FINDING HOPE AND INSPIRATION AS WE RESIST IMMIGRANT AND REFUGEE FAMILIES BEING TORN APART

MARK M. MCDERMOTT

July 30, 2018

Everywhere I go, many people are upset and angry about the brutal, cruel and inhumane immigration policies of the Trump administration.  The latest wave of outrage has focused on individuals and families seeking asylum, refugee status and, safety from brutal and unsafe conditions in their homelands.  The Trump solution has been to forcibly separate children from their parents and jail entire families with virtually no regard for the law or the impacts on these children and their families.

As I reflect on these deliberate abuses by the administration, I want to find hope and inspiration that will encourage people to continue their fights to change these immigration policies. 

So where do I find hope and inspiration?  The extraordinary level of resistance that led to 700+  demonstrations and protests on June 30^th alone.  This is unprecedented in our nation’s history of immigration.  The soul of our country is not dead.  It is rising up against these and so many other injustices. It is critically important for people of conscience to use our own history to grasp the significance of our modern-day resistance and find hope and inspiration to keep fighting forward. 

Consider this perspective.  For almost 250 years, it was constitutional and legal for white slavers and slave-owners to rip children away from their unjustly enslaved parents. Children were separated from their parents and sold to separate slave owners. The power of our government and the dominant social mores backed these practices.  Tragically, the outcry of the white population was small and weak for most of this period.  Eventually, African-Americans and people of conscience organized the abolitionist movement and these barbaric slavery practices were wiped out after the Civil War.  How many children and their parents suffered such unfathomable life-changing pain and injustice. Millions of children were torn away from their enslaved parents each year for 250 years. The number boggles my mind and pains my soul.

Our nation was founded by tearing away Native Americans from their land and forcing the survivors on to reservations. White settlers pushed people into smaller and smaller areas and countless Indian people were killed and wounded.  Once the carnage was over and the land taken, the government tore thousands of children away from their parents and forced them into schools where they were cleansed of their heritage and values. Thousands more children were taken. It was not until the 1970s till Native Americans and people of conscience ended these horrific practices.

So where do I find hope and in this current period of injustice and cruelty towards immigrants in America?  As we have seen in the past, I find hope and inspiration that we, the people, have risen nearly a thousand demonstrations and protests in one day. 

It is critical for people of conscience to recognize that the level of resistance to these injustices today dwarfs the resistance for most of the 250+ years of slavery and the conquest and dispossession of our Native American brothers and sisters.

Our own history can give us hope and inspiration that we can prevail over injustice and create a more just and humane future.  We can do this if we find hope and inspiration in our own acts of justice and compassion and inspire others to take action as well.  Despair is our enemy.  Hope is our ally.  We can bring hope to our friends, families, communities, and unions and inspire them to act.

Do you agree?  Is this perspective helpful to you and those you love?  Let’s us know.

Gridlock in Olympia?

Divided government again seems to be the outcome of yesterday's election in Washington State.

There were no surprises in Washington State Senate races. The Democrats picked up one seat and the Republicans another. Still at a Republican majority of 26-23.

The shocker was the State House of Representatives. The House's Democrats well-oiled machine was expected to lose few if any seats. But based on last night's count, Republicans may have picked up 4 seats taking the Democratic advantage down to a few votes.

However, only half the votes are in and a total of 6 seats are within striking distance for either party.   Two are very close. Rep. Larry Seaquist (Bremerton) trails Republican Michelle Caldier by only 78 votes.  In the 28th district, Democratic newcomer Christine Kilduff (University Place) trails Republican Paul Wagemann by a mere 69 votes.  Three Democratic districts are also in play. Kathy Haigh (Shelton) leads by 423 votes, Monica Stonier (Vancouver) trails by 526 votes. and Dawn Morrell (Puyallup) trails by 1,300 votes. The only Republican seat in play could be the open seat in the 41st districts where Democrat Mike Wilson trails Mark Harnsworth by 728 votes.

So what is the bottom line?  House Democrats will hold somewhere between 56 seats and a tie. Most likely outcome?  51-47.  

Washington State Elections - the Battle for the State Senate

The 2014 election in Washington State is simply about control of the Washington State Senate. The Governor is not up for reelection and House Democrats appear firmly in control.  The State Senate is close. The are currently 23 Democrats and 26 members in the Republican Majority Coalition.

