Obama’s New Economic Plan – Part 2

Obama Chattanooga-2On Tuesday President Obama delivered his first major follow-up address on job creation since unfolding his new economic plan for America in Galesburg, Illinois the previous week.  [See my previous post on that speech.]

Obama spoke this time in Chattanooga, Tennessee at an Amazon.com Inc. mega-warehouse, where he praised the company for its initiatives in job creation. The site was a somewhat controversial choice since Amazon has previously been cited for abusive working conditions in its warehouses.

Much of the President’s speech repeated the same themes and language found in his earlier address in Galesburg, and we may expect more of the same as he brings his message to the other stops on his multi-city tour. But he did use the occasion to expand on the first of the five main cornerstones of middle-class security outlined at Galesburg, that of having a good job with decent wages and benefits. He also provided additional details on how he expects to get his job plan approved by Congress. And with a bit of additional research I have been able to piece together some of the maneuvering in the background that underlies his proposals.

Obama had previously announced a series of major employment initiatives in his February State of the Union address. He promised at that time that creating these jobs would not add to the deficit – that expenses incurred in creating these jobs would be offset by other revenues so there would be no net cost to individual taxpayers. The problem has been that Republicans in Congress have been adamantly opposed to approving any additional expenditures, even if they would be offset by other means.

Now the President believes he has found a way around this impasse. He stated on Tuesday,

I came here to offer a framework that might help break through some of the political logjam in Washington and try to get Congress to start moving.

He is even talking once again about a “Grand Bargain.” He is attempting to combine measures that he knows Republicans support with those he knows Democrats will support to achieve legislation that can receive broad enough bi-partisan backing to be approved by Congress.

In his address the President said,

I don’t want to go through the same old arguments where I propose an idea and the Republicans just say, no, because it’s my idea. So I’m going to try offering something that serious people in both parties should be able to support: a deal that simplifies the tax code for our businesses and creates good jobs with good wages for middle-class folks who work at those businesses.

Obama is resurrecting his plan outlined during the 2012 Presidential campaign to cut the corporate tax rate from 35 percent to no more than 28 percent through revisions to the tax code. Republicans are generally in favour of this reduction in tax rates, although they are far from agreement on other revisions to the tax code. Obama seems to be hoping that his proposal will encourage them to get moving on tax code restructuring – something that politicians on both sides of the aisle have been calling for. But there is still a problem. Republicans have insisted that all gains in revenue from closing tax loopholes must be reabsorbed in a lower overall tax rate. Changes to the tax code must not be used to provide any increased revenue.

The Obama administration has also called for the “repatriation” of earnings by U.S. companies that are currently being kept overseas and out of the reach of the IRS. Any recovery of taxes on this estimated $1.5 to $2 trillion in off-shore earnings would amount to a sizeable one-time windfall for the U.S. government. Measures to repatriate and tax these earnings (even at a substantially reduced rate) have broad support in Congress.

In 2004 the U.S. granted a “repatriation holiday” to corporations that returned earnings held overseas, and the business community has been lobbying for another complete tax holiday as the condition for repatriating their earnings once again. But there is considerable resistance in Congress to granting these corporations complete tax immunity on these amounts.

Ezra Klein notes, both the White House and House Republicans have settled on a compromise solution that would impose

a small, one-time fee on all deferred foreign earnings. This isn’t a tax cut for money corporations bring back. It’s a levy on all the money they have sitting overseas, and they pay it whether they bring it back or not. After paying the fee, that money is free and clear so far as the taxman is concerned.

The details of this one-time fee still have to be negotiated, but the President is proposing to use this money to fund a jobs program providing broad employment opportunities in the repair of roads and bridges, in education at community colleges, and in creating new industrial centeres for manufacturing.

Obama’s jobs creation proposal consists of linking these two measures: The president will support a Republican plan for revenue neutral changes to the tax code (eliminating tax loopholes and using the gains to lower corporate tax rates) if they will agree to let him take the additional revenue received from a separate one-time fee on corporate foreign earnings and apply them to his job creation program.

Here’s the bottom line: I’m willing to work with Republicans on reforming our corporate tax code, as long as we use the money from transitioning to a simpler tax system for a significant investment in creating middle-class jobs. That’s the deal.

As MoneyNews reports,

The White House hopes the idea will gain some traction in Congress because Republicans want corporate tax reform and Democrats want spending for infrastructure, so this offers something for both sides.

