Improving Manufacturing Economic Conditions in the United States
Manufacturers cannot cover the spiraling healthcare benefit
costs!
There are many
causes of the U.S. Manufacturing Industry has shrunk to its lowest percentage revenue
level. Still, the leading cause
is the healthcare industry's growth and how the U.S. pays for it, and the
manufacturers cannot cover the spiraling healthcare benefit costs.
The U.S. manufacturing industry is at its lowest in modern
history, now at 11% of GDP. As such, there is no comparison between these two
industries, but on the basis of the healthcare cost and taxes, there is a
difference between the two industries in terms of changing GDP and revenue
level as well.
USA
healthcare sector is in many ways the most substantial part of the United
States economy. It is a fundamental part of people's lives, supporting their
health and well-being. Moreover, it matters because of its economic size and
budgetary implications. The healthcare sector now employs 11 percent of
American workers (Bureau of Labor Statistics [BLS] 1980–2019b and authors'
calculations) and accounts for 24 percent of government spending (Centers for
Medicare & Medicaid Services [CMS] 1987–2018; Bureau of Economic Analysis
1987–2018; authors' calculations).[1] Health insurance is the most significant
component (26 percent) of nonwage compensation (BLS 2019b), and health care is
one of the largest categories of consumer spending (8.1 percent of consumer
expenditures; BLS 2019a). The United States has a healthcare system that primarily
consists of private providers and private insurance, but as health care has
become a larger part of the economy, a higher share of healthcare funding. As
of 2018, 34 percent of Americans received their health care via government
insurance or direct public provision
A simple comparison of the percentage change in the
healthcare industry's GDP versus the manufacturing industry shows a direct
correlation between the growth of one and the shrinkage of the other,
percentage point for a percentage point. No other industry sector,except the
manufacturing industry, has seen such a decline during this time. The U.S. is
the only industrial country where the employer directly pays a substantial
share of employees' health care benefits. In other nations, citizens themselves
and businesses foot the bill through income taxes.
U.S. payment of health care costs by employers causes the
loss of U.S. manufacturing companies and manufacturing jobs. Health care costs,
both primary and secondary, are passed during each step to the next contributor
in the manufacturing process; think of it as value-added tax, moving the health
care benefit costs to the next purchaser of services or goods. But each time
the cost is passed on to another manufacturer in the supply chain, there is an
additional markup for profit; therefore, the $3.6 trillion for healthcare is
included in manufacturing costs. No other industry has as many links in the
supply chain for cost markups or has international competition.
A manufactured good is made through several steps to get to the
finished product, with each step adding the subsequent employee healthcare
benefits cost to the finished product. These costs are referred to as indirect
healthcare costs.
The providers and insurance
companies violated the tax laws, antitrust laws, federal and state kickback
laws and destroyed the nations' manufacturing industry. Price discrimination
concept also prevails in it in terms of the different amount
collected from private-pay patients, insured v. uninsured, different amounts
collected from different insurance companies, the kickback amounts are
separately negotiated; their different amount collected, within same insurance
contract, for different services, this is what is known as cost-shifting, many
times the charges reflect the demographics of the insured members not the
average cost to price ratios of each service, this is especially true when
increasing the charges for the elderly where the government picks up the
charges.
The amounts collected from different insurance companies are different due to
the amounts of the kickbacks paid. This is done to get the insurance companies
insured members and have the insured members boycott the competitive providers.
This is why the kickbacks are called trade secrets and hidden from competitors.
The competitors often are lower in price, but with the providers' kickbacks,
the insurance company gets a better financial deal. The charges do not reflect
the actual price, except for the uninsured, but the charges are used to reflect
the insurance companies' premiums to their customers, the employers.
The decline of the manufacturing sector in the U.S. economy
is even more evident looking back further in time. In 1998, there were 18.1
million manufacturing jobs, 11% of total jobs, and 5.6 million more than in
2018. Also, while total GDP increased 47% from 1998 to 2018, the manufacturing
sector increased just 5%.
All
of these factorshas shrunk the USA Manufacturing industry to its lowest
percentage revenue level.
