What Does the Government Shutdown Mean? That We're Not Focusing On Real Tax Issue

Don’t you just love this time of year? The leaves are changing colors, the air is crisp, and Washington is fighting another fiscal battle. Unfortunately, the annual signs of autumn are now accompanied with the Democratic vs. Republican budget showdown. Republicans voted to defund Obamacare, the president has refused to negotiate on raising the debt limit, and our government shut down Tuesday.  How can anyone doubt that the ever-elusive “grand bargain” will never happen?

What gets lost in all this political posturing is the fact that the United States is in desperate need of deficit and tax reform. The last time Congress enacted a comprehensive tax reform, Top Gunwas still in theaters. For those of us too young to remember, the year was 1986, and the president was Ronald Reagan. Democrats and Republicans in Congress worked together with President Reagan to pass the Tax Reform Act of 1986. In today’s Congress that sort of compromise and bipartisanship is unheard of. The Tax Reform Act of 1986 helped propel the American economy forward, paving the way for the boom of the 1990s. Our nation needs a tax code for a 21st century economy.

My goal is to borrow ideas from both sides of the political spectrum in order to find common areas where compromise can be made, and the Tax Reform Act of 1986 will be my main reference for policy ideas.  

President Reagan and Congress raised the maximum long-term capital gains rate from 20% to 28% and lowered the maximum ordinary income tax rate from 50% to 28%. They did this based on the principle that equal incomes should pay equal taxes. This principle should play a major role in any current discussion of tax reform. Is it fair that Warren Buffet pays a lower effective tax rate than his secretary?  A majority of Americans do not think so. Recall the uproar during the 2012 election over the revelation that Mitt Romney paid an effective tax rate of 14%. Since the wealthy receive most of their income from capital gains, and not ordinary income, it is only sensible they pay a similar rate. 

Today, the top capital gains rate (20%) is about 20% lower than the top income tax rate (39.6%). Many economists may argue that this is necessary to encourage investment by the wealthy. This may be true, but there is definitely room for Congress to raise capital gains taxes while still creating incentives for investment. One way to promote investing is to revive a 1985 proposal to index capital gains to inflation, which would provide a tax break to investors. For example, if inflation is 10% during the time one owned an asset, then the first 10% of capital gains would be tax-exempt.  This is just one of the numerous strategies that Congress could use to promote investment while closing the gap between capital gains and income taxes.

Increasing the capital gains tax serves as a positive step towards bringing more equality into our tax code. For those deterred by rhetoric about the battle of the 99% versus the 1%,  a higher capital gains tax is a more sensible, moderate way to reduce some of the tensions created by this perceived income inequality. Currently, the long-term capital gains rate is the same 20%, whether you make $1,000 or $1,000,000 in gains. A progressive capital gains rate (maybe one that mirrors the income tax brackets) may be another innovative policy Congress should consider.

Immigration Reform 2013: Reform Will Not Solve All Problems, But It Is a Start

“Give me your tired, your poor,

Your huddled masses yearning to breathe free,

The wretched refuse of your teeming shore.

Send these, the homeless, tempest-tost to me,

I lift my lamp beside the golden door!”

For generations the Statute of Liberty greeted millions of immigrants on their journey to the land of opportunity. Whether it was for life, liberty, or the pursuit of happiness, individuals throughout the world traveled to our nation in search of the American Dream. It was and is a simple dream: the promise that you will be judged on the basis of your character, and not on the basis of your race, religion, class, or creed. It is the promise that through hard work and determination you can achieve a better life for you and your family. This promise is what motivates immigrants, legal and illegal, to come to the United States. Today, it seems as though the American Dream is slipping away, but we as a nation can fight to reclaim it, and the first step is to pass immigration reform.

For those who do not believe economic inequality is increasing (and surprisingly, 58% of Americans do not), here are a few key statistics to help illustrate the gravity of our nation’s problem. Income inequality, as measured by the Gini index, has been on the rise since the start of the new millennium. Relatively stable during the 1990s boom years, the United States' Gini index has risen significantly since the Great Recession (1.6% in 2011 alone, compared to 5.2% in the prior 17 years combined). 

Our economic “recovery” exceedingly seems to benefit the richest Americans, while the poor and middle class are left behind. The top 1% received 93% of the income gains in the first year of the recovery. Poor and middle-class wage stagnation is a major reason for this. Deregulation, privatization, globalization, erosion of the social safety net, and the destruction of unions have all contributed to an economy that values corporate profits over rising middle-class wages. Corporate profits are 22% above their pre-recession levels, while employee compensation is 3% lower. The result of these trends is the dreadful fact that 80% of American adults will face joblessness or reliance on some sort of government welfare program. 

