My economic plan for the USA

Many of the news headlines that I have seen emerge on my computer screen are of the current US political scene. With the rise of ultra-conservative Republican Donald Trump, along with the ascent of “honest” politicians such as Bernie Sanders, the 2016 election promises to be unforgettable. Whether you are a Republican or a Democrat, a conservative or a liberal, American or non-American, one thing is for sure: you’ll be glued to your seat when the time comes for America to elect its next leader. However, there’s one problem (for me at least): I don’t identify fully economically with any of the major frontrunners’ policies. Regardless of the powerful rhetoric of Hillary Clinton or the punchy, powerful words of Bernie Sanders, there seems to be some policies that I just don’t like. While I fully acknowledge that no candidate will be perfect for anyone, the purpose of this article is simply to outline the economic policies that I would espouse, if I were to run for President, and to see people’s opinions on them.

It is my firm avowal that a major part of the economic progress of a country is the status of its most economically destitute individuals. As such, I propose raising the minimum wage progressively to a living wage, inflation adjusted, which varies state by state. While the spending power (in real terms) of the poorest individuals has seen near stagnation over the past decades, the cost of goods and services has increased by a quite substantial amount. To combat this, the minimum wage needs to be raised to a living wage over a period of a few years. In a time where worker productivity has nearly doubled from 30 years ago, it is only fair that the people at the bottom of the supply chain see their wages increase as well. The higher minimum wage will also mean that more skilled workers will be attracted to these minimum wage jobs, meaning that corporations will be able to pick and choose between the best employees. This results in an increase in productivity for the corporation, which will also increase their profits, keeping everyone happy, so to speak.

Of course, some might argue that corporations will not be able to fund a higher minimum wage, which will result in widespread job cuts. That is exactly the reason for my next policy: to cut corporation tax. When corporation tax is cut, corporations have more disposable income to spend, meaning that they can fund more workers, all of which are paid the living wage, at least. In addition to this, cutting corporation tax means that corporations have more money with which to invest in new branches and stores, employing more people and increasing their profits. When more people are employed with a good wage, more people will spend more money at different stores, resulting in more profits for those stores, so that they can employ more people, and so on and so forth. This positive multiplier effect will continue on and on after reducing corporation tax, stimulating economic growth. In addition, the cut in corporation tax will incentivise more corporations to come to the USA, maximising the revenue that the government receives from taxation. With my proposed crackdown on corporate tax avoidance and evasion supplementing this, in the long run, the government will receive far more overall revenue from taxation than they would otherwise.

An integral part to my economic plan for the USA is the Robin Hood tax. Even though the tax is miniscule in nature to financial institutions, it has the potential to make the government gargantuan amounts. The crux of the Robin Hood tax is that despite being of little or no concern to large financial institutions such as J.P. Morgan, it will do bucketloads for your average Joe. The money that will be garnered from the Robin Hood Tax will fund a program that guarantees free healthcare. In the 21st century, free healthcare is simply a fundamental human right, and therefore, any economic plan must find some way to guarantee free healthcare for US citizens. With the sheer volume of financial transactions made on stock exchanges such as the New York Stock Exchange and the NASDAQ, it should come as no surprise that even a small tax on these transactions would generate a huge amount of income. The key to economic prosperity is not to alienate the banks, so this tax would not be too large, however, it would be adequate for purpose and adequate for providing every citizen with their rightful healthcare. Hopefully, an amalgamation of all these economic policies would result in a new era of economic prosperity coming over America.

What do you think of my economic plan for the USA? Leave your answers in the comments below. Thanks for reading!

 

67 Comments Add yours

  1. starbritewarrior says:

    I’ve never really had much of a head for detailed economics but it sounds like you have put a lot of thought and research into your economic plan for the USA. Well done!

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    1. Thank you so much 🙂

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  2. HB (Harry B) says:

    Sounds like a perfect plan. Free healthcare is a universal right, which is true, charging people for a broken leg only creates a class divide — who can afford it and who can’t. Although they say Obamacare is affordable, it’s simply not good enough.