The Belleveue/Redmond 48th District of retiring Republican Majority Coalition leader Rodney Tom is almost certain to turn Democratic with Democratic Rep. Cyrus Habib winning 2/3 of the vote in the primary with no serious opposition in the general from the Republican candidate. That takes the count to 24D - 25R. 

To determine which of the remaining races are in play, simply follow the money. The money is being spent in 5 one million dollar plus races: 

• In the 35th district, incumbent and Majority Coalition member Tim Sheldon nearly lost in the primary to a Republican Travis Coture.  However, Sheldon is likely to pick up most of the Republican votes in the general. In this near $1,000,000 race, Sheldon has raised nearly a half a million million compared to Democrat Irene Bowling's $300,000. 

• With the retirement of Democratic leader Tracey Eide, former seven term Democratic legislator Mark Miloscia has switched parties and is running as a Republican against Democrat Shari Song in the Federal Way 30th district. Miloscia is said to have door-belled every residence in the district at least five times  This is yet another million dollar race with Song and Miloscia nearly tied in fundraising.  Miloscia got nearly 60% o the vote in the primary. 

• In the Lakewood/University place 28th district, Republican Senator Steve O'Ban is being challenged by Rep. Tammi Green. O'Ban was appointed to the position in 2013 after serving in the house for one year. Rep. Green has served 5 terms in the House.  O'Ban has outraised Green two to one with $730,000 in contributions at this point. While, O'Ban got 56% of the vote in the primary, Tammi Green has mounted a credible but late campaign. 

• Up in Whatcom County, Incumbent Republican Doug Ericksen has pulled in over a half a million dollars against Democratic challenger Seth Fleetwood.  Erickson got 57% in the primary. 

• Finally, in the Kirland/Eastside 45th district candidates have raised well over $1,500,000. Incumbent Andy Hill has raised the most of any candidate spending well over a million dollars compared to Matt Isenhower's $500,000 - which is also the top dollar amount raised by a Democrat.  Hill got nearly 54% in the primary. 

Republicans have out spent democrats by over a million dollars in these 5 races and it looks like they will win all five races. With the Rodney Tom seat switching to the Democrats, odds are that the Senate will remain 26 R and 23D.  What does this mean for Washington State?  It has something to do with climate change and K12 education funding.

Who's unhappy with the Seattle Minimum Wage Hike proposal

A Region Without Social Capital

This morning's paper was filled with depressing news.  Our Metro Transit services is facing dramatic cuts due to the voters rejection of Proposition 1 on Tuesday. Washington schools are sending out notices to parents that their schools are failing due to the failure of the legislature to come to agreement on teacher performance standards.The key word here is failure. We have bickered and failed to come to agreement on everything from mass transit to school, arena and state roads and highway funding.

The Seattle Metro region ranks is one of the most economically vibrant and resilient metro areas in the country ranking 5th in the nation according to the Institute of Government Studies at the U.C. Berkeley. We also rank 8th in the nation in business environment.  But when it comes to community connectivity (you might call this term social capital) we rank 205th in the nation. When it comes to income equality we rank 105th in the nation.

The bottom line is that the Seattle Region lacks the glue that brings people together. We lack the social capital to get things done.  Our business community lacks the interest in solving big regional problems. Pollsters tell us that we are the most anti-tax blue state in the country. Perhaps much of this has to do with the fact that we are a in-migration state. People come here from elsewhere bringing their education with them and maybe just don't feel invested in our education and governmental institutions. Maybe we are just a bunch of know-it-alls who think we are the only ones with the real answers.

Whatever the cause, I think the real problem is trust.  Our citizens lack both trust in government and in each other. This is a serious and expensive problem. Failure to make long term investments will hurt all of us.

The Future is So Bright, I Gotta Wear Shades

We have been facing two powerful and counteracting economic forces in the last couple of months.  The negative force has been the cuts in government spending resulting from sequestration, the end of the stimulus funds and cuts in state and local government budgets.  This has been accompanied the expiration of the payroll tax cut in January.  The payroll tax increase is a powerful negative stimulus since the gains from the tax cut mostly went to high spending low and middle income families.