So you may be asking, what does all of this have to do with immigration reform?  Organizations from across the political spectrum, from conservatives to progressives, claim that immigration reform will benefit the American economy, and low-wage Americans in particular. Illegal immigrants and low-wage workers are in perpetual competition for jobs.  When an illegal immigrant can work for less than the federal minimum wage, this puts poor Americans at a distinct disadvantage. According to the Cato Institute, legalization of low-skilled immigrant workers would increase the U.S. GDP by 1.27%, or $180 billion, largely because immigrants are more likely to start businesses than non-immigrants. A Small Business Administration studyfound that immigrant-owned businesses tend to have higher sales and are more likely to export good and services than non-immigrant-owned businesses. 

The United States of America is a nation of immigrants that was built upon the millions of individuals who traveled here in search of a better life.  We need to change our immigration system to one that can fulfill the requirements of a 21st century economy. Reform will not solve all of our nation’s problems, but it is a start. It will renew a promise: the promise that together we all prosper, the promise of a thriving middle class, and the promise that America will always be home to the hardworking, the tired, and the poor, yearning for an opportunity to succeed.  

The One Thing America Has to Invest In Immediately: R&D

The days of record setting deficits ($1.4 trillion in 2009) are behind us.  The budget deficit has fallen from 10% of GDP in 2009 to an estimated 5.3% in 2013 and the national debt is projected to fall from 76.3% of GDP to 73.1% in 2018.  Our nation’s improved fiscal situation can be attributed to a recovering economy, tax revenue increases, and the draconian spending cuts enacted by the sequester.  Instead of a grand bargain, Democrats and Republicans in Washington have gone for a piecemeal approach to deficit reduction and neither side is happy.  The left thinks we need higher taxes and more stimuli spending on job growth, while the right continues its austerity crusade.

And yet despite their differences, the President and Congress have authorized about $3 trillion of deficit reduction, but at what cost?  Our representatives in Washington chose short-term solutions over long-term reform.  The skyrocketing costs of entitlement programs, especially Medicare and Medicaid have not been addressed.  The Congressional Budget Office forecasts the deficit will start rising again in 2016 due the burdens of our aging population. 

Congress continues to let the American people down.  Instead of entitlement reform, we received the indiscriminate, across the board spending cuts.  These reductions may lower the deficit, but they will not create jobs.  As Jared Bernstein of the Center on Budget and Policy Priorities put it, “We’ve over focused on the deficit.  It’s time to tackle the job crisis.”

Our economy will never recover if we do not invest in the jobs, infrastructure, and research of the future.  This is the exact opposite of what Congress has done.  In a previous post, I discussed how our nation’s infrastructure investment gap would slow future growth.  Research funding by the National Institute of Health has been cut by 17%in the past decade, which “adjusted for inflation, puts overall funding at levels not seen since 1999.”  If the sequester cuts continue, the NIH will lose $19 billion dollars in funding over the next 10 years.

In order to stay globally competitive, the United States should increase research and development spending, not decrease it.  Countless innovations and immense economic value can come from government grants.  According to a Battelle Memorial Institute report, the $3.8 billion human genome project yielded $800 billion in economic growth and created 310,000 jobs.  Unfortunately, it seems more likely that future scientific breakthroughs will come from outside of the United States.

We need to take advantage of this period of falling deficits before it's too late.

Chad Kolinsky is a blogger and active member at The Can Kicks Back. 

Dispelling Chained CPI Myths

Dead on arrival… When President Obama released his budget recently, Congressional Republicans immediately shot it down. This was no surprise because the budget called for tax increases, which Republicans vehemently oppose. However, I was puzzled by the negative reactions of a few Democrats; after all, President Obama’s budget included many progressive ideas, such as more stimulus spending. What could have caused such dissent from his party? Well, the budget called for the adoption of Chained CPI to measure future inflation; a move that Democrats and Republicans condemned as an assault on seniors and a severe benefit cut. 

Shifting to Chained CPI entails updating and improving the way the federal government measures inflation for various government programs. The government indexes benefits (such as Social Security), in order to keep up with inflation, so that both rise at the same rate. The government has not changed the way it calculates inflation in quite some time. Since the 1990s, Chained CPI has been viewed as a more accurate measure of inflation than our existing policy because current estimates overstate inflation and, hence, benefits paid.

This brings me to the first myth about Chained CPI. Chained CPI is NOT a benefit cut. Chained CPI slows down the rate of growth of social security payments. Seniors will not wake up next month and receive any fewer dollars in Social Security benefits than they are used to. Chained CPI would shave only 0.3% off inflation estimates or about $9 annually for the average couple that retired in 2010. Under Chained CPI, Social Security benefits would keep up with cost of living, rather than increase faster than inflation as they do now. 

