Tomorrow will be a very significant day in the United States Senate. Not only will the next Senator for West Virginia, Mr. Carte Goodwin, be sworn in but also the Senate Democrats will push their legislative business forward after a good many months stonewalled by a filibuster-proof Republican bloc. The main goal of the senators is the bill that will approve a $34 billion infusion into unemployment insurance to shore it up as the unemployment situation continues to stagnate. The Democrats also hope to get enough support for the expiration of the Bush Administration tax cuts, which will end on December 31st of this year.
President Obama and other prominent Democrats have been waiting for this day for some time as was stated in his radio address that the Republicans were blocking the economic recovery of the nation and harming unemployed Americans by their reluctance to pass the extension. The Republicans in the Senate, have opined that the President and the Democrats in Senate should be also concerned with the great deal of debt that will be incurred if cuts are not made to other areas of the Federal budget to free funds for this prop up of unemployment insurance. The Republican senators also quite hesitant to repeal the tax cuts when the nation’s businesses need the money, that would otherwise be earmarked for revenue collection, to invest in more jobs and get the economy back to full capacity.
It seems our government is in a conundrum about how to solve this problem without much controversy in a vital election year. In the short-term, the Congress should do two things. One, continue the Bush Tax cuts for another two years. The savings that people and businesses are making from them are significant and may be the key in the long-term economic recovery of the country. The one sure thing is that a tax rate hike will stop any recovery in its tracks. On the unemployment insurance matter, the additional spending should be approved but it must come at the cost of significant cuts to other programs of equivalent spending. In the long-term, the Congress should consider the following options. First, a reform of the tax code from a progressive tax system to a flat tax, proposed by Alvin Rabushka and Robert Hall at the Hoover Institution, that would tax only money that is not saved or invested and only on people whose incomes are above a level of basic need. The rate would be low at about 19% (according to their estimates). This will be low enough not to slow economic growth yet big enough to keep the Federal budget in the black with the appropriate spending modifications. The second thing, all monetary welfare supports, including unemployment insurance, should be replaced by a universal basic income, which is a sum of money given to everyone that will cover the basic necessities. This way we will become a nation of savers who will not need serious government support in times of economic trouble and we’ll have the capital on hand in both government and the private sector to make a speedy recovery.
Christain Science Monitor Original: http://www.csmonitor.com/USA/Politics/2010/0719/Next-up-on-unfinished-Senate-agenda-unemployment-insurance
Hall-Rabuska Flat Tax: http://en.wikipedia.org/wiki/Hall-Rabushka_flat_tax
Basic Income: http://en.wikipedia.org/wiki/Basic_Income