The counter-acting force has been a revival of the animal spirits of capitalism.  Business confidence has shot upward and firms have begun to increase investment and hiring after four years of stagnation. This may have started out as the result of pent-up demand in household formation, inventories and aging equipment.  But the good news is that these forces have revived the animal spirits of capitalists.  Companies who were sitting on cash waiting for more certainty in the future, seem to believe that the future is bright.

Right now, the more powerful force is the animal spirits.   The media will take a long time to adjust to reporting good economic news.  The economic story has been bad economic news for so long, analysts will have trouble making the shift to a different mentality.  But eventually, the conventional wisdom will shift and the recovery may actually begin to accelerate. 

The Short Run and the Long Run

One of the biggest points of confusion in the deficit debate is the long run versus the short run.  In the long run we have an entitlement driven budget problem that is solvable but politically problematic. In the short run we have a inadequate effective demand problem is that is related to both tax increases (the payroll taxes) and the animal spirits of consumers and investors (which is resulting in weak spending). 

Most analysts want it one way or another.  Conservatives want to deny the stimulus problem and focus on shrinking government. This is not a surprise, a small government has always been their goal. Many liberals believe the entitlement problem is something that we should ignore for now and would instead focus on job creation. 

Obama has it right in his budget proposal.  Stimulate demand now with infrastructure investments that bolster the long-run economy.  But at the same time, agree to future long-term cuts to entitlements. This has the effective of calming markets and perhaps stimulating the animal spirits of capitalists allowing in an additional increase in investment. 

Complexity and Financial Aid: A Barrier to College Completion

Behavioral factors often play a bigger role in decision-making than financial or economic factors. For example, all of us tend to discount current losses compared to future gains. This factor, known as “hyperbolic discounting,” is true for all of us. We are unlikely to risk 50 cents today for $1.00 next year despite the return on investment.  Consequently, more than 80% of all Americans have a negative personal savings rate.  This tendency becomes magnified for low income families where earnings are barely able to keep up with daily life expenses.

All of us are loss averse. Potential losses loom larger than gains. We overvalue what we already have and discount what we may get in the future.  Research on loss aversion indicates that we require gains equal to double of that of the current loss. That factor is magnified again when the loss is potentially ruinous or your lifestyle is threatened.[1]   Let’s say your income is $45,000 a year, are you willing to lose $35,000 right now in exchange for $15,000 in additional income over the next ten years?  That is the risk many low-income students face.

We also tend to base our decisions on our experiences rather than theoretical projections offered by other people.  Lower-income families have little experience with college and thus the gains seem far more uncertain.  The combination of risk aversion and complexity not only leads to an aversion to borrowing but an aversion to seeking and receiving financial aid.

When confronted with a high risk decisions like investing in college, small barriers can become huge barriers. This starts with the process of seeking financial aid. According to the Advisory Committee on Student Financial Assistance, “Millions of students and adult learners who aspire to college are overwhelmed by the complexity of student aid. Uncertainty and confusion rob them of its significant benefits. Rather than promote access, studies show that aid often creates a series of barriers - a gauntlet that the poorest students must run to get to college.” [2] 

[1] Hahnemann, (2011) Thinking Fast and Slow  Farrar, Strauss and Giroux

[2] Advisory Committee on Student Financial Assistance. (2005). “The Student Aid Gauntlet: Making Access to College Simple and Certain.” Final Report of the Special Study of Simplification Of Need Analysis and Application for Title IV Aid. Washington, D.C.: Department of

Education.

The Cost of College

The most important indicator of regional economic success is the number of residents who have completed a college degree or certificate.  The problem is that the economic payoff from college occurs after completion of the program, so the costs precede the benefit.  And the costs are substantial. Tuition and fees at Washington Community and Technical Colleges have risen by 50% over the past five years.[1] The average cost of tuition, books, fees and the cost of living[2] for community and technical college students in Washington State is $17,044.[3] Even low income independent students actually receiving Pell Grants and the State Need Grants face an average unmet need of $6,400 per year.[4] This imposes an unsustainable burden on low-income and low middle income students. 

Perhaps most importantly, eligibility for Pell Grants, low interest Stafford Loans and the Washington State Need Grant is limited to families with incomes of under roughly $40,000. For example, a grocery clerk with a child earning $45,000 per year would be ineligible for aid.  Lost earnings for attending college as well as other college costs would take up over 40% of the family’s income. 

