There is something I had meant to mention in my last post plus some new information which I thought I should add. First, the old. It was the collapse of Lehman Brothers that was the immediate cause of our current economic crisis. Something that has come out relatively recently is that Lehman Bros. had engaged in what is called a Repo 105 maneuver (I hadn't heard of it before either). What that means is that they underwent an audit by one of the big accounting firms and prior to that audit they sold $50 billion in bad assets to another company and then repurchased them after the audit. In short, they made a paper or phony sale in order to hide their weakness. A former Lehman V.P. has testified that in May, 2008 he sent a letter to top executives warning them of concerns he had about their accounting practices and he was fired immediately thereafter. The company went under September 15, 2008. Think this doesn't affect you? A California representative has said that 40 municipalities across the nation lost $1.7 billion in total with the collapse of Lehman. All this is found in the LA Times, 4/21/10.
In today's LA Times is the report that the former CEO of KB Homes, one of the west's largest homebuilders, was just found guilty of four felonies related to backdating stock options. According to LA Times business columnist Tom Petruno, illegal backdating has been found at hundreds of companies (and who knows how many instances haven't been found).
Although I haven't read the books yet, I have seen the authors interviewed and I would recommend books by Michael Lewis (the title escapes me, but it is #1 on non-fiction best seller lists) and 13 Bankers by Simon Johnson and another fellow, I think his name is Kwak. They had an extensive interview on Bill Moyers Journal on PBS that was aired April 16, 2010 and I would recommend it for anyone who is interested. Also, although it is older and covers corporate misdeeds prior to the 2008 meltdown, a good read is Pigs At the Trough by Arianna Huffington.
Thursday, April 22, 2010
Wednesday, April 21, 2010
OBSERVATIONS, MUSINGS, AND RANTS
Tea Party Foolishness
Since August the Tea Party Movement seems to have dominated much of the national political discussion, despite the fact that their main premise is incorrect and their positions are often illogical and sometimes even inconsistent. Additionally, we have started to see such nonsense as people claiming that extending unemployment benefits creates dependency and that these "lazy" people are bankrupting our country. This is all part of the old Reagan trick of blaming the poor for societal problems and saying that government policies to help the poor do not help, but hurt our economy.
I have discussed the whole issue of income inequality previously, but it is probably useful to return again to some main points, especially since more information is available since I wrote last year. Regarding the charge that we are taxed too much already, I urge anyone who is interested to google income tax rates and check out the taxfoundation.org website. It gives all the tax tables since the inception of the income tax in 1917. Income taxes right now are at their lowest in about 75 years. From 1964 to 1981, the top (or marginal) rate was 70%. It was lowered to 50% in 1986, and then to 38.5% in 1987. It is now 35%. So, all during Reagan's presidency, the tax rate was higher than it is now. When the Bush tax cuts expire, the top rate will go up to 39.5%, or one percentage point higher than the last two years of Reagan. Likewise, capital gains are only 15%, down from 20% and, earlier, 25%. Also, the capital gains rate was extended to cover dividends under Bush, a new feature. This is one reason why in 2009 the top 400 income earners paid an average of only 17% on their income. Thus, as it should be clear, our income tax rates right now are at almost historic lows and the tea party movement's main complaint is, to put a simply, a giant load of crap. Recent reports are that either 47% or 49% (I have seen both figures) will not have to pay any taxes this year. As an added point, you should be aware that Reagan sponsored what was called then the largest tax increase in history (in dollar terms, not percentage) by increasing payroll taxes to keep Social Security afloat. Payroll taxes are not as progressive as income taxes, so that this tax increase hit the poor and middle classes more than the rich, just as Bush's tax cuts give much greater benefit to the rich than the middle class or poor.
A major result of these tax policies has been an incredible increase in inequality. When adjusted for inflation, average wages are actually down by about 12% when compared to 1973 (this is the date usually used) while the top 10%, 1% and one tenth of one percent has increased tremendously. The smaller the group, the larger their increase. While CEO's used to get about 35 times the income of the average wage earners in their companies, they now get about 350 times as much (again, there are differing figures here, but this is representative). Income inequality in the US is now the worst it has been since about 1920 (pardon the bold, but this word processor on this site has started defaulting to it even though I keep trying to change it back). Depending on whether you consider Russia a developed country, we have the worst income inequality of any developed country in the world, about on par with Mexico. According to a recent study (The Spirit Level by Wilkinson and Pickett), greater inequality means higher rates of teen pregnancy, infant mortality, obesity, mental illness, drug use, imprisonment, and homicide. It also means less economic growth and more economic instability. Here are the reasons why.
