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How to Move Working Families Forward

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There is less than one week to go before the so-called Super Committee must provide a framework to cut $1.2 to $1.5 trillion from the federal budget over the next 10 years. But from the looks of it, the bi-partisan gang of 12 is far from cutting a deal.

The partisan politics being played out today are reminiscent of those from the debt-ceiling debate this summer, which resulted in America losing its triple-A rating on government debt for the first time since being anointed with that status.

Never before has this country seen such a polarizing divide between republicans and democrats in Congress. As a result, most Americans have lost confidence in our elected officials to lead the country and more importantly, nurse the U.S. economy back to health.

This breakdown in the U.S. political system is the jumping off point for the new book Moving Working Families Forward: Third Way Policies That Can Work, in which authors Robert Cherry and Robert Lerman offer a set of solutions to seven of the country's biggest problem areas using a set of market-oriented policies that are neither liberal nor conservative.

Cherry, also a professor of economics at CUNY, joined The Daily Ticker's Aaron Task to discuss his solutions for two of the seven areas that substantially hurt working families in this country: housing and federal taxes.

How to Reenergize Housing Markets

In order for the U.S. to fully recover from the 'great recession' and for robust job creation to take place, the country must address the issue that got us into this mess in the first place: housing.

Cherry's solution is for the government to buy up 1 million homes to turn into subsidized rental properties.

"It is a win-win-win policy: It is a win for homeowners because it will give them confidence that the housing market has bottomed; it is a win for renters who will have more affordable rental units available; and it is a win for government because these units will be cheaper than Section 8 units subsidizes through the private sector and much cheaper than those funded through Low-Income Tax Credits, a honey pot for homebuilders who get huge subsidizes for the few below-market rent units they build," he writes.

Cherry is adamant that this solution is not a government bailout for homeowners at the taxpayers' expense. There are no principal write-downs involved and no debt would be forgiven.

How to Target Tax Cuts to Those Who Need Them Most

There may be no other topic so hotly debated these days as U.S. tax policy.

If tax policy is to be revamped, it must be made more efficient and distortions must be eliminated from the system, says Cherry.

"Republicans propose a variety of policies to lower business costs as a means of stimulating private sector employment," he writes. "Only policies to stimulate demand, however, can hope to significantly increase employment. The problem, however, is that Obama has not targeted tax cuts to the families that most need them and will increase their spending."

Currently the payroll tax cuts incentivize those who do not need the money and thus will only slightly increase their spending with the tax cut, says Cherry. The Moving Working Families Solution is to target tax cuts to the impoverished and lower-middle class.

"Today, many single mothers are in the phase out range of subsidy programs. When they earn more money, their food stamps are reduced, their rent subsidies are reduced, their childcare subsidies and their Earned Income Tax Credits are reduced. As a result, their net income may grow very little when their wage income rises," he writes. "In addition, since these programs are based on family income, if they marry a working man, their combined joint income will cause them to lose thousands of dollars of cash benefits. The Simplified Family Credit along with income average recommendations go a long way to rectifying these distortions and inefficiencies."

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