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So You Want Smaller Government? Save SS & Medicare?

“Cut, cut, cut entitlements!”

“Reduce the debt!”  We need to broaden the base (i.e more taxes on the 47%)!

“Reduce the size of government!”

Turn on any cable news network and that’s all you’ll hear.

And the only answers the politicians have are:  raise more taxes and/or cut entitlements (not defense, of course) or both.

We hear the GOP wants to cut food stamps and other programs that help the poor.  That something must be done with SS and Medicare because they’re going broke and Medicaid needs to be cut back, too, because we just don’t have the money.  And the Democrats refuse to let these programs take a hit.

People are tired of paying taxes to help the “lazy 47% who don’t pay taxes, is the complaint.

The economy is too sluggish, it’s not growing!

So we’re in gridlock, as usual, with no answers that either side is willing to accept.

Is there an alternative?  Maybe.

What if we could add  $169,260,000,000 to the economy?

Add $25,389,000,000 to the treasury each year in the form of taxes (without increasing anyone’s taxes.  Over 10 years, that’s $2.5 trillion to add to the Treasury that could be earmarked to reduce the debt/deficit.

Reduce the costs of programs providing food stamps, housing vouchers, and the big one – Medicaid, thereby, reducing the size of government?

Collect $10,494.120,000 more annually in FICA premiums to shore up Social Security and Medicare.  That’s over $1 trillion in 10 years, that would surely strengthen each of these programs for the coming years without making major changes in the program.

How, you ask?

Increase the minimum wage to $15.00.

Using 2010 numbers, the poverty level for 1 person under 65 was $11,344.  That’s someone making $218.15 per week, or $5.45 an hour.  The working poor receive assistance in the form of housing vouchers, food stamps, and Medicaid and pay little, if anything in the form of federal taxes.

Using the federal minimum wage in 2010 of $7.25 and the then number of working people making poverty level or less in wages of 10,500,000 you can extrapolate those numbers as follows:

10,500,000 x $7.25 per hour for 40 hours @ 52 weeks = $158,340,000,000 in wages annually. FICA at 6.2% for these workers would contribute $9,817.080.000 to SS/Medicare. Of course, some of these are part-time jobs, so this is merely an example.  But for every person who can be removed from government assistance, that’s less tax dollars needed to support them.

And if you think a person flipping burgers doesn’t deserve $15 per hour, consider how much of your tax dollars are going to subsidize their wages so they can be paid $7.25 to flip those burgers.  One way or the other, the consumer/tax payer is paying a considerable amount to get that burger flipped.

Now change the minimum wage to $15.00 per hour and extrapolate the numbers:

10,500,000 x 15.00 per hour 40 hours @ 52 weeks = $327,600,000,000 in wages annually.  FICA would receive an additional contribution of $10,494,120,000.  Over 10 years that would be over $1.4 Trillion dollars.

With a 15% tax rate, those wages would contribute $25,389,000,000 annually in revenue to the Treasury and could be targeted to directly reduce the debt.  Over 10 years that would be a $2.5 Trillion deduction, in addition to the reduced expenditures for food stamps, housing vouchers, and Medicaid.

Add an additional $169,260,000,000 increased purchasing power to the economy.

Increasing the minimum wage would also add to the treasuries of states in the form of sales tax, income tax, among other taxes these dollars would generate.

A two-person working household could generate $30 per hour providing them income to save and possibly purchase a home.

The counter-argument will be that increasing the minimum wage will reduce jobs.   There are several studies (links here) that refute that argument.

The other counter- argument will be that the cost of everything will go up and the jobs will move overseas.

First, these are service industry jobs…now 7 out of 10 in the U.S.  – it’s going to be hard to ship them overseas.  Are you going to order your burger from the McDonald’s in China and have it flown over to the pick up window?  I think not.  Nor is the Wal-Mart worker going to be shipped over there either unless you plan on restocking the shelves yourself.