It is a well known economic fact that the middle class and the poor spend a greater portion of their income than does the rich; after all there is only so much you can spend. Let's look at one of my favorite examples--hedge fund managers. First, they make fabulous amounts of money and yet pay at the capital gains rate of only 15%. A recent NY Times article found that the top 25 hedge fund managers made $25 + billion in 2009, or an average of a little more than one billion each. FYI, the low was $350 million and the high was $4 billion. These 25 individuals made as much as 500,000 people who made $50,000 each. 25=500,000. Imagine if you made $1 billion in one year. Could you spend it all? The fact is that they can't and they don't. So what do they do? They speculate. It is the super rich who drive the speculative markets, whether it be real estate, futures trading, stocks, or derivatives. Remember that in 1987 Reagan lowered the top tax rate to 38.5%? What happened two years later? The S&L debacle due to a bubble in real estate collapsing. If those hedge fund managers had to pay the old tax rate of 70%, those poor dears would have to get by on an averate of $300 million a year. Oh, the horror! Government revenue just from this one small group of 25 would increase by $14 billion per year.
Now, let's look at some obscene pay in other areas. First, you should know that the financial sector of our economy has gone from about 12% of our economy to 21% and, even more telling, the financial sector accounts for 45% of the profits in the economy. Wall St., just from 2003 to 2006, paid $121 billion to its executives (Dylan Ratigan Show, 4/7/10) Just since January of this year, Goldman Sachs has awarded $21 billion in bonuses to its top executives (Manchester Guardian, 4/19/10). I think it is safe to say that in the last decade, Wall St. executives have made over $200 billion. What do they get that money for? Making loans to businesses, investing in new technologies, helping our economy? No, they get that money mostly for gambling and conning other people out of their money. A Goldman Sachs executive testified recently that while they were selling derivatives to investors and assuring them they were safe, they knew they were risky and purchased credit default swaps, betting that they would go down in value. And this isn't even what they were indicted for. Of the $181 billion that went to AIG in TARP funds, at least $40 billion was pass through money to pay off Goldman Sachs for the credit default swaps they bought. If you think this is an isolated case, you haven't been paying attention to the news. Did you know, for example, that two different people were indicted recently for Ponzi schemes that took $1 and $3 billion respectively from investors? It was minor news because while that would have been a mjaor event in the past, now it has been dwarfed by Bernie Madoff, and Wall St. scams.
Here's another example. A former head of United Health Care made $1.2 billion, mostly in stock options, in about 7 years. Because it was discovered that many of these options were illegally backdated, he had to pay a fine of $400 million, leaving him with only $800 million. Since these were stock options, they would be covered by the capital gains rate and taxed at only 15%. That fine, by the way, went to the government, not to stock holders or, heaven forbid, those buying premiums from United Health care. The $1.2 billion he collected would have paid for the premiums of almost 30,000 people a year for 7 years, assuming a premium of $500 per month.
Now, let's take a look at those awful, lazy people getting unemployment benefits. The average unemployment check is $335 per week, or $17,420 per year. A recent story said that 44% of those getting unemployment had been on unemployment for 6 months, and 30% for at least a year. Since there are about 11 million unemployed, that means about 3.3 million were on unemployment for at least one year during 2009. Going back to the hedge fund managers, those 25 people made as much as between 1.4 and 1.5 million people on unemployment, or almost half of those who had been unemployed for at least a year. If those hedge fund managers paid at the old 70% rate, their income tax alone would have paid for about 1 million of the long term unemployed. I hope this gives you some idea of the extent of the income inequality in this country and how our system is set up to reward the super rich, many of whom contribute very little to our ec0onomy.
