EDITORIAL

Make Businesses Pay Their Way

President Obama got the ball rolling on a much-needed increase in the minimum wage with his Feb. 12 executive order that federal contractors pay at least $10.10 an hour. With Republicans blocking any effort to raise the federal minimum wage for other workers from the current $7.25, progressive advocates should take up the initiative at the state and local level and see if putting the wage hike on the ballot might goose low-income workers to get out to vote in November.

We think a living wage is a good deal not only for workers, but also for ethical business owners who already provide a fair wage and benefits for their employees. How can an ethical business owner compete with an unscrupulous business owner who pays the minimum wage and no benefits, forcing his employees to rely on food stamps, public assistance and charity to provide for their families? That amounts to socialism for businesses and gives the cheapskates an unfair advantage in the marketplace.

The Congressional Budget Office on Feb. 18 reported that a $10.10 minimum wage would mean higher earnings for 16.5 million workers, resulting in $31 billion in higher earnings, and it would lift nearly one million Americans out of poverty. The CBO also projected that the increase could decrease employment by 500,000 jobs, though economists said there is minimal evidence to support that projection and the additional money in workers’ pockets would stimulate businesses and actually cause a net increase in jobs.

The Gap Inc. announced Feb. 19 that it would set $9 as the minimum hourly rate for its US work force this year and $10 next year, resulting in a raise for 65,000 of its 90,000 employees. Even Walmart, which we count among the cheapskates, appears to be coming around, as the company announced it would not take a position on minimum-wage proposals so long as they didn’t target particular employers and had some provisions to “manage the impact,” like a phase-in period. Perhaps coincidentally, Walmart, like other retailers, had a tough Christmas season as cuts in food stamps and higher payroll taxes reduced disposable income for its core customers. Extra bucks in the working poor’s pockets go straight to Walmart’s bottom line.

One of the themes we hear from conservative economists is that people who prefer a higher minimum wage instead of an increase in the earned income tax credit are motivated by an anti-business animus. We don’t see it that way. Increasing the minimum wage and increasing the earned income tax credit are both ways to help the working poor. By increasing the minimum wage, we force businesses to provide something closer to a living wage. By increasing the earned income tax credit for low- to moderate-income working individuals and couples — particularly those with children — we force all taxpayers to subsidize skinflint business owners who are too cheap to pay a living wage that will support a family. So it’s not anti-business to support a higher minimum wage; it’s anti-cheapskate. And honest business owners who pay their employees a fair wage should welcome an increase in the minimum wage, which puts them on a more level playing field with the chiselers.

Also, the business that refuses to provide health care for its minimum-wage workers forces local hospitals to provide that care, a large portion of which probably will be uncompensated. So cheapskate businesses are the real “takers” in today’s economy.

And when the discussion comes around to tax reform, as House Ways and Means Chairman Dave Camp (R-Mich.) just debuted a proposal to “simplify” the tax code, remember that the federal government needs to come up with revenue equal to about 20% of the gross domestic product to pay the bills, as Bill Clinton proved when he last balanced the budget in FY 2001. George W. Bush rejected the balanced budget with his cuts for the wealthy, and the national debt was off to the races.

Camp proposes to shrink the tax brackets to two — 10% and 25%, with a 10% surcharge for people earning more than $450,000 and a new tax on assets for big banks. But Republicans won’t agree to a tax on bank assets and any time they get the tax rate on the rich much below 39.6%, they have to make it up by increasing revenue from lower- and middle-income taxpayers. That’s just simple arithmetic, because cutting food stamps and making life miserable for poor people won’t make up the difference.

Plenty of Targets for Pentagon Cuts

Defense Secretary Chuck Hagel is proposing to cut the size of the Army from 490,000 before the sequester to approximately 440,000. In asking Congress for $496 billion for the 2015 fiscal year, which would cut the Pentagon budget by $75 billion over two years, Hagel also proposes to limit military pay raises across the board to 1%, and freeze pay entirely for generals and admirals for one year. The budget also proposes to reduce subsidies to military commissaries, which will make goods purchased there more expensive, limits housing allowances for military families and increases health insurance deductibles for families of service members and retirees.

Of course, $496 billion is not all the Pentagon is asking for. President Obama is expected to ask Congress to approve a separate $26 billion appropriation for aircraft and weapons systems and then there’s the off-budget overseas contingency account, which is about $85 billion this year and can be used to cover shortfalls in operating expenses. And the Pentagon budget does not include money spent on the CIA, the NSA and other secret agencies, at least $49 billion in 2013 (reduced from $53.7 billion by the sequester). More than two-thirds of that goes to private contractors.

It’s reasonable to reduce the size of the Army, which peaked at 570,000 during the height of the Iraq and Afghanistan wars, but it’s wrong to cut salaries and benefits of soldiers and veterans to reach arbitrary spending limits of the sequester. Markos Moulitsas noted at DailyKos.com (Feb. 25), “not only is proposing benefits and pay cuts wrong on policy, it’s wrong on the politics. You’d have to be a suicidal moron to vote for any such cuts, it doesn’t matter what district or state you represent. By including such cuts in the proposal, Hagel has guaranteed that the cuts — already controversial to begin with — are dead on arrival.”

There are plenty of places the Pentagon can cut before it gets to soldiers’ pay and veterans’ benefits. First, Hagel should cut weapons systems that are designed for threats that no longer exist, such as the Lockheed Martin F-35, a single-seat fighter designed to perform ground attack, reconnaissance and air defense missions with stealth capacity at a cost estimated by the Project on Government Oversight (POGO) at $181 million each for the Air Force version to $299.5 million each for the Navy carrier-capable version. It’s a fine aircraft, but no nation’s air force can challenge the battle-tested fighters and bombers we already have. In fact, the US spends more on its military than the next 10 nations (including our allies) — and the Pentagon spends six times more than China.

Military spending, at $682 billion in 2012, accounts for 20% of federal spending — as much as Social Security, or the combined spending for Medicare and Medicaid. Scott Amey of POGO noted that in 2010 Defense spent $72 billion on its 790,000 civilian workers ($108 billion if you include overhead) and $253.8 billion on military contractors. That’s a good place to cut.

It’s hard to find a figure on how much it costs to garrison the American Empire overseas, but in 2010, the White House’s bipartisan deficit commission suggested cutting US bases in Europe and Asia by one-third, which it estimated would save $8.5 billion in 2015 — which is low-balling it. Of course, when you have 11 aircraft carriers you have cruising military bases, at a cost estimated at $5.3 billion for Navy vessels and personnel. And the Navy will keep its carriers and get two new destroyers and two new attack submarines under Hagel’s budget. — JMC

From The Progressive Populist, March 15, 2014