14 Paths to a Better America

America continues to struggle with stubbornly high unemployment, debt, spending, and division in many areas. Rather than concentrating on the negativity, one must seek answers to today's problems in our country.  A better path for our country is supported by the majority of Americans and would move us forward.  Research shows us that there are solutions which would have a ripple effect throughout our economy and would resolve many of our struggles.  These solutions are not supported by either party, yet they are embraced by Americans, regardless of political affiliation.

War on Poverty: 50 Years of No Improvements

LBJ's War on Poverty recently celebrated its 50th Anniversary.  The argument over poverty is one which has raged for centuries and continues today.  No one argues against helping people out of poverty; the argument rages over how to help.  There are ideological differences in the approach which different people support. No one, despite the rhetoric, is for throwing people out into the streets or over a cliff.

The War on Poverty has not changed much since its inception 50 years ago.  Poverty reduction approaches have relied on the Government to fund them.  More accurately, the employed support those in poverty through a series of taxes, credits and other distributive measures.   In the past, as today, churches and other local charities do their best to help out those in need.

Further, poverty rates have not changed since the initial inception of the War on Poverty.  There was a large drop in the poverty rate between 1961 and 1969.  But, ever since then, the rates have changed with employment and the overall economic atmosphere of the country.

Can it truly be proven that the fall of poverty was due to "The War on Poverty?"  After all, what else happened at this same time?  The Sixties were made up of two huge movements, racial equality and the rise of feminism.  Both of these movements, at the time, demanded equality in the workplace, voter booth, school, etc.  This lead to a rapid infusion of employees.  They had previously been discouraged from working to support their families at the fullest potential.

The economic milieu in which the War on Poverty arose is noteworthy. As of 1965, the number of Americans living below the official poverty line had been declining continuously since the beginning of the decade and was only about half of what it had been fifteen years earlier. Between 1950 and 1965, the proportion of people whose earnings put them below the poverty level, had decreased by more than 30%. The black poverty rate had been cut nearly in half between 1940 and 1960. In various skilled trades during the period of 1936-59, the incomes of blacks relative to whites had more than doubled. Further, the representation of blacks in professional and other high-level occupations grew more quickly during the five years preceding the launch of the War on Poverty than during the five years thereafter. (HOW THE WELFARE STATE HAS DEVASTATED AFRICAN AMERICANS)

In the 1960's, black people accounted for 10.5% of the United States population. It is also noted, at this time they migrated north for better jobs and to escape racial violence in the South.

Also noted, is the differences in cost of living.  Notice the figure on the left, where most of the poverty is concentrated in the South.  Cost of living in these areas is substantially lower than in other part of the United States.  It takes a lower income to survive and put food on the table in these areas.  If it costs less to live, it is highly likely that incomes would be lower, and therefore be lumped in as below the poverty line.

Obviously, women accounted for around 50% of the population.  Their arrival in the workplace also increased family incomes and brought some out of poverty level living.

Is it not feasible that much of the rhetoric surrounding poverty measures is misinformation?

How about we start preventing and actually doing something about poverty? Just like healthcare, treating the onset prevents the long term affliction and can lead to a fuller, more satisfying, life.

North Carolina may have shown us the way and the proof.  Last summer, North Carolina slashed benefits from unemployment.  The result?  The lowest unemployment rate in 5 years (see figure on left). If the incentive to stay home is removed, it is amazing how many people return to work.  It will be interesting to see how this plays out as it continues.

As discussed in Want Jobs?  Cut Corporate Taxes!, Corporate taxes prevent job creation.  It is time to cut corporate taxes and subsidies, while we are at it, to allow for cheaper products.

Related to the above is hidden taxation.  As discussed in Hidden Taxes: A True Burden on America the hidden tax burden is over $17,000 per American family per year.  What family would not do better with this much more spending power?  And, what is the effects on the economy when the money is kept in consumer's hands?

Scrap the progressive tax code and move to a flat or fair tax.  Both of these options will induce all levels of income to be involved in politics and pay attention to the spending of our governments, especially at the Federal level.  If everyone has skin in the game, the out of control spending in Washington will end FAST!  For all Americans, regardless of income, this is a good thing.

Education is key.  To fight poverty, education is where it must start.  Education does not need more funding, it needs a different format and more creativity.  In other words, it needs a free market where schools compete for kids.  Several proposals should be considered; the voucher program, school choice, and many others are out there.  Let's start looking at something new, instead of doing insanity...the same thing over and over.