Now, let's looks at the charge that all these people on unemployment would become addicted to the "free money." This is such nonsense that one hardly knows where to begin. Let's look at the Depression. President Hoover reportedly said something to the effect that all the men selling apples on the street was a sign that more people were going into business for themselves. He also was adamantly opposed to any governmental relief such as unemployment payments. This, as much as almost anything, was responsible for plunging the nation deeper into depression. With no income, they couldn't buy anything, so more businesses went out of business, leading to more unemployment and so on. It also led to more foreclosures which led to a tremendous drop in property values which led to more bank failures, which led to more unemployment whilch led to , you get the idea. Unemployment payments help stop a deflationary spiral. They keep the recession from getting much worse. During the 90's, when Clinton was president, the unemployment rate at one point dropped to below 4%, which as economists tell us, is full employment since there are always people moving, changing jobs, businesses going out of business, etc. so that there will always be some unemployment. Why would the population gladly embrace employment then, but spurn it now for $335 per week? Secondly, psychologists will tell you that for many people, their job defines their worth and losing their job greatly reduces their self-esteem. It is considered a major stressor in life comparable to death of a loved one or a messy divorce. Thirdly, it completely ignores today's present economic situation. There are over 5 applicants for every job opening, on average. It's not a lack of people trying, but a lack of jobs available.
Another tea party mantra is smaller government and reduce the deficit. It's obvious that most of these people have never bothered to learn anything about the government. It's astounding to me that any information you want is just a few clicks away on the internet, but these people and many others never bother to find out the facts. Defense and homeland security cost about $715 billion, or about 20% of the budget, and half of the so-called discretionary budget. Other major expenditures (by percentage) social security 20%, Medicare/Medicaid 21%, interest on the debt, 6%, safety net programs (food stamps, unemployment, e.g.) 14%, and federal pensions and veterans benefits 7%. These programs take up 92% of the total budget. If you really want to reduce government you need to cut defense spending, medicare/medicaid, and social security. Yet these same people don't want to cut these things. Revenues plunged to 15% of GDP, the lowest it has been in decades. The solution is simple, get people back to work, increase taxes on the rich ($1 million per year) and super rich ($10 million per year) and we will probably have to make some adjustments to Medicare and Social Security. Remember this, Herbert Hoover passionately believed in small government and balanced budgets and those policies produced the worst depression in US history. Had we followed the same policies this time, we probably would have had an even worse depression now than in the 30's.
Since August the Tea Party Movement seems to have dominated much of the national political discussion, despite the fact that their main premise is incorrect and their positions are often illogical and sometimes even inconsistent. Additionally, we have started to see such nonsense as people claiming that extending unemployment benefits creates dependency and that these "lazy" people are bankrupting our country. This is all part of the old Reagan trick of blaming the poor for societal problems and saying that government policies to help the poor do not help, but hurt our economy.
I have discussed the whole issue of income inequality previously, but it is probably useful to return again to some main points, especially since more information is available since I wrote last year. Regarding the charge that we are taxed too much already, I urge anyone who is interested to google income tax rates and check out the taxfoundation.org website. It gives all the tax tables since the inception of the income tax in 1917. Income taxes right now are at their lowest in about 75 years. From 1964 to 1981, the top (or marginal) rate was 70%. It was lowered to 50% in 1986, and then to 38.5% in 1987. It is now 35%. So, all during Reagan's presidency, the tax rate was higher than it is now. When the Bush tax cuts expire, the top rate will go up to 39.5%, or one percentage point higher than the last two years of Reagan. Likewise, capital gains are only 15%, down from 20% and, earlier, 25%. Also, the capital gains rate was extended to cover dividends under Bush, a new feature. This is one reason why in 2009 the top 400 income earners paid an average of only 17% on their income. Thus, as it should be clear, our income tax rates right now are at almost historic lows and the tea party movement's main complaint is, to put a simply, a giant load of crap. Recent reports are that either 47% or 49% (I have seen both figures) will not have to pay any taxes this year. As an added point, you should be aware that Reagan sponsored what was called then the largest tax increase in history (in dollar terms, not percentage) by increasing payroll taxes to keep Social Security afloat. Payroll taxes are not as progressive as income taxes, so that this tax increase hit the poor and middle classes more than the rich, just as Bush's tax cuts give much greater benefit to the rich than the middle class or poor.
A major result of these tax policies has been an incredible increase in inequality. When adjusted for inflation, average wages are actually down by about 12% when compared to 1973 (this is the date usually used) while the top 10%, 1% and one tenth of one percent has increased tremendously. The smaller the group, the larger their increase. While CEO's used to get about 35 times the income of the average wage earners in their companies, they now get about 350 times as much (again, there are differing figures here, but this is representative). Income inequality in the US is now the worst it has been since about 1920 (pardon the bold, but this word processor on this site has started defaulting to it even though I keep trying to change it back). Depending on whether you consider Russia a developed country, we have the worst income inequality of any developed country in the world, about on par with Mexico. According to a recent study (The Spirit Level by Wilkinson and Pickett), greater inequality means higher rates of teen pregnancy, infant mortality, obesity, mental illness, drug use, imprisonment, and homicide. It also means less economic growth and more economic instability. Here are the reasons why.