In fact, moving to Chained CPI actually helps strengthen Social Security. By 2033, the Social Security trust fund will be depleted and will require a massive increase in the payroll tax or a 25% across-the-board decrease in benefits. As the Baby Boomers retire over the next two decades, more and more pressure will be put on the Social Security trust fund. The worker-to-retiree ratio has fallen from 5:1 in 1960 to 3:1 in 2010 and will only continue to decline, which means less revenue to support beneficiaries. In two decades, Social Security will no longer be solvent. Imagine the horrors if the checks actually stopped coming! The shift to Chained CPI will help maintain social security for current and future retirees.

Another prevalent myth claims Chained CPI is a hidden tax increase that will hurt the poor, the disabled, and the elderly. Chained CPI will slow the growth rate for income tax brackets. Individuals right on the cusp of a higher tax bracket may suddenly be “bumped up” into a higher one. However, it is important to remember two points. First, due to our marginal income tax system, only the small portion of above the threshold will be taxed at a higher rate, and second, Chained CPI should be viewed as only one part of comprehensive tax reform.

Chained CPI alone will not solve our budget deficit problem nor will it close the Social Security funding gap, but Chained CPI or a similar policy will play an integral role in any budget deal between Democrats and Republicans. The switch has already been a part of most major bipartisan deficit-reduction plans (Simpson-Bowles, Domenici-Rivlin, Obama-Boehner). Fix the Debt, a non-partisan movement to fix America’s finances, states that the switch to Chained CPI will reduce the social security funding gap by 1/5 and reduce deficits by more than $300 billion over the next decade.

Chained CPI is not just smart policy; it is also smart politics. Congress and the President can easily find a way to make this happen and doing so will prove that both Democrats and Republicans are serious about solving America’s deficit crisis. Furthermore, Chained CPI does not just kick the can down the road to future generations. It asks all Americans, old and young, Democratic and Republican, to be willing to exchange a small amount of personal sacrifice for a whole lot of societal benefit.                 

Chad Kolinsky is a graduate of the University of Miami and a blogger for The Can Kicks Back (www.TheCanKicksBack.org), a non-partisan and Millennial-driven movement to fix the national debt. 

4 Companies That Are Making Mad Money While Also Changing the World

A new business entity is starting to emerge throughout the world.  A benefit corporation is a for-profit business that focuses on some sort of benefit to society; compared to a regular corporation that works to maximize profits.  The increase in benefit corporations can partly be attributed to the coming of age of the millennial generation.  As I discussed in my last post, millennials are seeking jobs that have a real impact on the world; jobs, which may help those in need or save the environment.  This led to an intriguing question.  What millennial run companies that are making money, while improving the world?  Below is a short list of companies that came to mind.  Some may be benefit corporations and some may not, but it is clear they are all changing the world in one way or another.

1) TOMS Shoes:  After reading Blake Mycoskie’s (CEO of TOMS) book, “Start Something That Matters”, I could not be more impressed with this remarkable company.  Blake started TOMS in 2006 after a trip to Argentina where he was introduced to the alpargatas shoe.  This traditional Argentinian shoe is worn throughout the country and Blake wanted to bring them to the US.  At the same time he noticed many Argentinian children lacked shoes, which prevented them from going to school and increased the chances of infections.  These two ideas combined to form the One for One business model.  A true entrepreneurial pioneer, Blake decided that for every pair of TOMS sold one pair would be donated to children in need.  Today TOMS has donated over 2 million pairs of shoes and are sold in over 500 retailers worldwide.  TOMS has expanded their business model to eyewear and apparel as well.

2) FEED Projects:  Lauren Bush worked as an honorary spokesperson for the United Nations World Food Program.  During her travels, she encountered the horrible consequences of malnutrition and hunger in the world.  At the same time, Lauren noticed the reusable shopping bag movement.  Together these two ideas formed FEED Projects where every bag sold guarantees free school lunch for a year to a child in a developing country.  Because the children receive the meal at school, FEED Projects also helps these kids receive an education.  FEED Projects has been a huge success; partnering with companies like Amazon.com, American Eagle, and Whole Foods.  To date, FEED Projects has donated over $6 million and 60 million meals.