We should note that Democrats have until now been opposed to the revenue neutral model of reforming the tax code, and want to apply the additional revenues resulting from these tax changes to funding enhanced employment and social programs. They do not want to see this increased revenue disappear again into other tax cuts.

So President Obama met with the Democratic caucus on Wednesday, explaining his proposals to them, and they have now rallied to announce their solid support for his jobs initiative.

The timing of this move has been carefully planned. This Friday Congress goes into summer recess, and both Republicans and Democrats will be returning to their home ridings to meet with their constituents. Democratic members of Congress will be promoting their strong support for the President’s jobs initiative and talking about their own “Make it in America” employment strategy. They will have a positive, hopeful message to bring to their constituents.

And what message will the Republicans be bringing to their constituents? What they have to report on so far is largely a negative campaign: nearly 40 attempts to repeat Obamacare, threats to shut down the government this fall by refusing to pay for current expenditures; the continuation of the sequester which the independent Congressional Budget Office estimates will cost the American economy 750,000 jobs this year and 900,000 fewer jobs next year? That may please their hard-core supporters, but it will not play well before a larger audience.

As the Congress prepares to go on summer recess, President Obama is putting the Republicans on the defensive. It will be interesting to see how this plays out.

Photo credit: Amy Smotherman Burgess/News Sentinel

Poverty in America

Recent posts have discussed the high standards of eldercare found in Denmark and the superior quality of life in Finland due to generous government supports. These government sponsored social programs greatly surpass those found in the United States.

Americans are accustomed to seeing themselves as Number 1 on the world stage. And in some areas America undoubtedly holds the top position. America is No. 1 in terms of military might, far exceeding the amount spent on armaments and military personnel by both its enemies and its allies.

Global Defense Budgets-1America is also No. 1 in terms of gun related murders, outstripping the murder rate in other developed countries.

death-by-violenceAnd America leads the world in the percentage of its citizens who are imprisoned (with 760 million people behind bars).

incarceration rates1Other than ranking first in some rather insignificant categories like the number of plastic surgeons, breast augmentation, and wine consumption, America falls far behind other developed countries in providing for its citizens.

According to The Global Competitiveness Report 2012-2013, which ranks 144 countries on a broad range of factors related to their economic competitiveness,

The United States ranks 34th in years of life expectancy, 41st in infant mortality rates, and 34th in health and primary education.

In a UNICEF report on Child Well-Being in Rich Countries published earlier this year, the U.S ranks #26 of 29 developed countries for overall child well-being and #28 of 29 for child poverty.

Poverty is an enormous problem in the United States.

A full 15.1% of Americans live in poverty, with one in fifteen Americans living in deep poverty (receiving less than $11,510 for a family of four). Without some form of government assistance, the poverty rate in the U.S. would be twice as high – affecting nearly 30% of the population.

Recent OECD studies show a larger percentage of Americans working at low wage jobs than in any other developed country.

Employees-Low Wage

Half of all jobs in America pay less than $34,000 a year. The poverty line for a family of 4 is $23,000 a year, and 25% of all jobs pay less than this amount. 28% of all working Americans receive poverty-level wages.

Since the mean annual salary is only $34,000, it follows that 50% of all working Americans receive wages either below or not far above the poverty line. Children are often hit the hardest.

child_poverty

22% of all children in the United States live in poverty, including 39% of African-American children and 34% of Latino children. Over 1 million children enrolled in public schools are homeless.

Traditionally, the poor were concentrated in America’s large inner-cities (the ghettos) and in the rural South. Most poverty relief programs were designed to address issues in those areas. But in recent years poverty has spread to the suburbs. Over the last decade millions of Americans have lost good paying jobs and either taken temporary or part-time low wage jobs, or been added to the growing list of the long-term unemployed. As the Austin Chronicle reports,

Once the secure base of the middle class, suburbs have become the fastest-growing home of American poverty. Since 2000, the number of suburban poor has surged by 64%, twice the rate of urban poor. By 2011, America’s suburbs held 3 million more poor people than were in our core cities.

What has the government been doing to help these people? In recent years we have seen a steady stream of initiatives coming from Republican members of Congress and Republican State Legislatures that impose major cuts to social assistance. The poor are being targeted as “freeloaders.” They are being blamed for their own misery – even the working poor. We are told America cannot afford to maintain its social programs. All the while, governments refuse to free up money from military expenditures or to close tax loopholes for large corporations.