It is a well known economic fact that the middle class and the poor spend a greater portion of their income than does the rich; after all there is only so much you can spend. Let's look at one of my favorite examples--hedge fund managers. First, they make fabulous amounts of money and yet pay at the capital gains rate of only 15%. A recent NY Times article found that the top 25 hedge fund managers made $25 + billion in 2009, or an average of a little more than one billion each. FYI, the low was $350 million and the high was $4 billion. These 25 individuals made as much as 500,000 people who made $50,000 each. 25=500,000. Imagine if you made $1 billion in one year. Could you spend it all? The fact is that they can't and they don't. So what do they do? They speculate. It is the super rich who drive the speculative markets, whether it be real estate, futures trading, stocks, or derivatives. Remember that in 1987 Reagan lowered the top tax rate to 38.5%? What happened two years later? The S&L debacle due to a bubble in real estate collapsing. If those hedge fund managers had to pay the old tax rate of 70%, those poor dears would have to get by on an averate of $300 million a year. Oh, the horror! Government revenue just from this one small group of 25 would increase by $14 billion per year.
Now, let's look at some obscene pay in other areas. First, you should know that the financial sector of our economy has gone from about 12% of our economy to 21% and, even more telling, the financial sector accounts for 45% of the profits in the economy. Wall St., just from 2003 to 2006, paid $121 billion to its executives (Dylan Ratigan Show, 4/7/10) Just since January of this year, Goldman Sachs has awarded $21 billion in bonuses to its top executives (Manchester Guardian, 4/19/10). I think it is safe to say that in the last decade, Wall St. executives have made over $200 billion. What do they get that money for? Making loans to businesses, investing in new technologies, helping our economy? No, they get that money mostly for gambling and conning other people out of their money. A Goldman Sachs executive testified recently that while they were selling derivatives to investors and assuring them they were safe, they knew they were risky and purchased credit default swaps, betting that they would go down in value. And this isn't even what they were indicted for. Of the $181 billion that went to AIG in TARP funds, at least $40 billion was pass through money to pay off Goldman Sachs for the credit default swaps they bought. If you think this is an isolated case, you haven't been paying attention to the news. Did you know, for example, that two different people were indicted recently for Ponzi schemes that took $1 and $3 billion respectively from investors? It was minor news because while that would have been a mjaor event in the past, now it has been dwarfed by Bernie Madoff, and Wall St. scams.
Here's another example. A former head of United Health Care made $1.2 billion, mostly in stock options, in about 7 years. Because it was discovered that many of these options were illegally backdated, he had to pay a fine of $400 million, leaving him with only $800 million. Since these were stock options, they would be covered by the capital gains rate and taxed at only 15%. That fine, by the way, went to the government, not to stock holders or, heaven forbid, those buying premiums from United Health care. The $1.2 billion he collected would have paid for the premiums of almost 30,000 people a year for 7 years, assuming a premium of $500 per month.
Now, let's take a look at those awful, lazy people getting unemployment benefits. The average unemployment check is $335 per week, or $17,420 per year. A recent story said that 44% of those getting unemployment had been on unemployment for 6 months, and 30% for at least a year. Since there are about 11 million unemployed, that means about 3.3 million were on unemployment for at least one year during 2009. Going back to the hedge fund managers, those 25 people made as much as between 1.4 and 1.5 million people on unemployment, or almost half of those who had been unemployed for at least a year. If those hedge fund managers paid at the old 70% rate, their income tax alone would have paid for about 1 million of the long term unemployed. I hope this gives you some idea of the extent of the income inequality in this country and how our system is set up to reward the super rich, many of whom contribute very little to our ec0onomy.