    Like here in the UK, it should remain free, however if people want gastric bypasses and other silly things, then they should pay. Taxpayers’ money won’t be wasted, and the NHS will be able to invest on better technology and treating serious cases more adequately.

    I like your idea of an increased minimum wage, too. While I must say that companies and other businesses should pay their taxes in full, I think this is an exception — people who work at corporations work tirelessly, after seeing different videos of corporations the younger workers deserve much more.

    The U.S is rich enough to do this, so it’s about time.

    Great article by the way. Happy new year! 🙂

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    1. Thank you so much Harry, and happy new year! How’s school going?

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      1. HB (Harry B) says:

        Thank you very much. I’m at college (the college is in Ware), and it’s going swimmingly, fantastic environment. How’s school going for you?

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      2. School’s going quite well, I’ve got GCSE mocks soon 😦

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      3. HB (Harry B) says:

        I wish you luck, but as they’re only mocks you can only improve if you get something wrong. I was surprised that I did get a good grade last year, because exams are so heated you just get in a muddle and explode!

        Which GCSEs are you taking? I took maths, English and art.

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      4. I’m taking Maths, English Language, English Literature, Spanish, Geography, Theology and Philosophy, Biology, Physics, ICT, and Chemistry. Our school makes us do 10 🙂

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      5. HB (Harry B) says:

        That’s hell of a lot. I didn’t really go to a mainstream school, so there was only a few to chose.

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  3. Carmela Pop says:

    It is going to be a very interesting election, to be honest I don’t really like any of the main candidates, so if I had the opportunity I would totally vote for you! your ideas make way more sense than the ones I have heard so far.

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  4. what about income tax? I agree with robin hood tax though

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    1. Regarding income tax, I think that if we slightly lower it, that would be the best option.

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  5. Also shrey why not introduce living wage and adjust for inflation rather than $15/hour wage?

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  6. Sheena says:

    You want to double minimum wage? What happens to the workers that already make $15/hour? Companies have a place in their budgets for employee wages. I would guess most anticipate less than 5% increase in that part of their budget annually. How could they double it without being forced to let some of their workers go, they’d have to cut costs somewhere to make up the difference. Also, I’m not so sure giving people more money makes them more productive. In some cases, maybe. But definitely not all. It’s a good idea in theory.

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    1. Sorry, I’ve just edited that. Instead of the $15 minimum wage, there would be a living wage, inflation adjusted, which varies for each state. And also, it’s not about the money making the people productive. The money acts as an incentive for more skilled workers to apply for jobs, who are inherently more productive, therefore making the corporations they work for more productive as well.

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      1. smallivy says:

        I think you miss the point of minimum wage jobs. These are jobs that people with little or no skill and little or no experience can take as a first step in the career. A high school junior can get a summer job at Subway, make enough to pay for gasoline and insurance, and learn things like showing up on time, customer service, how a business works, and that he should learn new skills so that he doesn’t make sandwiches all of his life. This kind of worker generally generates about $13 per hour for the business (divide McDonald’s profit by the number of employees times 2000 hours/year, than add that to the minimum wage of $7.25 and you’ll see it is about $13 per worker per hour. These are not supposed to be careers – people are supposed to work their way up as they gain skills and experience and be generating $35 per hour and taking home $25 per hour by the time they start a family.

        If you raise wages at Subway to $15 per hour, you’ll see simple jobs like working the register vanish as people are replaced by kiosks (I went to a McDonald’s in Florida this weekend with kiosks already). You will have the more skilled people apply for the jobs if you raise the wages, but those will be the only people hired since the fast food restaurants will need to raise the quality of their products to increase the amount they can charge (or else they’ll automate to the point where one person can do everything, or maybe the whole restaurant will be run by robots and have a lot more things that are self-serve), but those people are already working in restaurants and being productive – you’ll just move them from one place to another. The kid in high school or the adult who dropped out of high school will not be able to get that first job that leads to a better one. You’re trapping them in poverty and also reducing the output of the country while driving up welfare needs.

