Mark Warner’s Centrist Democratic Solutions for What Ails Us

Sen. Mark R. Warner. Photo credit: Virginia Business
The Thinker: Sen. Mark R. Warner. Photo credit: Virginia Business

by James A. Bacon

As governor of Virginia between 2002 and 2006, Sen. Mark R. Warner thought deeply and seriously about economic development in an era of globalization and knowledge-intensive industry. Although he is far less visible to Virginians since his election to the U.S. Senate in 2008, he continues ask what it takes for the United States — and Virginia — to adapt and thrive in a competitive global economy. In a lengthy spread in Virginia Business magazine, he expounds upon his thinking about what he calls Capitalism 2.0.

A primary focus is the changing nature of work, and the rise of the “gig” economy, in which people increasingly work on demand, as epitomized by drivers for the ride-hailing company Uber. The super-flexible work model suits the needs of many employers and employees but it creates challenges because current laws and regulations governing the labor market don’t fit the new jobs very well.

“What is the social contract going to be in the 21st century?” he asks.

Our current system basically says there are two classifications of work: You’re an independent contractor, or you’re an employee, and there are certain freedoms or responsibilities that come with each of those classifications. I think there probably is going to need to be either a third or fourth-level classification, and there may be a whole ability to create a set of benefits that will be more portable with you.

As one of those who fall into a nontraditional classification, I couldn’t agree more. Warner is asking important questions, and it’s encouraging to know that someone in Congress is thinking about them.

As a political centrist, Warner does not gravitate toward populist, Bernie Sanders-like solutions (free college for all, to be paid for with taxes on millionaires and billionaires). He worries about the $19 trillion national debt and the budget deficit that is growing again — “we are sitting on a ticking bomb” — and he embraces centrist solutions that entails both tax reform that yields higher revenues and entitlement reform that cuts long-term spending.

Warner also is clear-eyed enough to recognize that some of the legislation he supported like the Affordable Care Act and the Dodd-Frank Act still need work. Obamacare, he says, creates a “huge cliff” between part-time work at 29 hours and full-time work at 30 hours, at which point companies must provide health insurance. The result: Companies don’t want to “tip the scales” to full-time hours, thus dampening the creation of full-time jobs. Likewise, the Dodd-Frank Act imposes tremendous regulatory costs on community banks even though they do not contribute to the systemic financial problems that Congress wanted to guard against. The result: fewer community banks.

But Warner remains a Democrat, and he looks to government to solve society’s ills. A classic case is his take on the burgeoning student loan crisis. Like everyone else, he views the increasing debt load of college students — averaging $26,000 per student in Virginia among those who borrow to pay their college bills — as a drag on the economy and a hardship on the students themselves. What solutions does he propose? Use the power of government to make it easier to borrow money!

Thus, Warner introduced one bill that would allow companies to offer as an employee benefit the ability to pay down student debt with pretax dollars. In other words, share the burden of debt repayment with the taxpayer! Alas, history has shown that making it easier for students to borrow just allows colleges and universities to raise tuition, fees and expenses more aggressively than before. (To be fair: Warner had Republican partners backing the bill, which indicates that Democrats are not the only ones who instinctively turn to government solutions.)

Another bill would streamline the process for students to enroll in income-based repayment programs for federal loans. Warner also believes that federal Pell grants for low-income students should be offered to high school students taking dual-enrollment classes. More free stuff. Call it Bernie Sanders Lite!

The underlying problem in higher education is out-of-control costs, as Warner is well aware:

[When I went to school the] cost of a year of higher education was about the cost of a starter car, a basic Ford, both about $5,000. Now cars are maybe $15,000. You go to a private school today, it’s $50,000. This has kind of gotten out of whack.

Warner has proposed creating more user-friendly websites that would allow would-be college students to compare costs, the average length of time it takes to graduate, how much graduates earn, and the like. Putting more information in the hands of consumers is always a good idea, but the reason that costs are out of control is not insufficient consumer information — there is plenty data available on the Internet — but the availability of easy, subsidized credit.