Now, let's looks at the charge that all these people on unemployment would become addicted to the "free money." This is such nonsense that one hardly knows where to begin. Let's look at the Depression. President Hoover reportedly said something to the effect that all the men selling apples on the street was a sign that more people were going into business for themselves. He also was adamantly opposed to any governmental relief such as unemployment payments. This, as much as almost anything, was responsible for plunging the nation deeper into depression. With no income, they couldn't buy anything, so more businesses went out of business, leading to more unemployment and so on. It also led to more foreclosures which led to a tremendous drop in property values which led to more bank failures, which led to more unemployment whilch led to , you get the idea. Unemployment payments help stop a deflationary spiral. They keep the recession from getting much worse. During the 90's, when Clinton was president, the unemployment rate at one point dropped to below 4%, which as economists tell us, is full employment since there are always people moving, changing jobs, businesses going out of business, etc. so that there will always be some unemployment. Why would the population gladly embrace employment then, but spurn it now for $335 per week? Secondly, psychologists will tell you that for many people, their job defines their worth and losing their job greatly reduces their self-esteem. It is considered a major stressor in life comparable to death of a loved one or a messy divorce. Thirdly, it completely ignores today's present economic situation. There are over 5 applicants for every job opening, on average. It's not a lack of people trying, but a lack of jobs available.
Another tea party mantra is smaller government and reduce the deficit. It's obvious that most of these people have never bothered to learn anything about the government. It's astounding to me that any information you want is just a few clicks away on the internet, but these people and many others never bother to find out the facts. Defense and homeland security cost about $715 billion, or about 20% of the budget, and half of the so-called discretionary budget. Other major expenditures (by percentage) social security 20%, Medicare/Medicaid 21%, interest on the debt, 6%, safety net programs (food stamps, unemployment, e.g.) 14%, and federal pensions and veterans benefits 7%. These programs take up 92% of the total budget. If you really want to reduce government you need to cut defense spending, medicare/medicaid, and social security. Yet these same people don't want to cut these things. Revenues plunged to 15% of GDP, the lowest it has been in decades. The solution is simple, get people back to work, increase taxes on the rich ($1 million per year) and super rich ($10 million per year) and we will probably have to make some adjustments to Medicare and Social Security. Remember this, Herbert Hoover passionately believed in small government and balanced budgets and those policies produced the worst depression in US history. Had we followed the same policies this time, we probably would have had an even worse depression now than in the 30's.
Friday, April 16, 2010
OBSERVATIONS, MUSINGS AND RANTS
Since my last post I have been spending most of my time commenting on politics on various web sites, with the idea that I could reach more people. There are some things, however, which require this forum. A lot has happened since my last post and an even larger amount of misinformation has polluted the media in the meantime. I have been gathering a lot of information which I hope will help counter the misinformation and I am providing it here for your consideration. One thing I would also like to add is that nothing I have written previously has proven incorrect or required revision.
Health Care
When someone brings up the health care bill for criticism, you might want to point out the following facts. In 1974 President Nixon proposed to Congress that they create a health care bill which would require all employers, no exceptions, to provide their employees with health care. The government would then provide health care for those who were not employed. The current health care bill exempts small businesses with less than 50 employees from having to provide health care and provides tax breaks for those small businesses that do provide it. The Nixon proposal was more radical, more anti-business than the current bill. In 1993 a conservative economist came up with the idea of mandating people to buy health care insurance as an alternative to the Clinton health care bill. This was incorporated into a proposed bill introduced by 21 Republican senators and one Republican congressman. The idea of an insurance exchange was first devised by an analyst at the Heritage Foundation in 2006 and then incorporated into the health care plan of Republican Governor Mitt Romney of Massachusetts. The Heritage Foundation is a very right wing think tank. Thus, all the major provisions of the health care bill are Republican ideas. So, when Newt Gingrich calls it a radical social experiment, he is lying. Because he has a Phd. in history, he can't claim ignorance. When people call it socialism or taking over health care, they are just plain wrong. FYI, Germany first adopted a national health care system in the 1880's under those radical reformers, Otto von Bismark and Kaiser Wilhelm II. Even with the new bill, we will have the most unregulated system and the least coverage of our citizens of any industrialized country in the world. Remember when Rush Limbaugh said he was moving to Costa Rica if the bill passed? They have a much more socialized system than we do; it is very similar to a medicare for all option.
