottom/ middle of social strata.He allowed them to speak for all of us. I don't think this was a con game. I think you are jaded by the Bush Administration.
Jonathan Stein creates an utterly false moral equivalency between Hillary Clinton and John Edwards.
On the one hand, the Clinton campaign makes the nasty charge that Edwards is using the Sarkysian family as "talking points." In reality, the Sarkysian family contacted the Edwards campaign and offered to tell their story, one about insurers that will hopefully leave a lasting imprint on voters' consciousness regardless of who wins the nomination.
On other other hand, Edwards declared that the Clinton campaign (not Hillary herself) emphasis added) "had no conscience" and was diverting attention from the Sarkysian family's bereavement.
In what possible way was Edwards engaging in "mudslinging"? By any objective measure, the slime was coming solely from the Clinton camp.
Keep in mind, too, that top Clinton advisor Mark Penn (whose PR firm formerly represented Blackwater USA) used a recent TV appearance to repeatedly try to link Barack Obama with "cocaine," while supposedly trying to apologize for statements by a now-fired Clinton staffer. While the Clintons seem to represent Republican-lite policies (NAFTA, welfare reform, voting for the Iraq war), the political tactics are heavy-duty Karl Rove maneuvers.
Jonathan Stein's attempt to be "balanced" by calling a foul on both Edwards and Clinton is a predictable convention of the mainstream media, and a MoJO reporter should know better. Roger Bybee, Milwaukee
It's easy to see why Hillary's comments sound cold and hard about Edwards. Just look at her voting record. It's identical to Bush's. Money, power, greed. Corporate Greed is her motto. Make no mistake, if you vote for Hillary, you might as well re-elect Bush for a 3rd term. She's the same. She loves Lobbyist's money. If you like take and no give, she's the one for you. HILLARY CLINTON IS NO BILL CLINTON.
John Edwards is great!In my 66 years on this planet only two other candidates for president have voiced sincere concern about the working poor. Most are pawns of the military-industrial complex and get or got wealthy by corporate profits made off the labor of the poor.
J Stein has missed the boat and published a specious remark. Edwards is a trail lawyer making his case in the national courtroom, presenting concrete evidence that demonstrates the nature and depth of his concerns, plus his capacity to generate results.
The stories of the people he presents have a meaningful social interest and Stein does a disservice to Mother Jones to question it's legitimacy.
Add me to the list of people on here who think this crack against Edwards is strange and inaccurate. Edwards is point on and is doing a great job; if he fails, we have failed once more to step up and do the best thing for ourselves.
I'm voting for Edwards.
The cult of personality has reduced this election to a Brittany,K-Fed page burner. That two corporate bought political clones can argue with each other about "change" on the same stage as Edwards is almost as laughable as it is tragic.
Edwards isn't "using" anyone for his campaign. We need Edwards!! Plain & simple. There is no "middle class". I'm in the "missing class". I make less than 25K on a single income, and no kids. I was laid off my job in Mar '07 and can't get a job at McDonald's. While working, I made too much money to get any kind of help.I bought my Florida home 13 yrs ago and can't make the mortgage. The insurance premiums pushed me over the edge into poverty...I need help and Edwards is the solution for me. Have the rich pay their share and help the poor...The Clinton's are yesterdays news, but Hillary is 100% right about the cleaning up Bush's mess, and Edwards can get it done quickly.
Submitted by Matt L. (not verified) on Sun Jan. 20, 2008 10:39 AM PST.
The U.S. jobs market is broken. The causes of the breakdown are readily identifiable, and there are simple cures that would go a long way towards fixing them without undermining the general benefits of a free market. The Shared Economic Growth proposal (explained below and further at www.sharedeconomicgrowth.org) would be particularly helpful. As with antitrust enforcement, product safety regulation, and other facilitators of an efficient market, these steps would increase wealth for everyone, but particularly for middle class and working class people, helping our nation to deliver on the promise of the American dream. Further, like those other basic underpinnings of the success of the U.S. economy, they do not require "Big Government" interference, but rather just some simple common sense changes to address basic problems.