3) Change.org:  Ben Rattay founded Change.org and its mission is to “empower anyone, anywhere to start, join, and win campaigns for social change”.  A certified benefit corporation, Change.org is the world’s largest petition platform and makes money to “sponsored” petitions from organizations like Amnesty International.  Today Change.org has over 35 million users in 196 different countries.  In 2011, a Change.org petition with 300,000 signatures forced Bank of America to drop its $5 a month banking fee.  A 2012 petition with over 2.2 million signatures helped spur public overage over the death of 17-year-old Trayvon Martin.  Websites like Change.org have empowered people worldwide and will continue to grow their influence.  (Honorable mention to Causes.com.  A similar website created by Sean Parker, founder of Napster and the first President of Facebook).

4) Facebook.com:  With revenues of $5.1 billion in 2012, Facebook joined the Fortune 500 list for the first time.  When Facebook went public in 2012 the company was valued at $104 billion dollars.  It’s easy to see how Facebook makes money, but Mark Zuckerberg has also revolutionized the world.  Today Facebook is available in over 70 languages and has over 1.1 billion users.  This social network has transformed the way people communicate and share information.  Protest movements throughout the world have been emboldened by Facebook and other social networks.  As David Wolman wrote in Wired Magazine, “The Arab Spring has shown the world what is possible when you combine social unrest with brave citizenry and powerful digital tools.” 

What other should be on this list?  And why?  Share your comments / thoughts below.

Chad is a blogger for TheCanKicksBack, a non-partisan, Millennial driven campaign to fix the national debt and reclaim the American Dream and the founder of Purple State Politics.

What is the Best Job for Millennials in 2013?

Last week, this list of the best and worst jobs of 2013 was released. CareerCast.com put together the list based on data from the Bureau of Labor Statistics and other government agencies. They based the rankings on five criteria: physical demand, work environment, income, stress, and hiring outlook. Topping the list were actuaries, biomedical engineers, and financial planners, while lumberjacks and news reporters took the bottom two spots.

This got me to thinking: what would be the best job for millennials in 2013? I always hear about the lack of STEM — science, technology, engineering, and mathematics — workers in the United States so it would be easy to assume the best job has to be in one of these fields. In terms of hiring outlook, the National Association of Colleges and Employers claims the industries with the greatest demand for college graduates and millennials are business, engineering, computer sciences, and accounting.  If income is your deciding factor, petroleum engineer, IT manager, and quantitatisove analyst are some of the highest paying jobs for our generation. What about work environment? Millennials who want to be surrounded by their peers may look no further than the retail industry. Payscale.com found that millennials have filled more jobs in retail than any other industry.

But what exactly are millennials looking for in a job?  Compared to our Baby Boomer parents, millennials job-hop more frequently.  According to a Department of Labor study, the average millennial has worked 6.3 jobs by the time they are 25.  Some may attribute this to that generation having grown up in the age of the Internet where job listings are much easier to find and recruiters can easily contact potential applicants via LinkedIn or other social networks. 

These high turnover rates can be attributed to job dissatisfaction. It seems we millennials expect more from our jobs than sitting in a cubicle all-day and staring at a computer. We want to enjoy what we are doing, be engaged, learn something from our jobs, and we aren’t afraid to find a job that can fulfill these roles. The average millennial left their company after 28 months and 81% are open to new job opportunities regardless of their currently employment status.  Gone are the days when our grandparents spent decades working for one company. 

It might be overly simple, but the best job for millennials is the one that makes them happy. More and more it seems like happiness comes from making a difference in the world. Instead of maximizing corporate profits, many look to maximize the number of people they can help or ways to save the environment. A new class of corporation has emerged with our generation. "B Corps" are dedicated to social enterprise, the idea that uses business to help solve humanity's problems. The success of TOMS Shoes serves as a testament to this business plan.

So what would my advice be to millennials looking for the best job of 2013? As U.N. Ambassador Susan Rice said at my commencement ceremony, "Go out and get your hands dirty." Our generation is young and we should take advantage of the opportunities we have before life takes over. Apply for your dream job, take that internship or job abroad, do whatever makes you happy because in the end that is truly what makes the best job. For those of you who know you want to do something big, something excited, but do not know where to start check out Escape the City. This website is a great resources for anyone, millennial or not, to find out about some amazing jobs. And who knows, maybe I’ll meet you there.

We are the Millennials

            We are the millennials. We are Generation Y.  We are the 95 million Americans born between the late 1970’s and the early 2000’s.  We are America’s largest age demographic, we are growing, and we are the future of this great nation. According to The Center for American Progress, by 2020, there will be 103 million of us: 90 million of which will be eligible voters representing 40% of the electorate. In the landmark 2012 election, for the first time in the history of the United States, more millennials voted than senior citizens.  President Obama successfully won our demographic by large margins in both the 2008 and 2012 elections.  In fact, in 2012, President Obama received about 5 million more votes from 18-29 year olds than Mitt Romney did. Just by looking at these figures, it is safe to say that the candidate, who wins the millennials, wins the election.  The new, perpetual presence of millennials within the electorate is an extremely important concept that will dictate the future of our nation. We, the millennials, need to grasp how significant the opportunity that lies before us is.  We need to wake up and understand the undeniable potential for change our generation can bring about.

