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Are you self-employed? Read THIS!

Dear Readers of Brucenomics

I started this blog as a newsletter that I sent to a few friends as the ‘Financial Crisis’ of 2007-9 began. It grew from there and landed me on Huffington Post for a couple of years.

Ever since the elections of 2016, politics has swamped economics in people’s minds. Plus, for the past four years I’ve been through medical crises that made it impossible to keep on blogging at my former pace. And now I’m involved in a new project of writing a book.

But today, we’re in a whole new era of crises that is going to blow traditional economics thinking apart. 

So I’ve decided that with Brucenomics, I’m going to continue to try to suggest novel ways we can make our economic system better.

I’ve just put up a post titled Wake Up America!”  for what do “after the COVID-19” period. 

Previous blog posts I recommend reading for discussion of what to do after this crises include “Fault Lines”- Parts One – Three, and “Six ideas To Improve Our U.S. Economy”

But we have to change our thinking right now

In fact, I think Americans are going to have to let go of some of our pride in our work as the sole source of our meaning to others in this society.

“Welfare” is supposed to denote a healthy existence for people, not connote a dirty word. 

Also, we are too attached to the word “independence”. Now that we are all becoming quarantined at home we will learn just how dependent we are on other people’s help to get through this crises. 

Many of us will not be able to get through without help. How can we build goals of service in our lives to others and make our society stronger?  

And why not aim for a world where we work less and have more time for others and ourselves to be who we want to be? 

Future plans for Brucenomics

However, what I really want to cover most in Brucenomics is what I wrote about for Huffington Post years ago. That is how freelancers can survive in this crisis. 

Self-employed professionals, and owners of sole-proprietorships and small LLCs are an endangered species that make up well over 10 percent of our economy by now. 

While corporations are being handed tons of money, the bottom 10 percent, the self-employed, won’t even get loans from the banks that are handing out zero interest loans to ‘small businesses’ and huge corporations both of which have many employees. 

Why do I say that? Because self-employed business owners have been classified by the IRS for tax purposes as half employer and half employee. 

We are required to pay the full amount of payroll taxes, while employees only pay half. This is patently unfair and why so many “small businesses” fail. 

Giving tax credits to self-employed business owners for their expenses of doing business often results in those business owners putting business debt on their own personal credit cards and then not having enough money to pay for their SE tax bill or business expenses during economic downturns. 

The IRS even encourages this practice by allowing tax deductions for personal credit card fees and interest.

There is talk by Republicans in Congress and our President about paying both employers and employees a cash payment. This is insane for the situation we are in right now. 

Requiring employees to work in order to get paid by employers who will get reimbursed by the government is just not possible. It is the employees who cannot go to work and get paid right now who need the money to pay their bills.

If they go through with this, you can bet, Congress will probably treat self-employed as if we were either only employers or only employees. This is how we are regarded today by the IRS for self-employed (i.e., FICA) taxes. 

Self-employed cannot deduct the costs of our own labor on our business’ income-tax form. We have to keep working or our business goes under.

We need to insist that self-employed sole owners of a business must be allowed to get full payroll tax relief during this crisis and like employees be able to collect Social Security when we retire.. 

Too, self-employed people need loans just as much as anyone else, but rarely can get them.

A self-employed business or even a small business with an employee or two, cannot survive without both working and paying bills for the overhead costs of their business. 

Meanwhile corporations will pay nothing for  the costs of workers and management wages and salaries that the government will give them loans for.

This is why all of us need to protect self-employment:  Without both the employer and employee halves of a self-employed business owner there will be no self-employed businesses left standing.

Please speak up if you are self-employed! We need spokespersons who can get the attention of Washington D.C.—or self-employment for many will not survive this crises.

Six Ideas To Improve Our U.S. Economy

There are obvious things that no one running for President seems to be talking about these days. Here are six issues I think we should talk about.

(1) Talk about how we are going to improve our infrastructure 

From assertions that fossil fuels that would immediately be outlawed on election day, on one hand, to, on the other hand, the fact that fossil fuels are so far the only industries that our President supports wholeheartedly, we’re not talking about infrastructure. Why? A functional infrastructure is the foundation of good economics. We have no idea what needs fixing and how much it will cost. How can we be realistic in our expectations about updating our infrastructure. A recent documentary on TV lately showed that China is far ahead of us in building its infrastructure, and solving technical problems. We can’t afford to lose out in this race!