The obvious solution would be to expand traditional financial aid programs, which have failed to keep up with the soaring cost of college. The proportion of college costs covered by Pell Grants has fallen dramatically over the past 30 years, and now cover the lowest portion of costs in history.  In the state of Washington, budget cuts to the State Need Grant have left 32,000 students, or 30% of the eligible students, without aid.  And as a result of federal budget cuts in 2011, Federal Pell Grants no longer cover summer programs. [5]

Unfortunately, both state and federal budgets are shrinking and Washington voters show little interest in making college more affordable. 

There needs to be a creative way out of this box. Some kind of creative loan package might work. However, many working adults have little history or understanding of personal finance and borrowing.  Students fear indebtedness in a time of high unemployment and mortgage foreclosures. Many colleges have not offered federal students loans because of penalties related to the high default rate.  Private loans are only offered at very high interests, if at all, for lower income working adults.  

 

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[1] Washington Higher Education Coordinating Board, 2012, Key Facts About Higher Education in Washington.

[2] The cost of living is included in this figure since students who work more than half time are unlikely to complete programs. Program completion requires students to forgo earnings to attend college.

[3]  Scott Copeland, State Board for Community and Technical Colleges, July 9, 2012; Higher Education Coordinating Board, January 2004,  Key facts about higher education in Washington (adjusted for inflation)

[4] Washington State Higher Education Loan Program Work Group, December 2012, Higher Education Loan Program Legislative Report

[5] Washington State Higher Education Coordinating Board, January 2012, Access, Affordability, Achievement: Annual Report on State Financial Aid Programs 

Working Adults are Today’s Community College Students

The profile of college students in the minds of policy-makers today is an eighteen year old who lives at home and is going to school full time. 

Nothing could be further from the truth. Community college students (and university students as well) are older, often with dependents, and going to school part time while they are working. Unfortunately, policy-makers have designed tuition and financial aid around the needs of single, recent high school graduates. 

The median age of Seattle Community Colleges students is almost 30.  Almost a fifth are immigrants, over 30% have dependents, a quarter are working full time and well over half are working part time or more.  A majority are students of color. For the entire post-secondary system in Washington State, almost 40% of the students are over the age of 30. Two-thirds of the students who entered college at age 25 or older are low income.[1] In Seattle, only 5% of community college students have entered directly from high school. 

Demographics	Seattle Central	Seattle North	Seattle South	Seattle Vocational Institute	Washington State Community Colleges
Immigrants or refugees	18.5%	8.6%	9.3%	17.5%	8.4%
Single with Children	7.0%	7.0%	11%	27%	11%
Couples with Children	12%	23%	23%	9%	19%
Work Full time	18%	29%	29%	7%	17%
Work Part Time	26%	26%	20%	13%	26%
Median age	27	29	29	29	26
Over age 30					37%
Students of Color	55%	39%	52%	83%	36.3%
Source: Washington State Board for Community and Technical Colleges, Data Warehouse, 2011

However,  college programs and financial aid are not designed to meet the needs of today's students.   Adult friendly evening and weekend schedules exist at many colleges but are significantly less common than traditional school schedules. Child care is rarely provided on campus and financial aid programs are geared towards traditional college registration schedules. 

Most importantly,  these workers will still be a majority of the workforce for the next quarter century yet many lack the skills to compete. [2]  If our goal is to succeed in global competition over the next decade, we need to begin thinking about how to retool our college system to meet the needs of the workforce. 

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[1] Prince and Jenkins, April 2005, Building Pathways to Success for Low-Skill Adult students, CCRC Brief,

[2] Thanks to Robert Baker, Economist, Division of Forecasting, and Washington Office of Financial Management for help in calculating labor participation and population data... 

We Take Care of Our Own

As Bruce Springsteen points out in his recent song, We Take Care of Our Own, American don't seem to have much tolerance for moral hazard when it comes to the social safety net.

I've been knockin' on the door that holds the throne 
I've been lookin' for the map that leads me home 
I've been stumblin' on good hearts turned to stone 
The road of good intentions has gone dry as bone 
We take care of our own 
We take care of our own 
Wherever this flag's flown 
We take care of our own 

Despite a long great recession, rising poverty and high unemployment, Americans persist in their belief that the poor are culpable for their own plight. 