We are a radically different generation compared to the Baby Boomers or even Generation X.  We are the first generation to grow up in a globalized world and to experience the political, social, and economic transformations brought about by the Internet. Most importantly, our generation understands that change is unavoidable, a necessity, to remain relevant within the modern world.  Unlike past generations, we do not partake in the nostalgia of “traditional America values” because American values have been evolving our entire lives.  We look back at the 20^th century to see what made our country great, and then look ahead to the future for ways to make our country even greater. 

            Our familiarity with change and the lack of traditional ideology allow millennials to offer new common sense solutions to our nation’s problems.  We understand the need to reform entitlements because the looming burden of retiring baby boomers ultimately falls upon us.  We see the need to alter our bloated defense spending because taking care of our battle weary veterans and defending against cyber warfare are a greater priority than creating surpluses of fighter jets.  We take a progressive approach in promoting green energy, investing in schools, and supporting government’s role in society.  And yet, we do not want the federal government making decisions that should be left to the states, such as the legalization of marijuana, and most recently, gay marriage. 

            The topic of gay marriage is a surprisingly accurate gauge of where our country stands, and in what direction it is headed. Within the next few weeks the Supreme Court will likely either throw out, or make significant changes, to key anti-gay marriage legislation.  In 1996, when DOMA was signed, many argued same-sex marriage was morally wrong and had to be prevented at all costs. Today, over half of the nation believes gay couples deserve the right to marry.  This is attributed, in large part, to the influence of us, the millennials.  73% of 18-29 year olds support gay marriage compared to 39% of those aged 65 and older.  Some surveys even show figures of millennials supporting gay marriage in ratios greater than 4:1.  Last week, Senator Rob Portman, R-Ohio, a potential Vice Presidential candidate for Mitt Romney, declared his support for same sex marriage.  The national conversation is changing on both sides of the aisle, and millennials are leading the way.

            Our generation is finally finding its voice in American politics.  The 2012 election was the 3^rd straight election in which more than 50% of eligible millennials voted.  As we continue to get out and vote, we will elect representatives who embody our generation’s hopes and dreams.  The number of Millennials in Congress increased 3% from the 112^th Congress to the 113^th Congress; today, over 35 house representatives are under the age of 40. These trends will only continue to grow in 2014, 2016, and beyond as our generation becomes more politically active and aware.

            Both Democrats and Republicans in Congress should take heed of this coming shift.  The refusal to reform entitlements, change our tax code, or invest in our future will not go over easy. If both parties do not pay attention to the changing political tides, then it is all to likely that we just might put an end to this defunct two party system and create a party of our own. When Congress kicks the can down the road, it lands squarely in our laps - if Washington cannot solve our nations problems, then we Millennials will find representatives who will. 

            

America's Infrastructure Crisis

             Investment in infrastructure creates more “bang for our buck” than any other type of government spending.  A study from the San Francisco Federal Reserve found that, on average, each dollar of infrastructure spending increased state GDP by at least $2 dollars; more than a 100% return on investment. 

            As President Obama mentioned in the State of the Union last month, Americans continue to drive over more than 60,000 structurally deficient bridges everyday.  The lack of investment in infrastructure has left us in a crisis.  In 2002, American infrastructure ranked 5^th globalyl; by 2012 we were 25^th, behind countries like Saudi Arabia, Barbados, and Spain to name a few.  The American Society of Civil Engineers claims that without investing an additional $157 billion per year in infrastructure, the United States will lose over 3 million jobs and trillions of dollars in GDP by 2020.  And we thought the $85 billion sequester was bad?

            We must close our infrastructure gap to stay competitive.  Today, China has over 20,000km of high-speed rail; compared to our one track.  The port of Shanghai, handles more containers than the eight largest US ports combined.  Sitting back and allowing our nation to fall further behind should not be an option.

            We can choose to elect representatives who will maintain the status quo; who will not reform the entitlement spending that is bankrupting our nation.  Or we can elect individuals that will make the necessary investments for our country to succeed.  For the first time, this past election, more millenials (18-35) voted than senior citizens.  As a generation, we must find our voice and make it heard in Washington.  We must get out and demand bipartisan solutions to our nations problems and investments in our future!