The Senator also takes it as an article of faith that the U.S. should be investing more in human capital. “In capitalism today,” he says, “if you invest in a piece of equipment, it’s an asset. If you invest in a human being in terms of pay or training, that’s a cost. Is there a way to rebalance that a little bit?

What he doesn’t do (at least not in this interview) is justify the sentiment that the U.S. needs to be investing more in human capital, as opposed to, say, making better use of the massive sums we already invest, often ineffectually, in K-12 education, higher ed, and job training. As with health care, I would argue, the U.S. invests more and gets less for our human-capital “investments” than most other economically advanced nations. Among the most disastrous conceits is that everyone who wants to go to college should be enabled to do so, regardless of how well or how ill prepared they are, and regardless of how many middle-class jobs might go begging because people are unwilling or unable to get the necessary technical training.

While I disagree with Warner on these important points, I applaud him for a thoughtful take on topics in a nation that seems determinedly un-serious about public policy. At least Warner asks good questions, seems open to empirical evidence on what works and what doesn’t, and refrains from demonizing those who disagree with him. In an increasingly polarized country, he looks for win-win approaches to problems. And that’s saying something.

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6 responses to “Mark Warner’s Centrist Democratic Solutions for What Ails Us”

  1. LarrytheG Avatar

    I disagree with Warner on the college loan stuff also … but where he is coming from is other countries that offer basic college education for free.. no sports, off campus… no frills.. just the degree and for the most part – a degree that is in demand in the economy.

    That’s called “socialism” by some in this country but the sad realty is that all those folks, many of whom are Trump supporters still live in a world where they think a high school education should get them a nice factory job so they can buy a home, own a car, etc and those jobs are fewer and fewer.

    And Mark Warner is totally correct – the new economy is one in which no employers is going to take care of you and provide you with a lifetime career.. it’s up to you to get the education that will give you a decent job and you better have not only a portable 401K but portable health insurance.

    what’s the role of govt in this new world?

    Warner has his own ideas and when he uses the word “safety net” – he means social security and Medicare and what taxpayers do with workers who did not set aside social security and medicare when they worked?

    do we just let them live in cardboard boxes and get turned away at ERs when they get sick or do we have some other idea about how to deal with it?

    Give Warner credit – he thinks quite a bit more about this that all the POTUS candidates put together.

    Finally – one can disagree with Warner but what would you offer instead?

  2. LarrytheG Avatar

    re: ” Mark Warner’s Centrist Democratic Solutions to What Ails Us”

    I’m amused the way you word your titles sometimes.

    In this case – I end up wondering – what other “non-centrist” . non-Democratic “solutions” are in the realm of consideration….

    what other politicians that represent Virginia have had thoughts on the issue other than Terry McAuliffe?

    How about in the Virginia GA? who in that August body has posited their thoughts on this?

    How about those who represent Virginia in Congress?

    we’re into the 21st century up to up eye balls and manufacturing and coal mining, textiles and furniture manufacturing has gone belly up… and what have the elected representatives in Va have offered as a path forward?

    what’s their plan?

    what should we be telling our young folk in school?

    what should we be doing in our schools to prepare the young folk for when they graduate?

    I credit McAuliffe, Warner and Kaine with having enough backbone to talk about it .

    I do not think they have all the answers by a long shot but I think they are on the right track.

    where are the rest of our elected?

  3. You quote Warner as saying something I can’t get out of my head: “In capitalism today,” he says, “if you invest in a piece of equipment, it’s an asset. If you invest in a human being in terms of pay or training, that’s a cost. Is there a way to rebalance that a little bit?”

