USA: +1(669)289-8683 
Sign in
this is for yhtomit only
Response one PADM-05
Mortgage interest rates are expected to rise considerably in 2018. If the economy grows too fast, The Federal Reserve will have to raise interest rates faster than expected. That could make borrowing money more expensive. If that happens, the likelihood of a recession increases. Not only would this drive up interest rates, but reduce private sector investments and diminish the country’s creditworthiness. When inflation is too low, it can hurt the economy. Businesses get queasy about investing in people and equipment. If prices don’t rise, wages don’t either. But out-of-control inflation can also be harmful. As I see it, the current fiscal path is unsustainable. The Republican tax cuts could not come at a worse time, and I think it will hasten inflation and prematurely bring a recession.
The effectiveness of mortgage interest rates rising is in my opinion, is nonexistent. It is like a dog chasing its own tail. With the passage of the tax reform bill, which essentially lowered the income tax rate, the Federal Reserve raised or is raising mortgage interest rates. So, this essentially takes the money that was saved by paying lower income tax and essentially puts it toward paying the cost associated with a higher mortgage. True, not everyone owns a home. But if you plan to buy one, this will make it considerably more expensive. The efficiency of raising mortgage interest rates is has both equal value and detriment. Keeping mortgage rates low allows more people to afford housing, stimulating the economy. By raising interest rates, the cost of owning a home is more and less people purchase homes, which is a key sign of inflation. Either way, I believe the policy on raising or lowering mortgage interest rates is ethical – the entire point is to maintain a healthy, balanced economy. The equity, or measure of fairness, depends largely on who stands to gain the most. In the case of our current economy, it’s without question that that the restructuring of our tax code largely benefits the ultra wealthy. Had the entire country benefited equally from the tax reforms, then it would have been more equitable. The 2018 tax reform brought little political feasibility, as both political parties were at opposite ends of the restructure. Nonetheless, a compromise was reached. There was little social acceptability or public acceptance from this policy change, and many will end up paying considerably more tax because of it. I believe the administrative feasibility caught citizens off guard. I knew little to nothing of the tax reform until it actually happened. Whatever the case, the government reluctantly came together and enacted the policy. I do not know how technical feasibility plays into all of this, but I could only assume that the Federal Reserve had considerable reservations about the policy due to the fact that inflation will likely rise and mortgage interest rates will go up just because of it.
Links: https://www.express.co.uk/finance/city/902886/world-bank-inflation-interest-western-countries-economic-growth
http://www.telegraph.co.uk/business/2018/01/09/global-economy-set-decade-gloom-world-bank-predicts-recovery/
References
Shapiro, R. (2017). Trump in 2018: What happens when the next recession hits?. Washington: Brookings Institution Press. Retrieved from https://search-proquest-com.ezproxy2.apus.edu/docview/1982588319?accountid=8289
Phil’s stock world: EconMatters expects global recession by 2018 (video) (2016). . Chatham: Newstex. Retrieved from https://search-proquest-com.ezproxy2.apus.edu/docview/1823224390?accountid=8289
Clifford, H. (2017, 07). Preparing for the 2018 recession. Residential Systems, 18, 14-14,4. Retrieved from https://search-proquest-com.ezproxy2.apus.edu/docview/1931239402?accountid=8289
Response two PADM-05
The federal minimum wage was put into law with the Fair Labor Standards Act of 1938 following a long struggle between progressive politicians, labor activists, conservative politicians, and the courts. The law called for a minimum wage of 40 cents per hour, a maximum work week of 44 hours, and also contained a ban on most child-labor (Grossman, 2017). The Cornell Law School- Legal Information Institute narrowly defined the purpose of the original minimum wage as to “stabilize the post-depression economy and protect the workers in the labor force.” However, it would be wrong to leave the purpose at that narrow definition. Presidents Clinton and Obama both tied the concept of a minimum wage to an idea of human dignity, both outside of the workplace through bringing in a respectable income, and inside the workplace, to establish some minimum level of equity in dignity and respect between coworkers. President Obama declared that the lack of a minimum wage was a violation of the American social pact that if an individual works hard, they can succeed (Rogers, 2014). For our purposes here, a somewhat muddy middle ground encompassing human dignity and achieving a basic standard of living should suffice as a purpose.
The minimum wage is not efficient. As an artificial economic mandate on the price of labor it obscures the actual value of labor that has a multitude of negative effects on the market. This hampers economic growth that would help to improve wages under the correct conditions. The minimum wage destroys jobs in areas stricken by poverty as small business owners cannot afford to purchase labor. The minimum wage additionally harms young, low-skill workers as it makes it unprofitable for businesses to hire and train them because those workers simply are not worth the (current) $7.25 an hour. The unpaid internships that we currently see college students taking to gain workplace experience are largely a result of this dynamic (Lee, 2014). There are certainly more efficient ways for the government to ensure a basic standard of living.