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      2. Thank you so much for the long comment, but I beg to disagree. More than half of minimum wage workers are above 25, and for some, a minimum wage job is all they will aspire to get; the least we can do is to make it a living wage. I don’t think that minimum wage employers will introduce automation with this plan because of the cut in corporation tax, but I definitely see how it could happen, and that’s why recently I’ve thought of laws on automation that could be implemented in the USA. What are your thoughts on a percentage cap on the number of robots employed to do a particular job in the USA? 🙂

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      3. smallivy says:

        Think about what you’re saying. You’re saying that we should encourage people to never advance beyond being able to do what a person straight off of the street can do by paying them enough to never need to improve themselves. People who make more than minimum wage produce more, which means doing more for other people. Don’t you want to encourage people to make themselves and society better? Would you want to be encouraged to punch buttons with little pictures on them you whole life when you could become a great manager or something?

        Automation will happen regardless of the tax rates because it would need to. If you ran a fast food restaurant that paid employees $15 per hour and I ran one with robots that cost $10 per hour to maintain, I could sell my food for less and attract away your customers. That’s how free enterprise works to minimize waste and maximize efficiency. Try to put a cap on robots and they’ll just make robots that do more things. Trying to control the economy is like trying to pinch a raft and make it smaller – it just bulges out somewhere else. If you are actually successful in implementing caps, companies will just go to more friendly countries and we’ll have fewer fast food restaurants in the US, so people will lose a service they enjoy.

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  7. HB (Harry B) says:

    *choose

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    1. Haha yeah, some people do 15+ though so I’m at least grateful for that 🙂

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  8. To be honest, as an American citizen with health problems, I don’t care what is required tax-wise so long as I can have access to healthcare. As it stands now, to be able to afford my numerous medications the insurance I need is over $200 a month, which I can only afford because of the Affordable Care Act subsidies.

    You’ve put a great deal of thought into this. Here’s to hoping some of the politicians take a page from your book and stop to think.

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    1. Thank you so much 🙂

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  9. Interesting ideas. Not sure I agree with raising minimum wage – it could put a lot of small businesses out of business.

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    1. Thanks for the comment – that’s what the cut in corporation tax was trying to ameliorate!

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  10. I agree with the minimum wage. So many people barely surviving on the minimum wage. You did a great job making a well thought out plan. It is very obvious you did your research.

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  11. I’m from Canada and I don’t feel I’m qualified to speak on this matter.

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    1. Thanks for the comment – that’s okay 🙂

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  12. Definitely yes to raising minimum wage. People get so hostile about it though. As if every single person working a minimum wage job is just not interested in bettering themselves. Such as sad attitude to have about people you don’t know. Oh, right, there’s a word for that–Stereotyping.

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    1. I definitely agree 🙂

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  13. In my opinion a working health care system and a good minimum wage is essential. I’m a traveller from Austria and we have a top health care system. A worldwide travel insurance would cost me twice the price if I want to have the US included. Luckily I’m healthy and can rely on not needing a health insurance.

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  14. would you propose a robin hood tax of 0.5%?

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  15. in fact $250 billion worth of transactions take place EVERY DAY on NASDAQ and NYSE combined- by my claucaltons a 0.5% robin hood tax on transactions would lead to $400 billion worth of revenue
    A fantastic idea!!!!1

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    1. I’d go more with 0.4%, but yeah, around those levels 🙂

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  16. Roxanne says:

    Great info! I don’t think many people are aware of just how many people are barely making ends meet with the current minimum wage. Single mothers are the back bone of our working poor. Making it on a single income is just not possible- especially when providing health care, dental/vision coverage, healthy food choices, clothing and shelter for children.

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    1. Thank you so much for the comment – I agree completely 🙂

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  17. Candace says:

    Wow! Great Post! 🙂

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  18. Raman says:

    I am of the opinion that increasing the minimum wages will only lead to inflation through increased cost of labour, and this not make much of a change in effective spending power of the poor.

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    1. I don’t think that inflation will rise contemporaneously with a dramatic increase in the minimum wage. Thanks for the comment though 🙂

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  19. natural411 says:

    I can see you put a lot of thought and research in your post….

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  20. Wow, I don’t know much about the economy but this is ridiculously well written.I love how much research and how thoroughly you’ve thought out the economic plan. Keep it up. You’re destined for greatness!

