An Idea Liberals and Conservatives Will Hate

By Bradley Tusk  |  August 25, 2016

Most people believe that our country is seriously screwed up. And many would agree that we have both a fundamentally unequal society and a fundamentally broken government. I believe that income inequality is a problem that threatens the future and survival of the republic. And I believe that the federal government (and most state and local governments) lacks the ability to do much about it. But that doesn’t mean we have to shrug our shoulders and drive off a cliff. We can fundamentally reduce inequality and we can do it without having to fix government first. But it’s going to make a lot of people angry.

Here’s the part conservatives will hate: the solution means imposing a slew of new mandates on business — higher wages, more paid sick leave, paid child care, better health care, more paid maternity (and paternity) leave, more job training, better severance pay, and more. It’s going to impose massive new costs and obligations on businesses, many already struggling to get by.

Here’s the part liberals will hate: the solution means dramatically reducing taxes and dramatically downsizing government — fewer federal and state agencies, fewer programs for the poor, far fewer appropriations and chances to dictate where taxpayer money goes, a much smaller civil service, and dramatically weakened public employee unions. Both side would lose both much of their base and much of their reason for being.

But, here’s who should like this — workers who would now be paid more, given better benefits, better training, more job security, better child care and health care. And businesses — who would pay a fraction of the taxes they currently pay on all fronts — income, payroll, FICA, sales tax, etc… In other words, we’re taking away the role of government to redistribute money to the poor and having employers do it directly. In many ways, this approach helps achieve the same goals as the ambitious Universal Basic Income proposal, but it demonstrates less faith in government (UBI assumes that government can take in money and distribute it in whole without slicing off pieces of the pie to meet their political priorities; I’ve spent too much time in government and am too cynical about human nature to think this is possible in real life).

So instead, this approach directs the money to people who need it without going through government. Take the minimum wage, for example. Right now, the federal minimum wage is way too low. No one can live on $7.50 an hour. So that wage is then supplemented with a variety of taxpayer funded, government administered programs — food stamps, Medicaid, the earned income tax credit and a host of other programs.

Here’s the problem: the act of creating and running those programs takes most of the money away from the people these programs are trying to help. For a dollar in taxes to reach someone in need, it first has to go through the IRS (or a state/local tax collection agency, which imposes accounting costs on businesses). It then has to be appropriated by a legislative body, most of whom are motivated solely by politics, told how to vote by their donors and party leaders, and find all kinds of ways to funnel money to their allies instead of to the greatest needs. It then goes to an agency charged with administering the program. That agency is filled with civil service employees whose salaries, benefits and pensions eat up a large portion of their agency’s budget. Then finally, some of that original dollar gets passed along to the people who actually need it, although the programs serving them are frequently wasteful, inefficient and ineffective, which means the help provided does far too little to meaningfully address inequality.

Instead, what if the federal minimum wage were $15/hour (or even more), and the delta between the current minimum wage and the new minimum wage were deducted from the business owner’s taxes? So if you have 25 employees making minimum wage and your total annual employment costs rise by $187,500, you pay that much less in taxes (same goes for higher health care costs, job training, paid sick, etc…). The employees are far better off because they now have twice as much money in their pockets and they’re receiving 100% of the increase, rather than the pennies on the dollar that reach them through government programs. The business is held harmless but also now has happier, better paid employees. Government agencies and workers suffer, but we shouldn’t have a government whose main point is to sustain itself at the expense of everyone else.

In a August 14 editorial, the Wall St. Journal cited a University of Washington study of Seattle’s $13 minimum wage, showing a decrease in employment and hours worked. Absent an offset for businesses, this type of decline is completely predictable. But what if businesses didn’t have to choose between higher profits and better paid employees? What if the City of Seattle instead were required to bear the burden of lower revenue? If someone has to lose in this equation, better government than businesses or workers.

Will Republicans ever vote for doubling wages, mandating quality, employer paid child care, expanding health care mandates, and the like? I doubt it. Will Democrats ever vote to slash taxes, eliminate agencies and programs, and fire a slew of unionized government employees? I doubt it. But if either side cared about something other than keeping their jobs (so they don’t have to try to make it in the real world), they’d give this approach serious consideration. If you care about inequality and you care about having a government that serves the people, you could do a lot worse.