The minimum wage is social and culturally feasible while removing it is not. Lee elaborates two separate types of moralities in his piece on the minimum wage: The magnanimous morality and the mundane morality. The magnanimous morality is the kind of morality and ethic displayed towards people whom we know. It is kind. It is generous. Mundane morality is the set of general principles we all abide by with people we do not know: property rights, privacy, etc. (Lee, 2014). The long-standing place that minimum wage holds in our social consciousness has caused us to view it in terms of magnanimous morality even though, as a system, we might have better results if we viewed it via the mundane morality lens.
The minimum wage is ethical in-so-far as any government mandate is ethical. It is applied evenly (with few exceptions) and it is clearly meant for the betterment of people’s lives. Harm to business interests may be unintended, but not to the extent of negligence. Lower income levels are associated with higher rates of infant mortality and low birth weight (Komro et. Al, 2016). Should the minimum wage be revoked without any kind of replacement, many people would certainly fall into poverty, certainly. Both of these facts make a strong argument that revocation of the minimum wage is unethical.
There are alternatives, however. Economics scholar Daniel Shaviro advocates eliminating the minimum wage and allowing low-wage earners to have a ‘negative income tax’’ (Rogers, 2014). A new idea that is gaining some traction around the world is the concept of a basic universal income. In this model, the government simply pays everyone, regardless of employment a set amount of money over a set period of time. Both of these are possible alternatives to the minimum wage.
Cornell Law School- Legal Information Institute – Minimum Wage. Retrieved from:
https://www.law.cornell.edu/wex/minimum_wage January 30
, 2018.
Grossman, J (2017).
Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage
. Dept of Labor. Retrieved from:
https://www.dol.gov/general/aboutdol/history/flsa1938
Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage
Komro, K. A., Livingston, M. D., Markowitz, S., & Wagenaar, A. C. (2016). The Effect of an Increased Minimum Wage on Infant Mortality and Birth Weight. American Journal Of Public Health, 106(8), 1514-1516. doi:10.2105/AJPH.2016.303268
LEE, D. R. (2014). The Two Moralities of the Minimum Wage. Independent Review, 19(1), 37-46.
Rogers, B. (2014). Justice at Work: Minimum Wage Laws and Social Equality. Texas Law Review, 92(6), 1543-1598.
Response PADM-pol-05
The U.S. economic policy that I chose to analyze is taxation, more specifically, how marginal tax rates are determined. At the most basic level taxes are “what we pay for a civilized society” (U.S. Department of the Treasury, 2018). Taxes are revenue that pays for government services such as national defense, infrastructure, and programs like social security, Medicaid, and other safety net programs. Tax laws are enacted at the federal, local, and state level. There are also several different kinds of taxes, the most common is the federal income tax which funds roughly 33% of all annual government expenditures (Amadeo, 2017). While there are a great many policies that make up federal, state, and local taxation and fiscal policy in general, I will focus on how federal income tax rates are determined. The overall goal of maintaining a healthy economy is achieved by finding a balance between tax rates and public spending (Heakal, 2018). Fiscal policy is used to stimulate sluggish economies by decreasing tax rates, increasing consumer spending money, and increasing government spending by buying services like infrastructure repair. This type of government spending creates jobs and wages that in turn stimulate the economy through consumer purchases (Heakal, 2018). Fiscal policy can also be used to increase taxes in order to curb inflation, this also involves decreasing government spending and the amount of money in circulation (Heakal, 2018).
In my analysis of how federal income tax rates are determined, I will look at equity, social acceptability, and ethics using current marginal tax rates. With a framework of how taxes are used and how they effect the economy as a whole in mind, the equity and ethics of marginal taxation rates can be determined. Income taxes at the most basic level are determined by the amount of income generated during a tax year, brackets with a set percentage are assigned to certain levels of income, resulting in the marginal tax rate. The marginal tax rate is the amount of tax paid on an additional dollar of income, and will increase as income rises. This method of taxation aims to fairly tax individuals based upon their earnings; the lower the income, the lower the tax rate (Investopedia, 2017). I’ll use the 2016 marginal tax brackets, for taxes due in 2017 as an example:
15% Bracket: $9,275 to $37,650
25% Bracket: $37,650 to $91,150
28% Bracket: $91,150 to $190,150
33% Bracket: $190,150 to $413,350
35% Bracket: $413,350 to $415,050
39.6% Bracket: $415,050+
The marginal tax system is designed to be equitable. Another example of tax policy equity is how a moderate increase in income, enough to move just into the next tax bracket, is calculated. “When an increase in income pushes you into a higher tax bracket, you only pay the higher tax rate on the portion of your income that exceeds the income threshold for the next-highest tax bracket” (Investopedia, 2014). Take this example from Investopedia:
“Your annual salary increases from $36,000 to $38,000. Your previous tax rate was 15% or $5400. Many people incorrectly think that whereas they previously paid a tax of 15% of $36,000, or $5,400, leaving them with $30,600 in take-home pay, after their salary increase and tax bracket change, they will pay a tax of 25% on $38,000, or $9,500, leaving them with $28,500 in take-home pay.