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    1. Thank you so much 🙂

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  21. shrey says:

    Hi, My name is Shrey Mehta, i was very surprised to see someone of a similar age to mine interested in my favourite topic ,trading

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    1. Nice Shrey! We have the same name too 😛

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  22. Sue says:

    sounds like a cool plan, somewhat over my head so can’t say too much lol

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  23. HB (Harry B) says:

    Ignore when I said, “While I must say that companies and other businesses should pay their taxes in full, I think this is an exception — people who work at corporations work tirelessly, after seeing different videos of corporations the younger workers deserve much more.” I was tired, I just wrote about different issues affecting our country. I hate it when I make embarrassing mistakes, I feel compelled to justify. 🙂

    Like

    1. Oops, sorry for the late response 🙂 It’s no problem.

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  24. jmeadj says:

    In all honesty, I think the issues you’re trying to address issues that are very complex and cannot be treated via a one policy per issue method. I’d play devil’s advocate to your stance on the living wage – if you raise minimum wage, we know it will crowd out workers who would otherwise work for less, and that it may lead to unemployment as firms substitute human capital for physical capital i.e machinery.

    The logic therefore follows that at this higher wage rate, managers and the like would prefer to purchase physical capital over paying higher wages as the return on investment is greater when labour is priced at a ‘living wage’ level. Cutting corporation tax is a very blunt way of trying to address this; the extra profit for companies may simply go into purchasing physical capital rather than rehiring labour lost under minimum wage, or even redistributed to shareholders via dividends.

    Either way, there are ‘leaks’ as the system is not closed – not all money raised from tax cuts would be spent on workers, and raising the minimum wage could have many negative effects as stated above.

    Identifying the problem is the first step to a solution, and I think you have identified what you percieve to be the main problems well – however, you must be careful and try to evaluate the full extent of policy impacts.

    Textbook economics drastically oversimplify the effects of a policy change, so make sure to take a step back and question the common train of logic

    P.S. Keep up the good work, it’s seriously an impressive quality of writing at your age – I remembered about your blog today and I’ve been impressed at how far you’ve come! If you’d like to challenge or question anything I’ve said please feel free 🙂

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    1. Thank you so much for the lengthy comment and the appreciation! I really appreciate it. As to your first point regarding a living wage crowding out workers who would otherwise work for less, I would argue that a living wage is a fundamental human right and something which everyone should have, and by enforcing a “living wage”, we are granting the workers who would “otherwise work for less” a fundamental human right. The cut in corporation tax ensures that corporations’ profits are not hurt too much. Regarding your point about firms substituting “human capital for physical capital i.e machinery”, I would make the point that if they would do that, why haven’t they done it already? The cut in corporation tax in conjunction with an increase in the minimum wage means that these corporations’ profits are not hurt, and if they haven’t substituted human capital for physical capital yet, why would they do it in this new scenario? I agree with your other points however, the “leaks” could be ameliorated by a range of other policies which would be far too technical to include in the span of one article. Thank you so much again for the comment and the appreciation! 🙂

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  25. rationaloptimist says:

    Missing from your economic plan is anything addressing America’s biggest looming economic issue: debt, destined to rise to intolerable levels as the ratio of productive workers to those collecting benefits increases. This could wreck the economy if not tackled, and nobody seems ready to tackle it.

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    1. In my opinion, the funny thing about America is that they have an unlimited debt ceiling. Unethical, I know, but for some reason, that’s the case. Also, in the article, the increased revenue garnered from the tax cuts and the surplus from the Robin Hood tax could go towards paying back the debt that America owe.

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      1. moslerfan says:

        Well, legally we have a debt ceiling. It is really meaningless though, if you think about what a ‘dollar’ represents. In actual fact a ‘dollar’ represents a promise made by the US Government that it will accept that dollar in payment for a dollar in Federal tax liability. Literally, it is nothing more. The Government could issue those promises indefinitely without risk of default or bankruptcy, although inflation might result under certain circumstances. Since almost all of us will need to acquire dollars to pay our tax bill, dollars are widely accepted in the private sector as payment for all kinds of goods and services.