Ways to fix the U.S. Manufacturing
Industry in terms of percentage revenue level:
Each group must sell its products above its break-even point of costs to stay in business and then add amounts to cover its profits and taxes. By eliminating the direct and indirect employer's benefit costs, the final finished good's break-even point is much lower and can be competitively priced.
|
 Competitive Pricing
|
Discussion of how new tax proposal
affects the break-even point of an individual in terms of competitive pricing
and FICA taxes.
All international
manufacturing competitors have eliminated employer-paid health care costs. For
the United States to compete, we must eradicate employer-paid health care
insurance costs.
When
these recommendations for a single-payer system and revised tax system are
implemented there will be many changes taking place, some good and some bad. On
the good side, everyone will be covered for health care, people with
pre-existing conditions will be covered and people will have their choice of healthcare
provider. Employees with existing illnesses or disabling skills will be able to
get jobs and hold on to them with their skills to produce. Themoney allocated
to the employees for health care will be paid to them in the form of higher
wages, about $10 thousand per employee, plus FICA taxes. The salary increase
will be the biggest recorded in our nation's history while creating a huge
consumer group flush with money. The half-million personal bankruptcies due to
health care costs will be eliminated. The 25 percent of administrative health
care expenditures for billing and collecting will be eliminated. The national
health care expenditure will be cut in half or lower. The trade deficit will be
eliminated. The National Debt will be lowered. With universal healthcare, all
employees will have greater freedom of choice of where they work and not have
to worry about changing jobs with a loss of medical coverage. The state's
Medicaid expenditures will be eliminated and should immediately be moved to
offset the cost of free higher education, like every other industrial
country.
On
the downside the bad news is based on a comparison with the insurance companies'
employees per capita of Canada, 250,000 sales jobs will be lost, there is no
need for salespeople; these sales jobs should easily be moved to the
manufacturing industry. Taxes paid for The
Federal Insurance Contributions Act (FICA) will be substituted by
a flat tax added to the corporate and personal income rates. The total FICA tax is
15.3%. That percentage is given to the employee's gross pay.
New Tax Proposal –
Calculations
|
Old Tax System |
New Tax System |
|||||
|
U.S. Dollar,
Millions |
|
|
2017 |
Extra Revenues - 3% |
||
|
Taxes on income, profits
and capital gains of individuals |
|
2,025,518 |
2,039,144 |
2,083,564 |
44,420 |
|
|
On income and profits of
individuals |
Individual income tax
federal |
|
1,477,863 |
1,480,663 |
1,525,083 |
44,420 |
|
Individual income tax
state and local govt. |
|
348,727 |
361,411 |
361,411 |
0 |
|
|
On capital gains of
individuals |
Capital gains federal |
|
160,949 |
158,405 |
158,405 |
0 |
|
Capital gains tax state
and local govt. |
|
37,979 |
38,665 |
38,665 |
0 |
|
The New tax
system adds $15,000 to cover the addition of the average health care employee
expense and the FICA taxes. The $15,000 is now taxable income; therefore, the
United States' tax revenues have increased. The lower- and middle-income
classes see an increase in their take-home wages. The New tax rates are the 2017
Tax rates plus 3% for each tax group. Although this seems a tax increase, it is
lower for the lower- and middle-income groups because it has eliminated the
7.5% FICA taxes; therefore, it is lowering their taxes by 4.5%. The upper-income
groups will have a 3% increase. The amount of tax revenues will be
substantially increasedbecause all individuals will be paying taxes on
healthcare costs and FICA taxes; all lower- and middle-income groups will be
taking home larger paychecks but pay more significant taxes.
The
employer and employee each pay 7.65%. Here is the breakdown of these taxes:
Within
that 7.65%, the OASDI (Old Age, Survivors, and Disability program, AKA, Social
Security) portion is 6.2%, up to the annual maximum wages subject to Social
Security.
The
Medicare portion is 1.45% for each employee on all employee earnings.
The
new amount of the flat tax will have to be determined by the General Accounting
Office and should be added on all earned income tax levels, ensuring all people
pay their fair amount of taxes. The medical portion should only rise 3% to 4%,
raising each contribution to 10.65% to 11.65%. Included will be the government's
obligation to our military veterans. The rise in the amount collected for the
new taxes will be far lower than each person's increase of income.