Nothing divides Americans more than attitudes towards the poor. A recent Kaiser/Kennedy School pool on the causes of poverty asks the question, "Which is the bigger cause of poverty today — that people are not doing enough to help themselves out of poverty, or that circumstances beyond their control cause them to be poor?" 

Americans are split down the middle on this one. 48% says the poor aren't doing enough and 45% say circumstance beyond their control.  This issue almost defines the difference between Republicans and Democrats - Republicans go 63-31 on not doing enough while Democrats end up 57-37 on circumstances.  Not surprisingly,  Europeans with their vastly more expanded welfare state, go for circumstances by more than a 2 to 1 margin.  

Americans who believe the poor aren't doing enough are worried about moral hazard. 

Moral hazard hazard arises when an individual does not take the full consequences and responsibilities for their actions, and therefore has a tendency to act less carefully than they otherwise would, leaving another party to hold some responsibility for the consequences of those actions. 

The social safety net provides assistance to people who for one reason or another have fallen on hard times. Divorce or pregnancy might lead to poverty for a single woman with a child. Mental illness including addiction might lead to the loss of a job and eventually a home. A serious illness could lead to bankruptcy and poverty.  During today's recession, long periods of unemployment leave people with few or little resources to make ends meet.  

The degree to which  the safety net helps or hurts a person varies. In some cases,  the availability of unemployment insurance, welfare, food stamps or other benefits might lead to people postponing their job search, or avoid seeking mediation in marriage.  The assistance could insulate people from the adverse consequences of their actions. 

The problem is that there is no way to calculate the absolute level of moral hazard in social programs. In reality, most safety net programs benefit a mix of people and thus a wide mix of motivations and behaviors. The public policy question is does the amount of moral hazard created by the program exceed the net benefit to those in need? How much moral hazard are we willing to tolerate to meet the need of those in real need?  If there are 500,000 people on food stamps and 25 of them use the stamps at a casino, should the program be curtailed cutting off another 25,000 people to prevent the abuse? 

Unfortunately, most people derive the answer to this policy question based on values or ideology rather than empirical data. As we can see from the recent survey on the causes of poverty, the question of moral hazard versus needs essentially defines the two political parties in the U.S.   

Those who believe in moral character versus circumstances continue to hold to their beliefs even as conditions change radically. It doesn't matter if unemployment is 4% or 8% or if poverty rates change from 11% to 16% - the conclusion is always the same - the safety net will lead insulate people from taking action to change their situation. 

Today, in one of the hardest times in American history, a near majority of Americans appear to have little or no tolerance for moral hazard. For them, taking care of our own is merely a crutch. 

The Political Agenda

What determine what gets on the political agenda at the national, state and local level? Which issues get to be debated and considered,  which never see the light of day?

The most common answer to this question is interest groups. Interest groups invest money in campaigns and then in lobbying and their issues get considered and often accepted by policy-makers. There is no doubt that they exert enormous clout in determining the outcome of public policy issues.  However, I really don't think it is that simple. I don't think interest groups or even political parties actually get to decide most of what is considered in government. Looking at the policy agenda in the U.S. the key issues appear to be jobs and the economy, health care, gay marriage, immigration, education and the budget deficit . While interest groups may play a disproportionate role in determining many of the alternatives that are considered to solve these problems, they don't get to pick which ones draw the attention of policy-makers.

Author and professor, John Kingdon in his classic works Agendas, Alternative and Public Policy  identifies three policy streams that most often need to come together for an issue to be seriously considered by policy-makers.

1. Problems - problems come up and have to be dealt with. I worked with a former Federal Reserve Board economist during the Locke Administration who was always frustrated that the Governor's agenda never seemed to stay the course. For him, it was always issue du jour. You are working on economic development and then all of sudden energy prices skyrocket and you have to drop it and work on energy issues. Problems become the focus because citizens expect elected officials to deal with them. But problems in themselves aren't enough.

2. Solutions - if a policy-maker is going to consider an issue, she is going to want to know that the problem can be solved. Otherwise, an enormous amount of political capital will be spent and you will end up looking pretty foolish. The property tax is unfair because it doesn't include the value of financial assets in the valuation of property. But how would you do it? Could you administer it or would cheating be so prominent it wouldn't be worth it?  Tornadoes, earthquakes and Tsunamis are horrible events that should be stopped, but can you? A more realistic example might be health care reform - in a country so ideological devoted to the free market, can you have a solution that doesn't involve government ownership?

