Employment is down in America, due in large part to what we’ve called the “government wedge.” This is the money the government gets from each of our paychecks. And it is the main reason why businesses aren’t hiring, because too much of the cost of a new hire actually goes to pay the government.
There’s a way out of the downward employment spiral. While these ideas aren’t a quick fix, they would get America back on track.
Extend the Bush tax cuts
Important for stopping the slide of employment is to stop the erosion of take-home pay and savings by taxes. The current tax rates for personal income, capital gains, and dividends stand at 35%, 15%, and 15%, which were brought to you a la Bush and can be taken away with a whisk of the Congressional and Presidential pens.
This piece of rammed regulation allows individuals to receive a dollars worth of healthcare for only five cents. Who pays for the other ninety-five cents? Well, you and me, of course, as collected by the government. It’s part of that growing “government wedge” we spoke of. What folks don’t realize is that health care doesn’t come for free.
Somebody pays for Obamacare, and it’s not Obama. Those somebodies are you and me. And it comes from whatever income we manage to earn but don’t get to spend.
Eliminate trade barriers
When government imposes restrictions to trade, such as tariffs and taxes on foreign goods, it looks like a protection for American-made goods. But we just said unemployment in America is up and production of American goods is down and costing more besides. Nobody will buy our stuff because it costs too much if we produce it at all. So, what started out as a “protection” is another kiss of death for American employment.
Develop a better business climate
Business thrives when it’s unencumbered by rules, regulations, restrictions, and taxes. If governmental agencies would simply step aside and let consumers decide for themselves, we wouldn’t need all the protections government thinks it’s providing to the buying public.
A good business climate develops naturally when the tax burden is low. A dollar spent on taxes is a dollar less spent on products and services, along with the hiring of individuals to make those products and services. A study showed that 1% decrease in taxes produces a 0.3% increase in economic activity.
All together now….let’s put Americans back to work
Putting these four things together can make employment turn around. Let’s see if America can make it happen for all Americans.
Timothy Bartik, National Tax Journal, 47: 847-862, 1994.