However, you pay different tax rates on different portions of your income. The first dollars you earn are taxed at the lowest rate, and the last dollars you earn are taxed at the highest rate. In this case, you paid a 10% tax on the first $9,075 you earned ($907.50). On the remaining $22,975 of income ($32,050 – $9,075), you were paying a 15% tax ($3.446.25). Your total tax was $4,353.75, not $5,400. While your marginal tax rate was 15%, your effective tax rate was lower, at 12% ($4,353.75/$36,000).”
Two other important factors that help determine marginal tax rate are exemptions or tax breaks and filing status, which help determine how much of your income is taxable. Filing status takes into account factors like how many people you support, how many incomes you have, and help determine how much tax you are responsible for.
Where the ethics and equity of the marginal tax rate tends to break down, is at the highest income levels. The Washington Post posits that a “Premium placed on tax efficiency tends to favor the rich.” One of the roles of the federal income tax is to redistribute wealth from the well-off to the poor by using taxes to finance programs like welfare, food-stamps, and low-income housing (Kilborn, 1988). The social acceptability of this concept varies, and it is closely tied to both ethics and equity. Some argue that those who use programs or services the most, should shoulder most of the burden of cost to maintain them. However, in the case of social programs they are utilized the most by those who have the lowest ability to pay. The ability to pay is another core concept in the tax equity argument. The ability to pay principle can be summed up like this: “It is fair for people to pay taxes based on their capability to handle the financial burden. Progressive taxes, such as the individual income tax system in the United States, are based on the ability-to-pay principle. A progressive tax is a tax for which high-income taxpayers pay a larger percentage of their income than do low-income taxpayers. The U.S. individual income tax structure is based on income minus deductions, and the marginal tax rate rises as income rises” (Buck, 1970). It would be both unethical and inefficient to ask a low-income family to pay $1000 in taxes towards programs that they utilize because they cannot afford the necessities of life, this transfer in no way increases their net income (Buck, 1970). Returning to social acceptability, it is closely tied to equity and the perception of fairness. Different tax payers may have differing ideas of what is fair, using income taxes to provide a social safety net may not be perceived as fair to higher income earners who fund social programs but do not utilize them. This argument is often a political one. There are differing ideas among policymakers about the extent of aid that should be provided by the government and how taxes should be used to fund that aid. These ideas often impact whether or not income tax rates and their uses are perceived as equitable, ethical, efficient, and socially acceptable.
References:
U.S. Department of the Treasury. (n.d.). Retrieved January 31, 2018, from
https://www.treasury.gov/resource-center/faqs/Taxes/Pages/taxes-society.aspx
Amadeo, K. (2017, December). Why Do We Have to Pay Taxes? Retrieved January 31, 2018, from
https://www.thebalance.com/why-do-we-pay-taxes-4067684
Heakal, R. (2018, January 11). What is Fiscal Policy? Retrieved January 31, 2018, from
https://www.investopedia.com/insights/what-is-fiscal-policy/
Staff, I. (2017, February 16). Marginal Tax Rate. Retrieved January 31, 2018, from
https://www.investopedia.com/terms/m/marginaltaxrate.asp
Kilborn, P. T. (1988, December 09). Tax System: Efficiency vs. Fairness. Retrieved January 31, 2018, from
http://www.nytimes.com/1988/12/10/business/tax-system-efficiency-vs-fairness.html?pagewanted=all
Buck, J. (1970, January 01). Economic Perspectives. Retrieved January 31, 2018, from http://econperspectives.blogspot.com/2008/12/equity-of-tax-system.html
Response for PADMl-05
For my week five forum I decided to provide an analysis on the minimum wage issue in America. Of course as we all know this has been a hot button topic in our society and one that does not seem as if it is going away anytime soon. First and foremost the cost and benefit of raising the minimum wage for the poorest Americans has gone on for years. (Kurtzleben, 2013). As American citizens this is a topic that we ponder on because of our American value system and looking out for our fellow man and woman. Analyzing some numbers 7.25 an hour at 40 hours a week would earn $15,100 per year, while increasing to $9.00 per year would average out to be around 18,700 yearly(Kurtzleben, 2013). Using this argument we must keep in mind the spending trends of less fortunate Americans versus those that are well of. Americans with less money tend to spend more money on everyday items such as necessities that more well of Americans. African Americans spend trillions of dollars clothes, shoes, and other items where some more well of may spend money on these items but have the resources to do so. Poor Americans spend extra money readily than higher earners for items such toothpaste and other necessities (Kurtzleben, 2013). So will increasing the minimum wage provide more money but not address financial literacy? There is also the aspect of a rise in unemployment as employers being forced to higher fewer workers due to the increase in the minimum wage (Kurtzleben, 2013).
