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PHIL HARDWICK — How to make ends meet

PHIL HARDWICK

PHIL HARDWICK

The message that is consistently stressed in Sen. Bernie Sanders campaign for the Democratic Party nomination for president is that America now has more wealth and income inequality than any major developed country on earth, and the gap between the very rich and everyone else is wider than at any time since the 1920s. He points out that the top one-tenth of one percent owns almost as much wealth as the bottom 90 percent.

It is a message that is connecting with a lot of people. However, his challenge among many observers, especially business people, is reconciling how to solve the inequality. In other words, how does the country pay to implement his solutions to solve the inequality? Sen. Sanders isn’t the only one putting forth solutions to the problem. Politicians of every stripe seem to have a preferred solution.

An organization known as the National Issues Forums (NIF) has distilled the solutions into three options and is currently holding forums all across the country to learn how Americans feel about the issue. Later this year it will present the results of the forums to Congress and national leaders in the form of a report and a televised program. The forums offer three options for discussing the issue. The forums’ title is “MAKING ENDS MEET – How should we spread prosperity and improve opportunity?” The three options are (1) Create new opportunities, (2) Strengthen the safety net and (3) Reduce inequality. These three options are summarized below. The process used in the forums is to present the issue, have participants describe how the issue has affected them, discuss each option and then review the discussion to see if there is common ground.

Yours truly has had the opportunity to facilitate discussion of this issue and others for NIF. In general, most people come away from these forums feeling that they have a better understanding of the issues and learn something they did not know, especially how the issue affects others. Participants often ask, “Where do we go from here?”

Option 1 argues that a good way to solve the problem is to make sure that conditions are good for small-business owners to start and grow their businesses. There are 28 million small businesses in the country, and they provide 55 percent of all jobs and 54 percent of all sales, according to the Small Business Administration. Some argue that a more successful strategy than attempting to lure large businesses would be to focus on encouraging small businesses. One such strategy would be to form partnerships between governments, universities and business groups. In Mississippi, an effort such as that is underway in an initiative known as the Mississippi Business Engagement Network (MBEN). Another important aspect of small business ownership is access to financing, so this option would see more flexible lending to small businesses. Job training, especially retraining, is also an important part of this option. Finally, reducing taxes would put more money in everyone’s pocket. The U.S. currently has the highest corporate tax rates in the world.

Option 2 would concentrate on the safety net, especially unemployment benefits, shoring up Social Security and putting people to work through programs such as those that replace and improve infrastructure. One solution under this option would be to increase the federal unemployment tax that employers pay from 0.6 to 0.8 percent of wages. The Congressional Budget Office estimates this action would raise $14 billion over the next decade. This option also argues that we should remove health insurance, retirement plans and even unemployment insurance from employers. Social Security would also be addressed under this option by putting it on a better financial footing. Another way to concentrate on the safety net would be to invest in more public works projects to put people back to work. This worked during the 1930s when the Works Progress Administration created thousands of jobs for the unemployed.

Option 3 argues that we should reduce inequality. As the Sanders campaign mentioned above points out, the gap between the haves and have nots is great and continues to grow. The Pew Research Center reported that in 2013 the typical American household net worth was $81,400 after debts, which is 40 percent less than 2007. For white households that figure was $141,900, for African-American households it was $11,000 and for Hispanic households it was $13,700. So what can be done? This option states that we should consider raising tax rates, especially on the wealthiest Americans, and increasing the Earned Income Tax Credit for low-income Americans. The concept of a “living wage” is also a tenet of this option. Some cities and states are raising minimum wages, for example. This option also argues that school funding should be equalized between rich and poor zip codes. Reducing student loan debt is another way that inequality should be addressed.

Discussions at forums also address tradeoffs and downsides. For example, under Option 1 many new enterprises are risky and many will fail. The market should decide winners and losers, not government. Under Option 2 money for such benefits would cut into companies’ profits and would probably mean higher payroll taxes. Under Option 3 a higher minimum wage would mean layoffs and closures for some small businesses.

This subject is obviously a complex one with no easy answers. Finding the best way to address it is a goal of these forums. It is also about deliberating with each other to solve our problems.

For more information about this issue and others check out www.nifi.org. You will also learn about how to hold a forum in your neighborhood, organization or community.

» Phil Hardwick is a regular Mississippi Business Journal columnist and owner of Hardwick & Associates, LLC, which provides strategic planning facilitation and leadership training services. His email is phil@philhardwick. com and he’s on the web at www.philhardwick.com.

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