There is plenty of data showing that the growth in the U.S. economy over the last 30 years has flowed almost exclusively to the top few percent of the population. That is an unfortunate thing in a democratic society, for wealth translates into power and human nature is such that those with power tend to use it to help entrench themselves, their children and their friends. It is also inefficient. It has been a very long time since the U.S. was a capital constrained economy. Our growth is limited primarily by consumer demand. The wealthy do not spend all of their money, or even close to it. The middle class and working class, on the other hand, pretty much spend what they get and often more. Thus, an American economy with income concentrated at the top has less consumer demand, and hence less growth and strength, that an economy with better income distribution. No very good purpose is served by having a group of people with more money than they can ever spend, so this inefficiency in income distribution is a bad thing overall.
What produces it? It's hard to believe that the top 1% of the population really drives all the value creation in our economy. It feeds the vanity of those at the top to think so, but speaking as a corporate manager I can state with confidence that such a view is not consistent with the facts. I am good at my job, but I couldn't do much without the 43 other people who report to me. Any time we have a poor hire at any level it's a big drain on the group. If I can't trust the judgment of those below me and I have to look over their shoulders, then my ability to spend time and energy on cutting edge thinking falls to zero. I have lived through repeated examples of all of this, and am absolutely convinced of the value of the contributions of every member of the group. The same holds true at the level of the CEO and top officers. If they could not rely on the people below them, they would not accomplish anything. Special talent is important and logically commands a premium. But special talent does not explain the skewed distribution of income in America today. Something is wrong.
It's not hard to figure out where the problem lies. Despite having a relatively high employment rate, and certain fields that are going begging for employees, we have an effective oversupply of labor. This flows from several sources. The increase in women entering the workforce, whether voluntarily or out of perceived economic necessity, has added competition. Increases in employee productivity through automation, the information technology revolution, and let's face it just working people harder has increased supply and reduced demand. But layered on top of these developments are the effects of globalization, which hit on two levels.
At the low end of the spectrum, we have had the huge and unceasing influx of unskilled immigrants, mostly illegal, desperate for even minimum wage or lower work. (Read on, immigration backers. My point here is not nationalistic, it's just structural, and the solution would help everybody.) Defenders say that they do the work "that Americans are unwilling to do", but this is just code for saying that such immigrants can be hired for a wage that native born Americans are unwilling to accept. But this undercuts the market power of unskilled Americans. There will always be someone willing to take that unskilled job for minimum wage or less, so why should an employer pay more?
This problem is greatly aggravated by the other side of globalization, job export. The tradition blunt instrument that America uses to deal with over-competition among unskilled workers is minimum wage laws. The problem with such legislation is that it fails to distinguish between two very different classes of jobs mobile and inherently local. Many jobs, such as manufacturing or any type of service than can be provided over the internet, are mobile. If the government raises the minimum wage for those, they really do move to some other country where wages are lower, assuming that labor costs are a major concern for the employer. This movement may be direct a decision to put a plant elsewhere or indirect, through a company being forced out of business by a lower cost foreign rival. In any event, it happens, leaving the former employees looking for other unskilled jobs. The result of this is that minimum wage tends to become target wage for mobile jobs.
There are many jobs that are inherently local food service, child care, nursing, public security, harvesting crops, brick and mortar retail, etc. Minimum wage laws work for such jobs, within limits, because they cannot be shipped away. But with competition from unskilled immigrants and from unskilled native-borns who have lost jobs in mobile industries, it becomes difficult to drive wage increases in these jobs above the statutory minimum. And, again, because raising the minimum for mobile jobs creates more unemployed workers, minimum wage tends to become target wage for the unskilled segment of these inherently local jobs as well.
OK, but we have all be told ad nauseum that globalization was going to fix this problem by replacing the low-skill, low-wage jobs exported to developing countries with high-wage, high skill jobs here in America. We're told that all the U.S. employees who lose jobs will get new training and move happily up the scale. But that's not happening for the most part. Why? That brings us to the second flaw.