Our
progressive personal income tax system is fair. We realize certain individuals
will always make more than others, allowed to keep most of it which is a strong
motivator for success. We also realize that when more is given to an individual
under our capitalistic system, a strong financial system is required for
maintaining our freedom, therefore in the short run more has to be given to the
government for the maintenance of the country, maintenance of our capitalistic
system and the benefit of its citizens who make it possible. In the future we will
pass legislation for the maintenance of a balanced budget. When the transition is finished, we must
allow market forces to stabilize all industries and keep government
interference to a minimum.
The
country must make the changes advocated, or we will be facing financial ruin.
Manufacturing creates wealth. Without a strong manufacturing industry, we will
become a third-world country, with our primary industry becoming agriculture. Our
products' cost will keep rising because other rich nations will be buying our
products and inflate our costs.
A
massive stimulus program will give employees more money directly and the first
steps to rebuild the United States manufacturing industry. The employers are to
cancel all health insurance contracts for employees; the employers are to pay
each employee an average salary increase of the amount allotted for health care
benefits. Medicare is going to cover all medical expenses at the rates already
determined. Every patient will give the health care provider their Social
Security Number or their guardians S.S. #. Internal Revenue Service will freeze
all assets of health insurance companies while audits are in process.
The
highest-rated government-sponsored health care system is the United Kingdom's;
it is least expensive and provides good service. This system controls its
doctors' salaries, which will have to be reduced in this country. Moving to
this health care system means the U.S. national health care costs will be$1.5
trillion. This will cover medical services, medicines, hearing aids and
glasses.
In a nutshell. To
improve the quality of our lives, substantially lower the nation's healthcare
costs, cover all individuals, including those with existing conditions, improve
employees' salaries, make our manufacturing industry competitive with other
countries, we must eliminate employer-paid health care benefits and have a
single-payer healthcare system, with universal coverage and change the tax
system to pay for healthcare and Social Security benefits.
Future
trends in USA Manufacturing Industry
2020 has been a year like no other in recent history, and the
U.S. manufacturing industry has felt the impact. Along with declines in
production, forced shutdowns in the early days of the pandemic caused a
significant dip in manufacturing employment levels. In our 2021 outlook, we
look at the future of manufacturing and outline four trends for the year ahead.
Looking ahead to 2021, the recovery may take longer to reach pre-pandemic levels, as Deloitte projections based on the Oxford Economic Model (OEM) anticipate a decline in annual manufacturing GDP growth levels for 2020-2021, with a forecast of -6.3% for 2020 and 3.5% for 2021.
Reeling from the effects of a global pandemic-driven shutdown, U.S. industrial production (-16.5% year over year) and U.S. total factory orders (-22.7% year over year) saw a steep decline in April, followed by suppressed improvement. The current U.S. Industrial Production Index stands at 105.7 in December (the most recent month available), a substantial dip from its pre-pandemic level of 110. Production and order levels are still below 2019 levels, but the trajectory of the decline has slowed. Total industrial capacity utilization improved to 74.5% in December, up from 64.1% in April; however, it's still below pre-pandemic levels of 77%.
In 2021, there are four manufacturing industry trends which are: navigating disruption in the manufacturing industry, digital investment, supply chain resilience, adapting to the new workplace plays a vital role in the success of the USA manufacturing industry. How these trends help the USA manufacturing industry explain below:
The year ahead (2021)
will vary for manufacturers depending on where they have felt the greatest
impact from the pandemic. For some, it will focus on rebuilding lost revenue
streams; for others, it could require recalibrating supply networks to serve
different market demands. But for all manufacturers, it should include a
commitment to increasing agility in operations. By continuing to invest in
digital initiatives across their production process and supply network,
manufacturers can respond to the disruptions caused by the pandemic and build
resilience that can enable them to thrive.
Roy J. Meidinger
14893 American Eagle Ct.
Fort Myers, Fl. 33912
Email RoyJMeidinger@comcast.net
Tel No. 954-790-9407
References:
https://www2.deloitte.com/us/en/pages/energy-and-resources/articles/manufacturing-industry-outlook.html
https://www.brookings.edu/research/a-dozen-facts-about-the-economics-of-the-u-s-health-care-system/
Comments
Post a Comment