    Now, playing with that concept a bit, what if federal tax law actually allowed a business to “invest” in an employee’s education, capitalize it on the books, and depreciate it over the employed “life” of the employee (assuming, and conditioned upon, the employee remaining with that employer? We’d have a whole new attitude towards employee retention, for one thing. We might even have a way to deal with college education costs, as an initial “investment” in the newly hired employee.

    Just thinking out loud.

  4. Cville Resident Avatar
    Cville Resident

    I thought you all might find this commentary on the “contingent” worker to be interesting:

  5. LarrytheG Avatar

    Good article – and I’m impressed by Charlottesville Tomorrow for discussing a fairly meaty modern-day topic usually only seen in top tier media like WSJ.

    Jobs where one has a career with a company that provides health insurance, retirement contributions and pays FICA taxes that provides Social Security and Medicare (Part A) are slowly eroding away leaving fewer and fewer companies that do this except for government jobs – Federal, state and local – and the military – which is where many seek “shelter” these days.

    Acbar posits that perhaps employees should be treated as “owned assets” to be trained, maintained and “kept” but in the 21st century – few company’s business model are secure without challenges from a rapidly changing marketplace where their product or service can be made obsolete almost overnight by some “app” and the skills the “kept” employee has are no longer needed – no longer produce anything the business needs and in fact, a cost to it’s continued operation.

    Today – when companies change or go out of business, we often hear the term “re-training” more and more – for the employees. That’s the stark reality of a skill – made obsolete

    This means , for instance, a 45 year old with 20 years at one job – all of a sudden – no longer has that job, nor health insurance, nor retirement contributions, nor money going into FICA for Social Security and Medicare.

    Their follow-on job can often be a “free-lance” job per the CT article or as an independent contractor (a 1099 rather than w2) where you get paid for the work – but no Federal tax is withheld nor is FICA tax withheld and both of these are due at tax time and can easily be 20-40% of what you “earned”.

    Many first time Uber drivers find this out when they do their taxes – that they “OWE” big time.

    In order for Uber drivers and others like them to survive financially – they have to claim Schedule C expenses – for the maintenance and operational costs of their “assets” (their cars) as well as what they pay for health insurance and their retirement (which many do not have, cannot afford).

    All of these things that employers used to take care of for W2 wage-earners – now fall directly to the worker and tax time becomes a high stakes financial affair that may cause them to rethink the idea of being an Uber driver at all.

    These are the things that Senator Warner is taking about – basically trying to get a conversation started in terms of what govt policy should be or not in addressing these changes to the way we work and earn a living and the CT article actually has some suggestions… for individuals and policy.

    And these are the things that we hearing virtually nothing about from our other Virginia elected.

    good article – thank you for posting it and perhaps it will spur more discussion on this pretty important topic that is actually affecting our politics tangentially these days as many workers want their “jobs” back but they’re never coming back.

  6. TooManyTaxes Avatar

    I’ve worked on a 1099 basis with a number of law firms (as well as billing my own clients directly) since mid-2005. And I pay my taxes, including 1.5 times the standard Social Security rate. It’s a mixed bag. I get a lot of freedom and flexibility, most especially as to billing rates; can deduct all my business expenses (no 2% of AGI cap); and avoid the often evil backstabbing that permeates most larger law firms. But I must be my own back office and live with cash flow ups and downs. And, bottom line, I probably make less money this way that if I were a member of, or even employed by, a law firm.

    But, truth be told, the various law firms I have dealt with, and deal with, have been unable, with me, to assemble an “inside” relationship that works for both of us. I suspect that my situation is not unique and that many other 1099s and companies have not been able to develop a win-win employment scenario. So we use 1099 as a reasonable alternative.

    I’m sure lots of companies use 1099s to save money. And the many government mandates that kick in based on employer-employee relationships pushes many companies to use 1099 workers. Even with regular employees, many businesses keep hours down to avoid the ACA mandate or overtime.

    I think Warner’s call for a national discussion is probably a good idea. But I do fear that government solutions will make things worse for 1099 workers.

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