The U.S. tax system pushes corporations the primary source, directly or indirectly, of high paying jobs to move their best operations abroad. U.S. law currently provides that most income earned abroad is only taxed by the U.S. when you bring the cash home. So, if you make $100 in America you only keep $65 after the U.S. 35% corporate tax, but you keep the full $100 if you earn it in the Dominican Republic. When you reinvest that $100 of D.R. cash you can use the full $100 if you invest abroad, but only $65 if you invest in America, due to the U.S. tax bite. So you invest in new foreign operations, not American ones. This effect is strongest for the highest value operations, because they have the highest taxable profit margins. The U.S. became a net importer of high technology goods for the first time in 2002, and that deficit has increased each year since. So, the set of operations that would NOT more jobs abroad to chase cheap labor the operations that have a high profit ratio relative to labor costs flee abroad for tax reasons, and once they flee they become subject to an addictive need to reinvest their earnings outside of America.
This is not a theoretical problem. I am the head of tax for a large U.S. multinational. It is my job to advise that high value manufacturing and research should, from a tax point of view, be located outside of this country. I advise that it is better to invest cash in foreign operations than in American ones. If the recent tax proposal of House Ways and Means Committee Chairman Rangel becomes law, I will advise that good administrative jobs should be moved out of the U.S. I don't like giving that advice, but under current law that's what the numbers dictate. I want to change that.
This flaw also has indirect effects. Those of us who work for multinationals are now used to moving things abroad. Allow me to explain how this has affected my own function. There is a shortage of good accountants in this country. That is partly because no child says "gee, when I grow up I want to be an accountant and decide how to book things properly!" It is also partly because the infamous Sarbanes Oxley legislation and several unfathomable recent dictates by the accounting authorities have created a huge amount of new, mostly totally useless, work for accountants. That should make salaries rise, right? Not so fast. The first response has been to get rid of most of the less skilled jobs. Companies outsource these all over the world. My company moved them to Costa Rica, where there were plenty of bright, hard working, conscientious people happy to get the work. That increased the effective supply of accountants in the U.S., but there is still a shortage. Now what?
Well, we have the same problem in Tax, and I can tell you what I am doing. Good tax people are in even shorter supply, but companies are not offering us 20% budget increases to address that problem. What can I do? Well, I found that we could hire good people pretty easily in our European office, so I did. Last year, one of my managers went out on maternity leave, and the only person on the planet who knew enough to backfill her job is a former international intern of ours now based back home in Argentina. I tried to bring her in temporarily, but U.S. Immigration blocked it, declaring (wrongly) that she was not unique. So we had her do the work in Argentina, and it went just fine. So now I am looking to source employees in various foreign locations, where I will get reasonable cost, good language skills, geographic convenience, and diverse talents. And I am not raising average U.S. salaries by more than inflation for my highly skilled workers. I am pleased for my non-U.S. employees, who are quite good and are happy to have this opportunity to have exciting, highly development roles in a U.S. multinational, but at the same time I realize that this is not a good thing for America.
And it is going to get worse. The U.S. government has been trying to attack companies that shift U.S. developed technology abroad. What's the response? The companies, not surprisingly, are rapidly shifting their R&D operations abroad, so that they do not have to worry about U.S. developed technology. There are plenty of well qualified foreign researchers out there, so why not? The IRS has issued new regulations seeking to increase the tax on U.S. administrative activities, and Chairman Rangel has proposed a law that would substantially boost the tax on U.S. administrative jobs connected to foreign operations. Guess what the response will be? I will certainly have to advise my employer to push administrative jobs to a foreign holding company. Those direct effects have indirect effects. Similar to my tax hires in our foreign offices, lots of skilled jobs will flow abroad in response to these issues, undercutting the market power of middle class Americans. They may not be thrown out on the street, but good luck to them in negotiation for salary increases above inflation, no matter how quickly corporate profits grow.
Now factor in the other issues in our economy, such as our foreign debt of over $9,000,000,000,000, our maximally indebted consumers, our rising unfunded entitlements that have just caused Moody's to issue a caution on the triple A credit rating for U.S. government debt, the rise of foreign engineers, etc., and a bleak picture emerges. Our economy will inevitably slow, and all of the usual government tricks for trying to boost it are tapped out. The government is already running a huge deficit, low interest rates and the falling dollar are causing the foreign investors who have been propping up our credit markets to start pulling out, the phantom consumer funds from unsustainable mortgage debts are gone we're out of gas on government stimulus. If middle class wages have been struggling to rise in good times, what will they do as our consumer economy fades? If wages fall towards developing country levels, what kind of a spiral will we enter as our consumer economy contracts? Keynes was no dope. In the modern world, economies feed on themselves, for good or ill. As ours shrinks, everyone will suffer.