(2) Extending the time limit on unemployment insurance

So far, the only person I’ve seen argue for this idea is an economist who predicted the last financial crisis.Raghhuram G. Rajan (“Raj”) pointed out in his 2010 book, Fault Lines that European countries now allow their unemployment support to go on for two to three years. Given the need to retrain workers for jobs robots can’t do, I think unemployment and job training should be on the near horizon – especially since the Fed is feeding a low-interest-rate frenzy on Wall Street that may lead to stagflation and unemployment as soon as next year.

(3) Considering rotating teachers among schools rather than busing students or giving students vouchers to go to schools far away from home

Botswana in Africa (home of the Ladies #1 Detective Agency) rotates 20% of its teachers each year. Why? Because Botswana has a multitude of tribal groups. Rotating teachers has helped bring understanding among different tribes, and Botswana is an exceptionally peaceful country, having had no race wars. If any other country needs help with encouraging its racial/ethnic groups to understand and trust each other, it is the United States! We have the most diverse population in the world.

(4) In keeping with the above idea, how about restructuring the housing situation in this country?

Not just in terms of how to promote environmental justice for less-well-off people, or for controlling climate change, but also to encourage integration of neighborhoods. This would decrease gerrymandering and increase connections among the hundreds of racial/ethnic groups in the United States. The funding of housing is intimately connected with both Wall Street and our federal government. Government has looked the other way at redlining of whole neighborhoods, and banks have gotten burned profiting off sub-prime loans. How could we encourage government and banks to get involved in bringing Americans of all backgrounds together rather than segregating so many of our urban and suburban neighborhoods.

(5) Changing the way race is defined in this country.

The Census Bureau lists only a few categories of race. This country has over 500 Native American tribes along with successive inflows of immigrants from everywhere around the globe over many centuries. We are the most diverse country in the world. Our Census categories are completely inadequate for drawing any rational conclusions about how to serve all Americans. At best, using other sources, our government can only come up with percentages for 20 categories of Americans by race or ethnicity. This is a cornucopia of data with big holes in it.This kind of data promotes exclusion more than inclusion.

(6) Abandoning the view that corporations exist principally to serve shareholders

According to the Financial Times economist, Martin Wolf, The U.S. Business Roundtable, represented by 181 CEOs of the world’s largest companies has just issued a statement that their companies will “share a fundamental commitment to all of our stakeholders.” This is not a new idea. I worked for a non-profit in the 1990’s that was promoting the idea of serving long-term stakeholders in corporations, such as employees, clients, and communities. In fact, a Wall Street power broker named Marty Lipton put forth a call to abandon short-term profits for long-term commitments to stakeholders in his 1979 paper, “Takeover Bids in the The Target’s Boardroom” (Source: Financial Times Gillian Tett, “Does capitalism need saving from itself”). Isn’t it about time to discuss this idea!

If you have ideas that you think should be discussed by our Presidential candidates but aren’t, please comment (briefly as you can) and I’ll post comments (with or without your name if you prefer). Let’s hear your ideas about changing things for the better!

Word of The Day – Stagflation

Those of us who lived through recession during Jimmy Carter’s Presidency will remember this word—stagflation.

During Carter’s time in office we had long-lasting rise in unemployment and even gasoline rationing – one could only fill up on certain days of the week. 

It was a frustrating time for me as, with two graduate college degrees I stood in a line of 200 unemployed workers in South Carolina trying for a grocery store’s cashier job. 

Stagflation is a word that conflates inflation with stagnation into one word.

First inflation comes about because there is “too much money chasing too few goods”. (And since our tariffs on imports are a tax on U.S. consumers, we expect prices of U.S.-made goods will go up in a trade war).

Then, if the government does nothing to curtail inflation, will come layoffs of workers.

After that, if too many Americans aren’t able afford to buy higher-priced U.S. goods, we’ll have stagnation occur in our economy because the production of goods and services slows down or even starts to decline.

Note too that the US. is a debtor country. We import $3.1 trillion and export only $2.5 trillion in goods and services.

Trump’s tariffs are threatening us with this fate again. Here’s why. Continue reading →