3.  Politics - there has to be the right political alignment for the issue to move through the political process. Somebody or some people who are policy-makers have to make it a priority. Health care reform wasn't politically ripe during the Cater Administration because it wasn't the priority of the president and the political mood of the country was souring on government solutions. On the other hand, the election of Barak Obama was accompanied by large majorities in the House and the Senate and Obama made it the #1 priority of his administration. Climate change was clearly on the agenda in 2008 with major Republicans and Democrats in Congress and the President seeking legislation. But the 2008 recession knocked it off the agenda as concerns moved away from the environmental protection to it's effect on jobs.

Politicians who understand these forces are often said to have a good sense of timing.  An advocate for education reform might hold off on passing major investments in education because they know that during a severe budget crisis there is no viable financial solution. But when the economy improves, and revenues are back on track, they may have a solution in hand and will work ensure that the public sees that it is a problem worth solving. When that time comes, they will jump on any news on comparative test scores or school failures try and put the issue on the agenda. Advocates for small government jumped on their chance to shrink government when the great recession and tax cuts led to huge budget deficits.

Given the problems we are facing today, the political climate and the availability of realistic solutions, what issues might be ripe for getting on the agenda?

Why is there so little emphasis on college cost containment?

Over the past 30 years one of the biggest issues policy-makers have been wrestling with is the issue of health care costs and health care access. Policy-makers have been gradually expanding access to health care starting with medicare and medicaid adding on medicare coverage of drugs, medicaid expansions by state and medicaid expansions for children. But even more prominent has been the emphasis on reducing healthcare costs. Over the years, cost-saving institutions such as HMOs have sprung up and the new health care law encourage competitive exchanges and evidence-based medicine as strategies to reduce costs.

Health care cost inflation pales in comparison with the cost of higher education. Between 1978 and 2008,  tuition has increased 9 fold while medical costs have risen 6-fold and inflation has tripled.

The cost of college dwarfs all costs including oil over the past 34 years. The last four years have made it worst as the recession has slowed medical inflation and the CPI but tuition has continued to sky-rocket as lawmakers push even more college costs off taxpayers onto students.

Health care policy started out much like higher education with little or no emphasis on cost. Doctors were beyond reproach and meddling in the work of medical industries was playing with human lives. But then along came evidence-based medicine which not only began to question to the efficiency of medical procedures but their efficacy as well. Higher costs procedures were often found to be worst for patient health. 

Up till now, higher education has dodged the conversation on both costs and outcomes.  Isn't it about time we started thinking about it?  Are the only options cutting instruction and dumping more costs on students?  





Combined Federal and State Tax Regressivity

There has been a fair amount of research done on the regressivity of Washington taxes. The Gates Commission report concluded in 2007, "Most people agree that fairness requires relative tax burdens on households (taxes as a percentage of household income) to be the same for all households, or higher for households with higher incomes (i.e., a progressive tax system). Correspondingly, a tax system that imposes higher relative burdens on households with lower incomes (i.e., a regressive tax system) is considered inequitable. Washington's tax structure is regressive. The lowest income households pay 15.7 percent of income for total excise and property taxes, while the highest income households pay 4.4 percent of income for the same taxes. Sales tax is the main cause of regressivity.

Our state's system is pretty much the opposite of the federal system. Despite all the recent rhetoric about tax inequality at the federal level, the fact remains that the federal system is progressive. According to the Congressional Budget Office, the top 1% pays an average of 31% of their income in taxes and the bottom 20%, pays about 4%. This includes the federal income tax, the incidence of the federal corporate, federal excise taxes and federal payroll taxes for social security and medicaid.

State taxes are quite regressive with top 1% paying about 1.8% of taxes and the bottom 20% paying 17% of their income in taxes.

When you combine the two results, the bottom line (the second chart above) is that the state tax system cancels out almost all of the progressivity of the federal system.  This is not true of taxes in other states. On average, taxes in other states are slightly progressive.

Washingtonians often seems themselves living in a "progressive" state. When it comes to paying for government, that is far from the case. 