So what's the cure? Start with the Shared Economic Growth proposal, explained in detail with lots more background at www.sharedeconomicgrowth.org . Shared Economic Growth would allow corporations a deduction for the dividends they pay out, but otherwise would leave the current corporate tax in place at current rates. This means that corporate operations conducted in the U.S. could be effectively tax free, creating a huge incentive to move high value operations to America. This would overnight become the best place to conduct R&D, headquarters operations, high tech manufacturing, and everything else that tends to provide high value jobs. As corporations responded to those incentives, they would need to hire employees. This would give employees market power, effectively eliminating foreign competitive pressure until U.S. wages reached an equilibrium level offsetting the tax benefit of being here.
Would this be a corporate giveaway ladling cash out to the wealthy and boosting the deficit? No. Corporations would only get a benefit to the extent that they paid out their cash within 2 years after earning it. (If you are naturally inclined to dislike corporate power, think about the implications of corporations having to cough up their cash and ask investors to give it back again.) Since corporations currently hoard most of their cash, if they instead maximized this tax benefit (as their shareholders would surely press them to do) the proposal would be largely self funding, since the incremental dividends would be taxed at the individual level. Some incremental offset would be needed, and I recommend two particular things, though others would be possible. First, I would eliminate the special tax rates for capital gains and dividends. This would take a huge amount of game playing out of the tax system that causes billionaires to be taxed at lower effective rates than their secretaries, and would reinforce the intended operation of the proposal in important ways.
That in itself would be the only necessary offset if it wasn't for the fact that much stock is held by non-taxable pension funds and charities. Most people do not realize it, but a primary effect of the corporate tax is to impose a hidden 35% tax on their IRAs, 401(k)s, and other supposedly tax free investment vehicles, and Shared Economic Growth would eliminate that hidden tax. To offset the lost revenue on dividends flowing to such nontaxable holders, I would impose a 7.5% incremental tax on individual income in excess of $500,000 a year. That would still leave individuals in that bracket with a marginal rate well under 50%, it would do much to address our looming retirement problems without gimmicks, and it would help to ensure that the flow of direct benefit from lifting the corporate tax wouldn't flow too heavily to the group of fortunate individuals that hold most of the stock outside of pension savings.
That's it. Simple, easy to enact, easy to administer, doesn't open up new loopholes, but the benefit to America and American workers would be huge.
Proposal number two is on the immigration side. The argument that keeps being raised for not just stopping illegal immigration by really going after employers (you don't need a fence if illegal immigrants can't find a job they will just go home) is that America needs them to "do the jobs that Americans won't do". So, let's test that proposition by allowing guest workers for jobs (not requiring a college degree) where the sponsoring employer agrees to pay them at least three times the U.S. minimum wage. If we really want those jobs done that "nobody will do", surely we can pay three times the minimum wage to make it happen. And if you, dear reader, wouldn't do that job at that price, then I suggest that you should not object to paying someone else that much to do it. What's the effect of that change? Suddenly, there would no longer be a race to the bottom for inherently local jobs. Employers would desperately try to recruit native-born Americans to replace the guest workers at somewhat lower wages. But, unlike a minimum wage change, this would have no impact on wage-intensive mobile manufacturing or service jobs, other than through the general increase in demand for labor. If a U.S. manufacturing job moves abroad because all its workers were attracted to above-minimum wage jobs at another company, that's OK. This would not be a panacea for the low-skill part of the job market, but it would be a well tailored, free-market friendly big step in the right direction.
Shared Economic Growth and smart immigration would make a huge difference at a time when America really needs it, but neither one will happen unless people help to spread the work and force such proposals into the public conversation. The Powers That Be won't do it. Neither political party will do it. It has to come from Americans who care about reforming our country for the sake of all Americans and our children. Be part of that awakening to the possibilities for real, simple, effective change. Spread the word.
Matt Lykken is the Vice President, Tax for a Fortune 250 multinational and the Director of SharedEconomicGrowth.org.