Amazing as all the past lying about the bill was, it continues even after passage. The St. Petersburg Times called the charge of death panels the biggest lie of 2009. At one tea party rally a speaker compared the health care bill to genocide. Does anyone remember what Congressman Joe Wilson (R-S. Carolina) was talking about when he yelled out "You lie!" to President Obama? President Obama had just said that any bill he signed would not cover illegal aliens. So, who lied, Wilson or Obama? All these lies get thrown out there and the lies and liars get overlooked or forgotten because they are followed by more and more lies that grab the headlines. The latest big lie is that the bill will have the IRS hire 16,000 agents to enforce the requirement to have health insurance. First, the bill specifically states that if someone does not buy insurance and does not pay the fine that is assessed for that, there are no criminal penalties nor can the IRS put a lien against any property of the taxpayer. Thus, there is no real enforcement of the mandate. Secondly, the IRS currently has about 17,000 auditors/enforcement agents for all the taxpayers in the US. There are currently 47 million uninsured, and 32 million are covered by the bill (illegal immigrants make up most of the rest). Previous studies have found that 80% of the uninsured are working poor, and they will get subsidies or Medicaid coverage under the bill. Thus, if everybody else defies the mandate, you will have, at most, 7 million taxpayers who will be fined. So, according to the big lie, we will double the number of IRS agents for a maximum subset of 7 million people who can't be really punished anyway.
Obama/Democratic Mistakes
One of the biggest mistakes that I think that Obama has made so far in his presidency, is the failure to have nationwide prime time addresses to the people and too few press conferences. Instead the White House has decided to substitute town hall meetings throughout the country.
I don't think these have been nearly as effective, plus there is no reason you could not combine the two approaches. I am a big believer in visual aids and the president has failed miserably to use them to his advantage. His first major mistake was with the Recovery Act. He should have gone on television right next to a big pie chart showing where all the money in the bill would go. How many people know/knew that one-third of the bill went for tax cuts? Instead, for months we heard charges that Obama was raising taxes. How many people knew that a similar sized chunk of the act was for extending unemployment benefits and reducing COBRA payments? Instead all we heard was how the bill was filled with pork projects. Similarly, the President should have had a speech to the nation where he laid out the major provisions of a health care bill and how it would affect people. Time and time again, the Republicans have seized the message, put it in their own terms and dominated the media, often with lies, and the Democrats have done little. When The Democrats have reacted it has been defensively. Here's some examples of how the Democrats could have fought back: Every year 15 times as many people will die because of lack of health care insurance as died on 9/11. Why don't you value the lives of uninsured Americans? When the Republicans were filibustering the health care bill, the Democrats should have been challenging them, "Why don't you believe in majority rule and democracy?"
Another major mistake by the Democrats was to give up on major issues in order to try and achieve bi-partisan support. By the summer of 2009 it was clear that there was almost no chance of getting Republican cooperation. A single payer system was never presented by the Democratic leadership as an option for health care. You always negotiate down and by starting lower, they guaranteed that the final bill would be very watered down. Also, it turned out to be a mish-mash of complicated provisions. Even tea party goers favor Medicare 2 to 1. The easy and simple approach should have been to say that Medicare will be extended, as an option, to anyone who chooses to join, with the understanding that the Medicare program will charge enrollees under 65 a premium rate that will recover costs. The system is in place, it's simple, you don't need an insurance exchange, government regulations on private insurance, or anything else. If a private insurance company messes with you, you can just go and join Medicare. This would be the best check on private insurance rates/premiums and unfair practices. Just because of its lower administrative costs, Medicare plans should be able to undercut private insurance by about 20%. Private insurance can compete by reducing executive perks and offering plans that provide extra or special coverage.
Next, the tea party and a lot of fo0lishness about the economy and government.
Health Care
When someone brings up the health care bill for criticism, you might want to point out the following facts. In 1974 President Nixon proposed to Congress that they create a health care bill which would require all employers, no exceptions, to provide their employees with health care. The government would then provide health care for those who were not employed. The current health care bill exempts small businesses with less than 50 employees from having to provide health care and provides tax breaks for those small businesses that do provide it. The Nixon proposal was more radical, more anti-business than the current bill. In 1993 a conservative economist came up with the idea of mandating people to buy health care insurance as an alternative to the Clinton health care bill. This was incorporated into a proposed bill introduced by 21 Republican senators and one Republican congressman. The idea of an insurance exchange was first devised by an analyst at the Heritage Foundation in 2006 and then incorporated into the health care plan of Republican Governor Mitt Romney of Massachusetts. The Heritage Foundation is a very right wing think tank. Thus, all the major provisions of the health care bill are Republican ideas. So, when Newt Gingrich calls it a radical social experiment, he is lying. Because he has a Phd. in history, he can't claim ignorance. When people call it socialism or taking over health care, they are just plain wrong. FYI, Germany first adopted a national health care system in the 1880's under those radical reformers, Otto von Bismark and Kaiser Wilhelm II. Even with the new bill, we will have the most unregulated system and the least coverage of our citizens of any industrialized country in the world. Remember when Rush Limbaugh said he was moving to Costa Rica if the bill passed? They have a much more socialized system than we do; it is very similar to a medicare for all option.