America prides itself on being the richest nation on earth. But it has allowed its vast wealth to become concentrated in the hands of an elite few who use their positions and influence to lobby for broad privileges. The average American does not benefit from this strategy, and those who live in poverty are directly harmed by it.

Ralph Nader, in his recently published book, Told You So, presents a very negative view of the current situation. As quoted recently in The Guardian, he says,

The cruelty is unbelievable here. We are an advanced third world country. We have great military equipment and science and technology. Half of the people in this country are poor. They can’t even pay their bills. They’re deep in debt.

Americans can do better. America’s greatness lies in its communitarian spirit, in its citizens banding together to support one another and solve their problems together. Yes, the challenges today are daunting: massive poverty and underemployment, poorly funded schools, inadequate social services, inefficient health care, and ineffective government. But solutions can be found as long as people have the imagination, the courage and the will to pursue them.

Four days before he was assassinated, Martin Luther King Jr. addressed a gathering at the National Cathedral in Washington, D.C. He said,

There is nothing new about poverty. What is new is that we now have the techniques and the resources to get rid of poverty. The real question is whether we have the will.

Do we?

Can Canada’s Temporary Foreign Worker Program Be Fixed?

Yesterday the Harper government responded to increasing public pressure and announced significant changes to Canada’s Temporary Foreign Worker Program.

Pressure on the government has been mounting since the CBC broke the story earlier in April of how Canada’s largest bank, RBC, was replacing dozens of its Canadian staff with temporary workers from India who had been hired to take over their department.

minerThis comes on top of news that a mining company in BC had been allowed to bring in 201 miners from China despite the fact that qualified Canadian workers had applied for the positions.

The Rise in Temporary Foreign Workers

The use of temporary foreign workers has dramatically increased since the Conservative government came to power.

Between 2007 and 2011, 30 per cent of all net new jobs in Canada went to migrant workers — during a period of high unemployment in this country.

Since 2008 the number of temporary foreign workers has increased by 60 per cent in Toronto, 70 per cent in Quebec, and 80 per cent in the Atlantic Provinces – all of which continue to have high rates of unemployed Canadians. Last week the Alberta Federation of Labour released a report stating that three out of four jobs created in the province over the last few years were filled by temporary foreign workers instead of Canadians.

The number of temporary foreign workers entering the Canadian workforce each year is now greater than the number of permanent workers receiving visas. And while limits are set for the number of new immigrants admitted to Canada each year, there are no limits to the number of foreign workers that may be approved. Today over 340,000 temporary foreign workers are employed in Canada.

migrant workersTemporary foreign workers do not have the same rights as other workers. They are required to pay into the Employment Insurance Program but are ineligible for any of its benefits. They are not covered under the national health care plan. If they are injured on the job their contracts can be terminated and the employees sent back to their country of origin. And federal legislation allows them to be paid up to 15% less than Canadian workers – even if this falls below the minimum wage.

If temporary foreign workers quit their jobs for any reason, they cannot look for other employment (their work is tied to a specific contract) and they may be deported. Temporary workers are subject to harassment, exploitation, unsafe working conditions and substandard housing with little government oversight to ensure that the terms of their contracts are being honoured.

In 2009, Immigration Minister Jason Kenney announced that his department would publish online a list of employers found to be flouting the rules, and they would be subject to sanctions. Four years later, that bad-boss website doesn’t contain a single name of a single company.

The stated goal of the Temporary Foreign Worker Program is to enable “employers to hire foreign workers on a temporary basis to fill immediate skills and labour shortages, when Canadian citizens and permanent residents are not available to do the job.” However, many employers have used the program to avoid training Canadian workers and to hire labourers in unskilled jobs at less then minimum wage.

Tim Hortons[While] the federal government has granted thousands of fast-tracked work permits designed for employers seeking high-skilled migrant workers … documents show many migrant workers brought in … are actually toiling in fast-food restaurants, convenience stores and gas stations.

Tim Hortons is one of many employers to take advantage of this program. Between 2007 and 2012 it received permission to bring close to 15,000 temporary foreign workers to Canada.

