Tuesday, July 26, 2011

Stimulating The Economy, Reducing The Deficit... The Private Sector Solution

What we know:
· 20 years ago, corporate executives earned 40 times the wage of the average wage earner.
· Today, corporate executives earn 400 times the wages of the average wage earner.
· 20 years ago, corporations offered full medical benefit packages to their employees with no co-pay or employee cost.
· Today, if a corporation offers medical benefits, the average wage earner pays as much as $400 per month plus co-pays for doctor visits and prescriptions.
· 20 years ago, corporations offered pension plans as a benefit to the employee.
· Today, corporations are eliminating pension plans.
· Today, corporations are granting 20% and higher pay increases to their executives while the average wage earner pay remains stagnant.
· The Federal deficit is $14 trillion and growing.
· Federal revenue has declined since the 2008 recession which is creating a call to cut social programs, i.e. Social Security, Medicare, etc. at a time when Corporations move away from offering pensions and health benefits.
· The American worker is being squeezed both in terms of pay levels and benefits.
With this in mind, it is believed revenue to the Federal government must be increased to cut the deficit and sustain a healthy budget. Tax rate increases are the option being discussed as the Federal government has more of a revenue problem then a spending problem. Corporations can take part in the solution to this problem by giving an immediate pay increase of 20% to every wage earner they employee instead of to the Corporate executive. By doing so it would resolve the following:
· With more income to spend, employees would be stimulated with a demand for goods beyond anything seen in the past 20 years. This demand would stimulate manufacturing, new housing starts, home purchases, retail sales, etc. as wage earners enjoy greater expendable income.
· This would elevate wages for the lower income workers who would enter tax brackets requiring them to pay income tax.
· The average wage earner would pay more income taxes based on the increased wages.
· With the increased tax revenue attained from the higher employee wages, there would be enough revenue to pay for our social programs, cut the deficit and balance the Federal budget.
A Call to Action:
Companies can make an investment in their future by immediately giving a 20% pay increase to their employees. This will immediately stimulate the economy, it will put billions of dollars into the market, it will increase demand for goods and services that will increase demand for output and a need for new employees. This pay increase program will have a direct positive effect on the P&L of corporations, improve the health of the nation, improve the morale of the employee and reduce the need for tax rate increases.