Amazing as all the past lying about the bill was, it continues even after passage. The St. Petersburg Times called the charge of death panels the biggest lie of 2009. At one tea party rally a speaker compared the health care bill to genocide. Does anyone remember what Congressman Joe Wilson (R-S. Carolina) was talking about when he yelled out "You lie!" to President Obama? President Obama had just said that any bill he signed would not cover illegal aliens. So, who lied, Wilson or Obama? All these lies get thrown out there and the lies and liars get overlooked or forgotten because they are followed by more and more lies that grab the headlines. The latest big lie is that the bill will have the IRS hire 16,000 agents to enforce the requirement to have health insurance. First, the bill specifically states that if someone does not buy insurance and does not pay the fine that is assessed for that, there are no criminal penalties nor can the IRS put a lien against any property of the taxpayer. Thus, there is no real enforcement of the mandate. Secondly, the IRS currently has about 17,000 auditors/enforcement agents for all the taxpayers in the US. There are currently 47 million uninsured, and 32 million are covered by the bill (illegal immigrants make up most of the rest). Previous studies have found that 80% of the uninsured are working poor, and they will get subsidies or Medicaid coverage under the bill. Thus, if everybody else defies the mandate, you will have, at most, 7 million taxpayers who will be fined. So, according to the big lie, we will double the number of IRS agents for a maximum subset of 7 million people who can't be really punished anyway.
Obama/Democratic Mistakes
One of the biggest mistakes that I think that Obama has made so far in his presidency, is the failure to have nationwide prime time addresses to the people and too few press conferences. Instead the White House has decided to substitute town hall meetings throughout the country.
I don't think these have been nearly as effective, plus there is no reason you could not combine the two approaches. I am a big believer in visual aids and the president has failed miserably to use them to his advantage. His first major mistake was with the Recovery Act. He should have gone on television right next to a big pie chart showing where all the money in the bill would go. How many people know/knew that one-third of the bill went for tax cuts? Instead, for months we heard charges that Obama was raising taxes. How many people knew that a similar sized chunk of the act was for extending unemployment benefits and reducing COBRA payments? Instead all we heard was how the bill was filled with pork projects. Similarly, the President should have had a speech to the nation where he laid out the major provisions of a health care bill and how it would affect people. Time and time again, the Republicans have seized the message, put it in their own terms and dominated the media, often with lies, and the Democrats have done little. When The Democrats have reacted it has been defensively. Here's some examples of how the Democrats could have fought back: Every year 15 times as many people will die because of lack of health care insurance as died on 9/11. Why don't you value the lives of uninsured Americans? When the Republicans were filibustering the health care bill, the Democrats should have been challenging them, "Why don't you believe in majority rule and democracy?"
Another major mistake by the Democrats was to give up on major issues in order to try and achieve bi-partisan support. By the summer of 2009 it was clear that there was almost no chance of getting Republican cooperation. A single payer system was never presented by the Democratic leadership as an option for health care. You always negotiate down and by starting lower, they guaranteed that the final bill would be very watered down. Also, it turned out to be a mish-mash of complicated provisions. Even tea party goers favor Medicare 2 to 1. The easy and simple approach should have been to say that Medicare will be extended, as an option, to anyone who chooses to join, with the understanding that the Medicare program will charge enrollees under 65 a premium rate that will recover costs. The system is in place, it's simple, you don't need an insurance exchange, government regulations on private insurance, or anything else. If a private insurance company messes with you, you can just go and join Medicare. This would be the best check on private insurance rates/premiums and unfair practices. Just because of its lower administrative costs, Medicare plans should be able to undercut private insurance by about 20%. Private insurance can compete by reducing executive perks and offering plans that provide extra or special coverage.
Next, the tea party and a lot of fo0lishness about the economy and government.
Tuesday, August 25, 2009
Health Care Reform Facts, Part I
First, let me state that there are lots of numbers swirling around and it is not always possible to pull out discrete data or disaggregate specific figures from total amounts. Whenever possible I have used official figures and always gone with reputable sources for estimates. Some numbers have been repeated so often in so many different places without contradiction (such as the number uninsured) that I adopt those numbers without attribution. With that explanation, let us proceed.