        Learn Modern Monetary Theory to understand more about the consequences of Government-issued money.

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  26. fred swartz says:

    Shrey,
    Congrats on being interested in economics and finance. We need more young people such as yourself to enter the conversation. I picked up your web address in a comment section at Zerohedge. I agree with the stance on corporate tax reduction. But it will take so much more. The fact is that we are no longer competitive with lower cost nations. Regulations, tax, and unions have hurt our competitiveness to the point where we have lost in excess of 50,000 manufacturing facilities since 2000. You have good ideas, but our baseline here in the US is one of BANKRUPCY. We owe $19T++ and unfunded promises of another $100 T or so. We have sent our wealth creating capacity to Japan in the 1980’s, Mexico in the 1990’s, and China in the 2000’s. Wealth creation solves multitudes of problems. Wealth creation comes in the form of capital investment and returns on same. If you study the period after the Civil War until about 1913 you’ll understand what I mean. But back to bankruptcy…there is no way to pay off our debt other than to create more money out of thin air. This is the very reason that the process is well underway to dump the dollar as the world’s reserve currency. This spells serious inflation here in the US, and it is a foregone conclusion. It’s just a matter of time. Not only that, our big banks (about the 30 biggest) are insolvent. Giving them interest free money by the FED (which is private and owned by the big banks by the way) is the only way to keep their doors open. I could go on and on. But the bottom line is that there is no free lunch. Higher wages are paid by someone, in the form of higher prices. Excess government debt makes us all slaves. We are so far down the road that soon, you’ll see…a do-over will be necessary. We MUST in one fashion or another, devalue the dollar. This means higher prices for the citizenry. Might I suggest a book entitled ‘Theft of the American Dream’?? You’ll get a scary picture of our dire circumstances.

    Like

  27. moslerfan says:

    Shrey, its good to see a young person interested in economic policy. Here’s my advice: try to learn what the old masters have to say, because they have interesting and useful insights. That would be people like Adam Smith, Marx, Keynes. Dont take modern neoclassical economics too seriously, because the assumptions it is based on, like rational actors, perfect competition, eqilibrium are completely unrealistic. Most importantly, study Modern Monetary Theory. Nothing you learn will be more useful for identifying ignorance and intentional misdirection.

    That said, I believe you’ve made a good effort at understanding the problem. I believe that Keynes would have diagnosed our problem as lack of demand. Some of the prescriptions you’ve made address that situation. Keep thinking about that.

    Your prescription for reduced taxes is very interesting, and I believe on target. You will be very interested in a 1946 paper by Former New York Fed President Beardsley Ruml on “Taxes for Revenue Are Obsolete.” (Google it) He advocates eliminating corporate income taxes, and then explains why it wouldn’t work. He’s right that corporate taxes should be eliminated, but wrong when he says it couldn’t work. See if you can figure out why.

    Another amateur economist

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    1. Thanks! I’ll definitely make sure to study some of what you’ve said in more depth.

      Like

    2. moslerfan says:

      A little more on corporate taxes – just recently, Neel Kashkari (Minneapolis Fed President) called for eliminating the deductibility of interest. This is because businesses make decisions based on tax structure instead of looking for profits through production. Eliminating corporate taxes would solve this problem immediately.

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  28. You have a much strong command of finance and economics than people twice your age…hats off to you.

    You have strong ideas, some of which I can strongly support.

    Here is the rub…the US will remain in trouble because we as a a nation have become lazy and entitled. We want more and more and are willing to do less to earn it. It is not everyone, but there is a prevailing diminish mentioned of work ethic and drive. The 80/20 rule is pervasive 20% are doing 80% of the work. We are nation living beyond our means. I agree minimum wage needs to be increased but we have to find a way to fix our one nation under debt, under compounded interest we stand.

    You impress me. If I had your understanding I would be far better off at my age, glad to see you are sharing your knowledge and insights with others.

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    1. Thank you very much 🙂

      Like

  29. kage2015 says:

    Health care is important. Minimum wage not all the way on board yet. I see way to many people on welfare who aren’t even trying to find work no matter what they pay.

    Like

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