Policy Framework
When analyzing the effectiveness of a proposed policy let’s take a look at what effect increasing the minimum wage would have on the economy, the increase in economic activity and job growth. The Economic Policy Institute studied how a rate increase to 7.25 an hour 10.10 an hour would pump 22.1 billion dollars into the economy and create 85,000 new jobs (ProCon, 2018). In addition as we read in regard to the federal reserve bank they back this information by announcing that a 1.75 increase in income would increase household spending by 48 million(ProCon, 2008). Efficiency can be addressed as higher minimum range would reduce government welfare spending (ProCom, 2008). The logic here is that low income individuals look less toward the government for benefits, but take pride in providing for their family. The Center for American Progress reported in 2014 that raising the minimum wage by 6% to 10.10 dollars would reduce spending on the Supplemental Nutrition Program by 6 percent or 4.6 billion(ProCon, 2008). As it relates to equity within the policy framework the Organization for Economic Cooperation and Development emphasizes The United States has one of the highest levels of income inequality.(ProCon, 2008). As a civilized country with so many resources to go around it seems unimaginable that we would be on such a list. Equity is one of the key elements of political framework. The success of the whole equals the success of the nation. In 2012 the richest 1percent of the U.S. population earned 22.83 percent of the nation’s total pretax income resulting in the widest gap between the rich and the poor since the 1920’s (ProCon, 2008) Social Feasibility which is a measurement of public acceptance of a proposed policy increasing the minimum wage would increase worker productivity and reduce employee turnover. There are two issues that run parallel here, the more wages increase equals increase in productivity (ProCon, 2018). In 2014 Alan Manning a professor at the London School of Economics summarized that when the minimum wage rises and work becomes more attractive, labor turnover rate and absenteeism tend to decline (ProCon 2008). These are not hard concepts but to put them into action takes a determined leader and detailed studies. . Administrative feasibility which is the ability to implement a proposed policy stands a lot to gain from an administrative standpoint. Raising the minimum wage would increase school attendance and decrease high school dropout Arates (ProCon, 2008). In a 2014 California Study the minimum wage was raised to 13 dollars which increased incomes for families by 7.5 million dollars meaning fewer children in poverty the study goes on to prove that children in poverty miss more school time so by increasing the minimum wage would mean fewer days of school missed by children(ProCon, 2018). This study should give the administrative feasibility a huge boost when it comes to our futures which are our kids. As we look at ethics within the political framework which deals with cultural norms we could change the norm to a new normal. According to ProCon.org increasing the minimum wage would reduce poverty (PrpCcon, 2008). What bigger ethical achievement is there than having the ability to reduce poverty in a wealthy country such as the United States of America? The 2014 Congressional Budget office reported increasing the minimum wage to 9 dollar would lift 300,000 people out pf poverty, and an increase to 10.10 dollars would lift 900,000 people out of poverty (ProCon, 2018). These are staggering numbers yet achievable but what will we do. Finally Political Feasibility would be a dream for a politician to increase the minimum wage and promote a healthier population and prevent premature deaths. A 2014 Human Impact Partners study by Rajiv Bhatia MD found by raising California minimum wage to 13 dollars by 2017 would benefit the health those earning more, they would have enough to eat, exercise, and less likely to suffer from emotional and psychological problems preventing 389 premature deaths a year(ProCon,2008).
Incorporating the minimum wage within the political framework provided insight I did not know and even some I believe could work with studies to back them up. I just wonder will we see real change in the politics of it all.
References
ProCon Orgranization (2018). The Leading Source for Pros and Cons. Retrieved From
https://minimum-wage.procon.org/
Kurtzleben, D. (2013). America’s Complicated Minimum Wage Argument. Retrieved From
https://www.usnews.com/news/articles/2013/02/15/americas-complicated-minimum-
wage-argument
