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Friday, October 1, 2010

Problems & Solutions

There is a dramatic disparity of wealth between rich and poor.  From Yahoo tech Ticker:

"In 2009, the top 20% of American earners -- those making more than $100,000 annually - received 50.3% of all income generated in the country, compared with 12% for the bottom 40% and 3.4% for those below the poverty line, according to the Census Bureau."

"Last year 43.6 million Americans, or 14.3% of the population, were living below the poverty rate, the highest level since 1994. A record 6.3% of Americans were making less than 50% of poverty-level income, defined as income of $21,954 for a family of four. (Those poverty figures exclude government programs such as Food Stamps.)"

"The percent of income garnered by the wealthiest 10% of U.S. households hit 48.2% in 2008, up from 34.6% in 1980, according to a recent report on income equality by the Congressional Joint Economic Committee. "Much of the spike was driven by the share of total income accrued by the richest 1% of households. Between 1980 and 2008, their share rose from 10% to 21%, making the United States as one of the most unequal countries in the world.""

OK.. that's the Problem.   Now what have been the solutions so far?

1)  Pumping trillions into the stock market to prop up the Dow from the March '09 lows of 6500, which helps financials, banks and investors.

2)  Pumping hundreds of billions into the credit markets so people can take out low interest mortgages and loans to put themselves into further debt.

3)  Lowering of W2 taxes- the more you make in salary, the more you benefit.

4)  Currently there is a debate about repealing the Bush tax cuts..  Seems some people want the cuts only to be for those who make $250k and lower.. and others want the tax cuts to be on all income brackets and made permanent.

Every solution the government has come up with in the last two years, from Bush to Obama, has been about helping the affluent and upper middle class keep or expand their income, and maintaining the socioeconomic status quo while the rest of the nation can basically eat cake.  Remember, the less you make in income, the less you pay in taxes thus the less one benefits by tax cuts.  And when you're living below the poverty line, in all likelihood you aren't watching CNBC's cackle of geese for investment advice.

(Photo caption- "Interesting. The gap between Rich and Poor is not as great as we thought")

OK.. so what are some REAL solutions to help merge this widening equity gap between rich and poor..  Here are some ideas that I've yet to hear ANY politician of either party mention, not even once..

1)  Debt Debit cards-  In the past 2 years, the government has given over $13trillion dollars to the banks, financials and stock market and the only ones who can say 'recovery' with a straight face is them.  The government wants people to consume- can't consume when up to one's ears in debt.. so what's the solution?
Government bailouts out the everyday person, and buys back individual debt.  Here's how it works:

Government allocates 1 trillion dollars to assist the 50million poorest adult Americans, meaning each person would be getting $20,000.  Money to be given in the form of a debit card, specifically to be used to pay down mortgages, auto & student loans, credit cards and any other debts held by a bank or lending institution.   This would lower the collective personal debt load for Americans by $1 trillion, and because the recipient of the funds are banks, they receive another $1 trillion in funds.  It's called "Trickle Up" economics; a bailout that helps most everyone.

             ~ Elmo says: "Yay Bailouts for Everyday People.. Hee-hee" ~

2)  Matching Grants to Small Businesses- Recently a Small Business bill was passed by Congress, supposedly with the intent of creating jobs.  Instead, as mentioned in a previous posting, the bill is nothing more than setting up funds for small banks to loan $ to businesses at interest and tax deductions for small & large businesses and investors.  The bill allows businesses to use the money for anything they wish including refurbishing and building new stores.  Nothing specific about job creation or making business use the funds for that purpose.

If government was serious about lowering the unemployment rate, one policy they would enact is to set a reserve fund, say $250billion to start, and any business who wants to hire new workers but doesn't necessarily have the means, can take from this fund and match dollar for dollar.   Ex: company A wants to hire 4 new employees but only has financial capability to hire 2 people.  Company A applies for a $75k free grant- is approved, and then matches $75k.. 4 new people hired (not temps) and retained. Business is more productive and thrives.

Now, if Company A took the funds but did not show it used the funds to hire or matched dollar for dollar, it would be required to pay back those funds at a high interest which even Chapter 13 bankruptcy could not absolve a business from repayment.   This  is called Carrot & Stick.  Businesses have shown adamant refusal to hire during this recession, so Government must give Incentives, yet Punish those businesses that stubbornly will not hire more non-temporary workers.

        ~  Elmo says: "Please keep America strong, so my friend here can have a good paying job when he grows up"  ~

3) Tariffs-  In order to rebuild the US manufacturing base, it is clear that business must be forced to do this.  Currently companies are having their cake and eating it too, as the saying goes, by having its goods manufactured abroad, yet enjoying American markets to sell their products and the US is one of, if not the largest consumer nation in the world.  This 'best of both worlds' for businesses must stop.

Government must have the backbone to institute new trade policy that says in order to enjoy American markets, a certain percentage (perhaps 15%) of the totality of the goods made to be sold in the US must be made in the US by American workers.  This applies to everything from Nike to Ralph Lauren to HP & Gateway computers.

If companies refuse to open manufacturing plants in the US, and hire American workers, then government adds a 40-50% tariff to their products, and thus take away their profit stream.  If Nike for instance believes that Americans will rush out to buy $200 sneakers and $70 t-shirts, then they will continue having their products made in Africa, Southeast Asia and Middle East.  But if they realize their entire company will collapse when most Americans can not afford those tariff prices and stop buying,  they will be forced to open factories domestically.

          ~ Wouldn't these shoes look adorable on your child, especially if an American made them? ~

Meanwhile, the government sets up business grants and very-low interest loans to upstart companies who will make clothing, computers and anything else Americans consume domestically; an Invest in America movement that starts with government policies in that direction.

~  In summary, there ARE solutions to these problems of poverty and wealth discrepancy.. Its just its not in our nation's leaders' interest to actually Fix them..

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