The Federal Minimum Wage

Bloomberg Business Week on their opinion page editorialized in favor of raising the minimum wage to as a level as high as $9.80 an hour and with a CPI escalator.  Business Week writers argued that a "A low-wage bias is creeping into the economy" where in many cases minimum wage jobs are all that is available. The article argued that raising the minimum wage would have a "wage ladder" effect where employers would bump up salaries for slightly higher-paid employees too.

Throughout the United States, states have become passed minimum wages higher than the federal rate of $7.25 an hour. The variability of state rates along state border areas has given economists access to new empirical data from which to study the impact of the wage hike on employment. A team of Berkeley economists looked at changes in wages and employment in contiguous counties on both sides of state borders with variable minimum wages. The consolidated data showed little if any employment impacts from state who raised their minimum wage.

According to Business Week, "The Federal minimum wage was always meant to be a floor, not a ceiling. Today, someone earnings the minimum would have to work 749 hours to afford one year of health insurance premiums and 923 hours to afford a year's tuition at a public four year university.

Washington State already has the highest minimum wage in the country at $9.04 per hour. The Washington wage also has a CPI escalator which adjusts the wage with the Seattle Consumer Price Index. A prominent federal minimum wage bill sponsored by Senator Tom Harkin would raise the federal wage to $9.80 an hour.

Most of the strategies for improving living standards focus on education as the solution. For a large portion of the labor market, that makes a lot of sense. But our economy will always have a large, low-skill, low-paying labor market where education and skills will not lead to higher wages. For this sector, we have to focus on economic justice. The rest of us in society should pay a bit more for our services in order to ensure that all Americans have enough to live on.

Why do we tax business?

There is probably nothing more important to an individual or household today than a good, stable job. In countless surveys, nothing yields greater unhappiness than unemployment. There is good reason to believe that state policy-makers should focus on this issue above all others.


Creating and sustaining good jobs is all about competitive advantage. It means producing high quality goods at the lowest possible cost. It is simply about productivity. Taxes may not be the most important factor in global competitiveness but they are a factor that policy-makers can actually control.


Why do we tax business?  There are a couple of theories that are used to justify business taxes. One theory is benefits received. We tax business to insure that the price of goods reflects the social costs are spent on creating that good. These costs would include water, sewage, public safety, environmental protection and a skilled workforce. Many of these goods are goods that corporations receive for free but somebody has to pay for them - taxpayers. 


Another theory is ability to pay. Businesses should pay their share of taxes based on their ability to pay taxes. Since business owners make a lot of money, we can indirectly tax them by taxing their business.


Economists say that taxes have the effect of creating inefficiencies in both the process of production and in the distribution of goods. Taxes will change the mix of goods produced. Taxes create a deadweight loss in our economy by reducing the consumer and producer surplus by more than the actual amount of the tax itself.  


In general, taxes are most efficient when they fall on those who have the most difficulty avoiding them.  Big corporations can and do spend an enormous resources shifting avoiding taxes and the government spends enormous amounts of resources  trying to make rules to stop them.  They also spend enormous amounts of money on lobbyists to get them special tax breaks.


But most importantly, in a global economy business taxes can reduce competitiveness. They either reduce the amount of capital invested in a company or they increase the price of the good. In today's hyper competitive markets, small price differentials matter.


What if we created a serious competitive advantage for Washington by simply eliminating all business taxes. We could replace the taxes by fees on specific services and progressive taxes on individuals.


Many of the benefits received by businesses are already captured by specific fees on those services. The costs of sewage, water, electricity, and roads are already charged directly to businesses based on actual usage. Supply and demand for the specific service determine the price. We could extend this approach to directly charging businesses for additional services like education. Or perhaps we could even charge a large proportion of those services to individuals who earn money from companies rather than the companies themselves.


You can't tax a corporation; you can only tax a person  Ultimately all of the earnings of businesses go to individuals in the forms of interest, dividends, profits or wages. Rather than trying to indirectly get at that revenue through business taxes, why don't we just tax the income those individuals earn. The tax is thus based on the individuals ability to pay. There is no distortion on the productive process, no change in the mix of goods produced and no competitive disadvantage in global competition. The deadweight loss to the economy from business taxation is eliminated. 


If this is such a good idea why haven't we done this already?  I would venture to guess is that  policy-makers have never offered this specific trade-off.  Given the condition of our economy today, perhaps now is the time to look at it.