A couple of years ago, when the economic crisis was just hitting the fan, I offered an idea which I called Bob’s Bailout Plan. The big politicians in Washington went with their own bailout plan instead, but so far it does not appear that the bailout really did much good. The nation’s economy is still massively screwed up. I believe that my solution would have been a better idea for the nation, but what can I do? 😆
So, in the spirit of helping move things forward, today I am ready to announce “Bob’s plan to tackle unemployment.”
The unemployment that resulted from the financial crisis that reared it’s head in 2008 is still with us. Just yesterday the Federal Government of the USA came out with the May unemployment figures, and unemployment increased to 9.1%. Many people speculate that the “real” unemployment rate is closer to 20%, some even say more. Only those seeking employment are included on the unemployment rolls, so the real unemployment rate really is undoubtedly higher than the figures would indicate.
Both of the major political parties say they want to get people back to work, and I am sure they honestly do want to do so. Unhappy, unemployed voters do not vote to keep people in office who have been unable to solve the problem. So, the politicians really do want to get people back to work. However, each party has different ideas of how to get people back to work.
Generally, this is my wrap up on how each party seemingly thinks they can create employment:
The Democrats feel that taxes should be increased, mostly on the wealthy, to get the fiscal situation in order. By getting the budget balanced, or closer to being balanced, the Democrats feel that the economy will respond by improving. When the economy improves, companies will need to hire people in order to fill needs of a more robust economy.
The Republicans feel that increasing taxes, especially on the wealthy, will kill jobs. Republicans feel that the wealthy people are the ones who start businesses, and thus hire people to work for them. By increasing taxes, it is a disincentive to do more business and make more money, because the more money you make, the more you have to give to the government. Additionally, Republicans would rather cut the taxes so that wealthy individuals will have more money in their pockets in order to hire more people.
So, basically, both sides feel the exact opposite from the other. How can the two sides compromise when their plans are on polar ends of the scale? This is where Bob’s plan to tackle unemployment comes in.
I feel that my plan is simple, and I am surprised that it has not been mentioned before, or at least I have never heard it mentioned. Here is what I would do:
Enact a new tax cut for businesses that would take effect only after new people are hired. Implement a system where for each new employee hired, 50% of that new worker’s salary would be taken off of the tax bill of the company. So, the company would actually be getting the worker for half of the normal salary, the worker would be getting full pay, and the government would bring in more money, because they are getting zero taxes from people who are not working.
Right now, the government is paying out benefits for unemployment and other programs to people who are unemployed. I just did a search and found that in some areas unemployment is around $350 per week. So, the government is spending $1,500 or so per month to each person who has no job and is eligible for unemployment benefits. Additionally, many of these people are getting food stamps. A quick search revealed to me that a family with 3 children gets about $800 per month worth of food stamps in some areas. So, add that to the $1,500 per month of unemployment, and the government is giving out $2,300 per month to some unemployed. I am sure there are other programs that the government is spending money on for unemployed too, like training for new jobs and such, but I won’t even include those in my calculations.
Let’s plug in some real figures as an example.
Let’s say that Goodyear tire manufacturing hires Joe Smith as a new line worker. Joe’s salary will be $50,000 per year. Joe has been unemployed for the past 18 months, and has been collecting unemployment benefits, as well as food stamps to nourish his wife and 3 kids during his lack of work.
So, during the past 18 months, the government has been giving Joe and his family $2,300 per month, which amounts to $27,600 per year.
Now, when Goodyear hires Joe and pays him $50,000 per year, Joe immediately ceases to receive the monthly benefits from the government, saving the US government $27,600 per year.
When Goodyear files it’s corporate taxes, they get to deduct $25,000 right off their tax bill, because they get a 50% tax credit on the salary that they pay Joe.
Of course, Joe is now going to become a taxpayer, because he is once again earning an income. Let’s say that Joe pays a total of 15% in income taxes. So 15% of $50k is $7,500 per year that Joe will pay in Federal Income Taxes. Additionally, Joe will be making money which means that he will be out stimulating the economy by making purchases and spending the money which he is now earning, which will in turn create more jobs and more income for the government.
So, in this example, the Government will lose $25,000 which will be credited toward Goodyear for hiring Joe. The government, though, will gain $27,600 per year that they don’t have to give Joe in benefits, $7,500 per year that they will collect from Joe in income taxes, and some other amount from the economic activity that Joe’s salary will spur the economy. A net gain to the government of $10,100.
It’s a winning situation all the way around. Joe gets a job. Goodyear gets a new worker at half the price. The government brings in more money. Unemployment declines. And, all of this rolls downhill like a snowball. Once Joe gets his job, things improve a bit, and that causes FedEx to hire Sally, which in turn helps out more, and causes Sheraton Hotels to hire Dick. And so on. It’s a win-win.
So, you might think this is only small change, getting a job for Joe. But, multiply this out. Say that Goodyear hires 10,000 new people. FedEx hires 3,000. Sheraton hires 500. Sears hires 4,000. Think about the thousands of companies all hiring a number of employees. Pretty soon the USA and the rest of the world is on the road to a real recovery, not just some numbers on paper, but people still suffering.
So, that is Bob’s plan to tackle unemployment. What is your plan? What is the governments plan? Is it better than mine?