Sharing The Sacrifice

Everyone else has a tax day proposal - figured I should offer one of my own. Mine is built around the idea of shared sacrifice (or shared boon.)

When a CEO forces the layoff of a portion of his company's workforce to reduce expenses (and likely increase both the stock value and his compensation), in a well-functioning, robust economy, those displaced workers can find other work at or near their former pay. The transition may not be completely seamless, but it should occur.

However, when an economy is stumbling, fizzing, or recessing, those same displaced workers may not be able to find other jobs even close to their former compensation - they may not be able to find jobs at all, or they may take jobs and displace others. The net result is that many find themselves chronically unemployed, with neither prospects nor income for lengthy periods. They make a 100% sacrifice, whereas the management and CEO that oversaw their layoff often suffer nothing or very little.

So, to spread the sacrifice (or force at least a rudimentary sharing), I propose that the top marginal tax rate be directly tied to the unemployment rate. National unemployment rises - so does the top tax rate. Unemployment drops - so does the top tax rate.

I would use the extra money pulled in from the increase in top tier taxation to fund a government work program that would pay any takers for as long as they are willing - or, as long as they are unable to find a job in another sector of the economy. To borrow an idea from Hyman Minsky, such a guaranteed program could, potentially, even replace the minimum wage - the wage the government pays would generally be a new minimum (although one could see that for part-time work, especially that taken by teenagers, it might be possible for a franchise to pay slightly less in return for more flexible working hours our conditions...)

The money could also pay for re-training programs, to handle contractions in one sector that force massive skills re-alignment. Since we may have a surplus of workers that lack the proper training, and a shortage of workers in a new, growing sector, until their skills get re-aligned, we have higher unemployment.

This is not a silver-bullet solution, to be sure. It doesn't address the structural problems in our economy that promote the creation of monopoly - and although they may see their tax rate rise, many at the top would still likely benefit more from a decision to throw workers out of work than they would ultimately pay in increased taxes. But, it has a nice reciprocity to it: Instead of the sacrifice of a sputtering economy be forced on the few, it is spread more evenly on the top and the bottom.

Additionally, it does avoid the problem of a growing government deficit when demands on the government are raised by a chronically unemployed populace - and it would 'claw back' some of the excess compensation taken by those at the top.

I know one of the arguments against this is the idea that the wealthy create jobs. We can dispense with that (hopefully once and for all!): First, we will simply observe that at the start of the recent recession, wealthy pay had risen sharply and was continuing to rise, even as jobs were being shed - if the wealthy create jobs, this should not have happened. Second, we'll observe that most economists blame the slowdown on over-leverage, the collapse of the housing bubble, and market opacity - none of which are related to wealthy pay (well, ok, market opacity does relate in that it allows CEOs and their ilk to vastly overpay themselves without it being evident). Third, the idea that wealth creates jobs runs completely counter to the idea that productivity and increases in productivity are what fuel and grow an economy (and by extension, fuel and grow the ability of the economy to employ more) - the latter ideas which form the core of the observations made by Adam Smith in 'Wealth of Nations', and Fourth and Finally: Any ideology that draws direct casual connections between two elements of a modern economy is likely false or misleading - observe how easily statistics can be employed to both 'prove' and 'falsify' many economic statements - proof that neither captures much useful information about the myriad connections and forces that are at work.

We can, and should, simply assert that the ability to work and provide is a right in an affluent society, and since we are a community, all should be working before we allow those who are more skilled and productive take a larger share. Tying the top marginal tax rate to the unemployment rate is a start in aligning the interests of the few with the interests of the many.

Mr Greg Daniel

I was out riding the other day. Just after turning around at the far end of our local reservoir, (which involves a small climb), this cyclist came zooming past. Descending the hill he freewheeled, and his cassette made a sound I hadn't heard since the old Suntour freewheel days. I wondered if that was the SRAM freewheel (I swear, it was even louder than Campy!)

Hitting the flat, I could see that perhaps he wasn't going all out, and I wondered if I had a strong enough interval in me to catch him. I figured if I could, then I could see if I was right on his components, if not, well, I needed some interval training anyway. So, off I went.

I did catch him, and to forestall a counter push by him, quickly asked him about his components and his bicycle. Yep, he was riding the SRAM group set, and yes, he really liked them (good news to me since I've been considering getting a new bike so equipped.)

We rode along together and talked - one of those geeky conversations that only cyclists have: Length of crank arms, training patterns, peaking, etc. He mentioned an upcoming trip to Belgium to do some racing, so I asked who he was. Turns out he is local a local phenom and pro rider Greg Daniel. He's heading to Europe to try his hand against the best juniors over there.

Nice guy. I wish him well, and it will be fun to have a local name to watch in the cycling stats. Might even get me interested again.

Oh, he was polite, too. Even asked me if I raced!