Fixing the Abuses

In response to these and other massive problems with the program, yesterday the Harper government announced some significant revisions to the Temporary Foreign Worker Program. Effective immediately, these changes will ensure that

– employers will be required to pay temporary foreign workers at the prevailing wage offered to Canadians (eliminating the 15% pay reduction)

– the program is not used to facilitate the outsourcing of Canadian jobs

– the government will have increased authority to suspend and revoke the work permits of employers who misuse the program

– employers using the program have a firm plan in place to transition to a Canadian work force over time, and

– fees for work permits are increased so taxpayers are no longer subsidizing the program’s costs.

It is a very good start – especially for protecting Canadian jobs. But the rights of these temporary workers also need to be protected. The government  needs to take further steps to ensure that these workers are not being exploited during their stay in Canada.

E4ZPSME43UBP

Can Canada’s Temporary Foreign Worker Program Be Fixed?

Yesterday the Harper government responded to increasing public pressure and announced significant changes to Canada’s Temporary Foreign Worker Program.

Pressure on the government has been mounting since the CBC broke the story earlier in April of how the Royal Bank of Canada was replacing dozens of its Canadian staff with temporary workers from India who had been hired to take over their department.

minerThis was on top of the news that a mining company in BC had been allowed to bring in 201 miners from China despite the fact that qualified Canadian workers had applied for the positions.

Public anger over these events has finally prompted the government to act.

Foreign Workers in Canada

The use of temporary foreign workers has dramatically increased since the Conservative government came to power.

Between 2007 and 2011, 30 per cent of all net new jobs in Canada went to migrant workers — during a period of high unemployment in this country.

Since 2008, the number of temporary foreign workers has increased by 60 per cent in Toronto, 70 per cent in Quebec, and 80 per cent in the Atlantic Provinces – all of which continue to have high rates of unemployed Canadians. Last week the Alberta Federation of Labour released a report stating that found three out of four jobs created in the provinces over the last few years have been filled by temporary foreign workers instead of Canadians.

The number of temporary foreign workers entering the Canadian workforce each year is now greater than the number of permanent workers receiving visas. And while limits are set to the number of new immigrants admitted to Canada each year, there are no limits to the number of foreign workers than may be approved. Today over 340,000 temporary foreign workers are employed in Canada.

migrant workersTemporary foreign workers do not have the same rights as other workers. They are required to pay into the Employment Insurance program but are ineligible for any of its benefits. They are not covered under the national health care plan. If they are injured on the job their contract can be terminated and the employee seen back to their country of origin. And federal legislation allows them to be paid up to 15% less than Canadian workers – even if this falls below the minimum wage.

If a temporary foreign worker quits their job for any reason they cannot look for other employment (their work is tied to a specific contract) and may be deported. Temporary workers are subject to harassment, exploitation, unsafe working conditions and substandard housing with little government oversight to ensure that the terms of their contracts are being honoured.

In 2009, Immigration Minister Jason Kenney announced that his department would publish online a list of employers found to be flouting the rules and they would be subject to sanctions. Four years later, that bad-boss website doesn’t contain a single name of a single company.

The stated goal of the Temporary Foreign Worker Program is to enable “employers to hire foreign workers on a temporary basis to fill immediate skills and labour shortages, when Canadian citizens and permanent residents are not available to do the job.”The program was specifically set up to alleviate labour shortages in skilled positions where not enough qualified Canadian workers could be found. Yet,

Tim Hortons[While] the federal government has granted thousands of fast-tracked work permits designed for employers seeking high-skilled migrant workers … documents show many migrant workers brought in … are actually toiling in fast-food restaurants, convenience stores and gas stations.

Tim Hortons is one of the many employers to take advantage of this program. Between 2007 and 2012 it received permission to bring close to 15,000 temporary foreign workers to Canada.

Addressing the Problem

In response to these and other massive problems with the program, yesterday the Harper government announced some significant revisions to the Temporary Foreign Worker Program. Effective immediately, chese changes will ensure that

– employers will be required to pay temporary foreign workers at the prevailing wage offered to Canadians (eliminating the 15% pay reduction)

– the program is not to be used to facilitate the outsourcing of Canadian jobs

– the government will have increased authority to suspend and revoke the work permits of employers who misuse the program

– employers using the program have a firm plan in place to transition to a Canadian work force over time, and

– the fees for work permits will be increased so that taxpayers are no longer subsidizing the program’s costs.

It is a very good start – especially for protecting Canadian jobs. But the rights of these temporary workers also need to be protected. The government also needs to take steps to ensure that these workers are not being exploited during their stay in Canada.

E4ZPSME43UBP