There are many other ideas that can be explored.  It is sufficient to say, our current system is not reducing poverty any longer and has not since the late 1960's.  We should begin trying new things that can have an effect and have been proved through other legislation in the past.  Putting these ideas together will only help those in poverty and strengthen our country as a whole.

Want Jobs? Cut Corporate Taxes!

The American economy, which trickles down through the world economy, is growing anemically at best.  Politicians seem more intent on scoring points than actually working towards an improvement that could easily be achieved.  People need jobs and the fastest way to bring them about is to cut the Corporate Tax Rate. That is all of the opinion that is blatantly offered in this article because the rest speaks for itself.  Facts are facts, and the fact is corporate taxes are holding our economy back from creating jobs.

Often times, tax discussions become very complex and most well-informed participants will rightly point out that growth and shrinking economies have many other causes.  To look at the effects, one must account for such other factors and their impacts.  Numerous studies have been done that look at the issue of Corporate Taxes and their effect on the economy.

Progressives argue that high tax rates of the 1950's stimulated the economy during the 1950's.  They often cite the CRS report which looked at this time period in specificity.  There is a major issue which is well addressed by William McBride in the following excerpt:

For instance, the Congressional Research Service (CRS) has found support for the theory that taxes have no effect on economic growth by looking at the U.S. experience since World War II and the dramatic variation in the statutory top marginal rate on individual income.[1] They find the fastest economic growth occurred in the 1950s when the top rate was more than ninety percent.[2] However, their study ignores the most basic problems with this sort of statistical analysis, including: the variation in the tax base to which the individual income tax applies; the variation in other taxes, particularly the corporate tax; the short-term versus long-term effects of tax policy; and reverse causality, whereby economic growth affects tax rates. These problems are all well-known in the academic literature and have been dealt with in various ways, making the CRS study unpublishable in any peer-reviewed academic journal.[3] (What Is the Evidence on Taxes and Growth?)

When accounting for other causes in the economy, what effects does a change in the corporate tax rate do to GDP?  GDP is the economic output of our country and thus, a good measure of business growth.  But, you don't have to take my word on GDP, here is the definition and explanation.

When taking into account, the other variables that change GDP, research has found the same conclusion time and time again.  An increase in the corporate tax rate has a negative effect on GDP.  A decrease in corporate tax rates has a positive effect on GDP.  For a list of the peer-reviewed studies and their findings, please follow this link to Table 1.  The actual effects of corporate tax increases to GDP decreases is approximately a 1% to 1% relationship.  For our economy, a 1% decrease is an enormous drop in GDP.

In addition, throughout these studies, one will find that there is an effect on individuals as well:

1. A reduction in corporate taxes can increase revenue to the government.  Why do we care?  It is assumed that a tax cut equals higher taxes for others.  In the case of corporate taxes, this is not the case.  The reduction causes so much growth that the growth covers the loss in tax revenue and then some.  Meaning, individuals will not be burdened with additional taxes.
2. Costs of goods and services are shown to drop for individuals when corporate taxes are decreased.
3. Jobs, jobs, jobs....an increase in jobs for others, lessons the burden carried by our current tax payers.  The more people are employed, the lesser amount each working individual needs to be taxed.
4. Aforementioned above, but equally important are tax rates.  All of these studies allude to the fact that individual tax rates have the same effect on the economy.  It should also be noted that decreasing corporate tax rates allows for the cutting of individual tax rates with similar effects.

What can we conclude from the look at the corporate tax rates?  They are one major solution to our current economic failures.  According to these studies, if we cut the corporate tax rate by 10%, we should see a 10% increase in GDP within the year and even more after that.

But wait, no one has to take my word for it, the empirical evidence is enormous.  A recent analysis looked at cutting corporate taxes by 10%.  Here is a summary of the findings:

The CDA analysis of a reduction in the corporate income tax rate to 25 percent shows impressive growth for the U.S. economy.[3] For example:

• The number of jobs in the U.S. would grow on average by 581,000 annually from 2011 to 2020, with 531,000 on average being created in the private sector each year;

• U.S. real gross domestic product would rise on average by $132 billion per year;

• A typical family of four’s after-tax income would rise on average by $2,484 per year;

• U.S. capital stock would grow by an average of $240 billion more per year; and

• Gross private domestic investment would increase by $57.2 billion per year.[4]

When looking at solutions for our ailing economy, keep in mind the above information.  There is no reason that we tax corporations at the highest rates in the world.  These taxes are hurting the people they are supposedly trying to protect, the American worker.  It is time to cut corporate taxes and start creating jobs once again, at a faster clip than now.