As for the cost…two things to consider.  Are you going to pay $15-30 for a McDonald’s Big-Mac?  Unlikely.

Prices are determined based on the floor (the lowest price a seller can sell a product for) and the ceiling (the highest amount a consumer is willing to pay), and on competitor pricing.

And while the prices may go up — if the consumer is willing to pay and competitors are not competing — the consumer/taxpayer is already paying.  If the end game allows your taxes to be reduced and you, the consumer, have the freedom to choose where you will make your purchases — based on competitive prices and your willingness to pay and the fact that you have more money to spend then haven’t we all won?  Especially, if the economic health of the country is improved?

When you look at the trillions of dollars that are currently not being invested in our economy via our workers, but are sitting on the shelf waiting to invest…the only question I have is is – who better to invest in than the workers and our economy?

For the mom and pops out there with few employees, rather than subsidizing their profits  by providing the employee with these programs, wouldn’t it be better to subsidize their paychecks by increasing their wages by diverting the money from those programs to increase their wages?  If we want to give people a hand up rather than a hand out, isn”t that the better way to do it?

There will always be people who will need these programs, those unable to work, the disabled and the elderly who need help.

Certainly, adding fuel ($169 billion) to the economy should generate jobs – and a $15 per hour job is one worthy of pursing, rather than sitting at home collecting a check that is the other complaint.

2 comments. Leave a Reply

  1. Gary Williams

    I believe much of the incentive or motive behind the push for smaller government we see originating from Koch-funded groups like the original Tea Party, and those that push libertarianism (CATO Inst. was founded by Koch’s as well) is their desire for *weak* democratic governments rather than simply “small”. Historically the wealthy have ruled through a combination of support for the monarch and the power that owning the workshops, factories and merchant sailing vessels able to bring back trade goods gives such people over those who work in them…with the food they must eat being simply a matter of having the strength to work in the shops and grain fields somewhat efficiently, and not a matter of decency or (God forgive!!) altruism on the part of the elites.  This continued up to the Industrial Revolution when steam power gave non-aristocrats the ability to amass huge fortunes. However that did not mean that the Rockefeller’s, Duponts, and other “nueveau riche” were any less prone to seek absolute power than were the hereditary monarchs, Lords and Barons. And it was only when power was taken by force from the aristocracy that democracy and later, Marxism put an end to rule by a small elite that had drawn to themselves only all the strings of power and wealth.
    Today they still exist. Only they must mouth the words of a democratic state while not really believing in it…hence the effort to purge voter rolls and capture the means of political persuasion eg. Murdoch’s media empire. With democracy out of the way, power naturally falls to those who control large sectors of the economy albeit for the ability of our democratic government to force them to make workplaces safe or not spoil the land and water the rest of us must still live and depend on for life itself. And that is what I strongly believe is behind the libertarian philosophy being pushed by the Koch;s and other “free market” advocates and their single-minded push to reduce the power of the federal government and its ability to order the US military, FBI, CIA, to investigate and arrest anyone plotting the overthrow of federal power eg. right-wingers, fascists and supporters of S. American elites working with US elites and who tried to enlist Gen.Smedley Butler back when fascism hadn’t gained the smear that Nazism gave top it. Like-minded elites still exist but who must now cloak their efforts in the language of the Constitution…not that hard when few of the most ardent defenders of such among the working class have even bothered to read it, instead taking the word of FOX News pundits and others who seek the approval of billionaires and political elites like the Bush Family.

  2. [51] An alternative analysis might examine just the Social Security portion of the taxes and benefits. The Social Security portion of FICA taxes is 12.4 percent of wages; 35 years of contributions at the median unlawful immigrant wage would equal $108,000, and 18 years of benefits at $14,652 per year would yield $264,000—more than two dollars of benefits for each dollar paid. The analysis would be slightly different if the tax payments were saved and invested and then paid in retirement, but that will not occur.

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