Wednesday, January 01, 2014

Federal Unemployment Insurance Extension

At the rate of less than $300 dollars per week, for on an average 26 weeks per unemployed; you are talking less than $40 Billion dollars for about 5 million long term unemployed. With around 12% chances for these long term unemployed finding a job (after their state insurance is maxed out at around 26 weeks of unemployment and these folks are in Federal unemployment extension); in a way the justification of extended Federal Unemployment insurance is all on the basis of a humanitarian case. Knowing where political and moral compass of GOP points, it is no surprise that the party of Rep. Paul Ryan would like to remove these folks from 'Federally sponsored welfare hammocks'. What is surprising though is why are Democrats simply clamoring for a blanket extension rather than understand causes of such longer term unemployment. Possible causes are:

- the skill set of these people is not matching to what jobs are demanding, 
- these Americans have no mobility and are not in positions to relocate to places in America where jobs are,
- employers actively discriminate against this group of people,
- social networks which would otherwise help to create 'leads' for these unemployed are dying and
- technology enabled outsourcing and global capitalism have clearly destroyed vast swath of middle class job opportunities for these people.
(Economists might talk about 'prolonged unemployment' because of finance industry driven recession like in 2008 and that might be very well true also; but essentially that is an observation / expectation. What collectively we need to talk about is causes which common people can understand so that as a society we can get mobilized politically to attack these causes together.)

Having forfeited 'government interventionist approach' because of a disastrous roll out of 'mother-of-all government backed program - ObamaCare'; Democrats will have to wait until they regain credibility with American voters in applying their style of mandated programs to address some of these causes. Meanwhile though what Democrats can pursue is, changes in tax laws which tame down uncontrolled force of 'global capitalism' which gives rise to non-sustainable inequality and which contributes significantly to loss of livelihood for large number of Americans. These tax law changes could be along following lines:

- Preserve the 'creator spirit of capitalism' by continuing to keep Capital Gain Taxes at lower levels but protect lower rung of Americans by increased minimum wage and more participation in equity distribution for more number of employees.
- Non-equity compensation of a CEO cannot be at a stratospheric multiple of lowest paid full time employee; whether it is a private company or public company of a sizable revenue. (SEC is forcing public companies to publish 'ratio of CEO compensation to average employee compensation' is a good start; but still it is a long way to go. IRS would have to be involved when dealing with non-public / private companies.)
- We want corporate tax laws such that corporations are minimally taxed (or even not taxed at all so long as those keep generating employment in USA), but individual's income is taxed without loosing revenue to Federal government. Only time we want corporations to be taxed is when CEO defies by exorbitantly expensive pay package to himself. At that time 'tax' the company; then the shareholder pressure would automatically bring CEO compensation package in line.
- As far as equity compensation of CEOs go, it should be aligned with more longer term well being of the company and share holders (like no selling of equity by CEO in the first year and remaining sale spread over multiple years) rather than a short 'wham-bang-thank-you-mam style' tenure of a CEO. Implicit to all this is what restrains the CEO, it would restrain all other executives of a company.

Many constructive proposals have been put forward by experts in this area. What is deafening is the silence of American Political Class to talk about those options and complete unwillingness of national level Democrats, including you President Obama, to stoke appropriate public opinion in this regard to achieve some concrete legislative and executive success. 

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