First, it is accepted that 47 million in this country are uninsured. However, with the increasing numbers of unemployed, that number is probably low and will certainly increase for at least the next year when we may start to see an uptick in employment. When assessing that number, we need to also keep in mind that there are 45 million enrolled in Medicare, most of whom could not find private insurance because of pre-existing conditions. Additionally, even if they could find private insurance, the cost would probably be prohibitive for 90% of them. There are 42 + million receiving Medicaid (42 million as of 2006, the latest figure I could find), people who can't afford private insurance. Some of the people receiving Medicaid also receive Medicare. The number is probably relatively small, but to be conservative, I will estimate that 35 million are receiving Medicaid but not Medicare. The bottom line is that, in addition to the 47 million who don't have health insurance, another 77 million are receiving government insurance because they can't get private insurance. Thus, if we look at the number of uninsured against the number of people who are in the private insurance pool, it is 47 million out of about 223 million, not 47 out of 300 (the US population). This means that 21% of the people in the eligible population are uninsured, not the 16% usually cited. Medicare and Medicaid figures come from cms.hhs.gov/medicare and questionsmedicare.gov. Additionally, the Commonwealth Fund in June, 2007 estimated that 25 million are underinsured. If you add that to the 47 million uninsured, that means that the percentage of people who are uninsured or under insured, as a proportion of the private pool, is 32% (72 million out of 223 million). CONCLUSION--Almost one in three people who are in the private pool are either uninsured or underinsured. I hope these numbers do not confuse you, but they do indicate that the problem is greater than usually supposed.
Next, let's look at the effects of uninsurance and underinsurance. A 2007 Harvard study (see Business Week, 1/4/09) found that 62% of bankruptcies are due to medical expenses. There are approximately 1 million bankruptcies (certain to be higher this year), so that means over 600,000 bankruptcies a year are due to medical expenses. Further, the Harvard study found that 60% of these bankruptcies struck families who had (inadequate) medical insurance. This means that about 360,000 bankruptcies are due to medical expenses which hit people with insurance (the underinsured). Additionally, it is estimated that 1.5 million lose their home to foreclosure due to health costs (National Coalition on Health Care, web site cited below).
In a 2002 study (Institute of Medicine, Care Without Coverage, pp. 161-165), it was estimated that 18,000 people die each year because of lack of medical insurance.
Because the uninsured go to emergency rooms for much of their care and most of the time they can't pay, it has been estimated that this additional cost adds approximately $1100 per year to the average insurance premium.
Even if you are covered with an excellent plan, expect the cost of that plan to continue to rise until it is unaffordable for the average American family. Most of the following information can be found at nchc.org/facts/cost.shtml which has a lot of interesting data. Since 1999, the cost of employment based premiums has increased 120%, compared to a 44% increase in inflation and a 29% increase in average wages. By 2017, the cost of premiums will take from 40 to 50% of the average family's income if nothing is changed. Not surprisingly, the primary reason for non insurance is the high cost of health insurance. The Kaiser Commission study found that 80% of the uninsured are "working poor." Unless you are rich or in Medicare or Medicaid, you, too may join the ranks of the working poor unless something is done. Think your employer will cover the increased cost? Fewer are doing so every year or are passing along increases to their employees. The number of employees getting their insurance through their employers went from 66% in 2000 to 61% in 2004 (Kaiser Commission study). It is certain to be declining more and more rapidly with the recession.
Next, let's look at the overall national picture. Nation-wide, total health care expenses are estimated at $2.5 trillion, which is approximately 17% of Gross Domestic Product. It is projected that that total will reach 20% by 2017 (nchc.org). By way of comparison, the country which is second highest in spending as a percentage of their GDP is Switzerland which spends about 11% of their GDP on health care. If we spent the same percentage in the US as Switzerland does, we would spend about $800 billion less per year on health care. On a per capita basis, we spend approximately twice as much as other developed countries such as Canada, England, Germany, France, etc. Despite spending half as much, the citizens in those countries live longer on average and they cover everybody in their country.
Next, problems and solutions.
First, it is accepted that 47 million in this country are uninsured. However, with the increasing numbers of unemployed, that number is probably low and will certainly increase for at least the next year when we may start to see an uptick in employment. When assessing that number, we need to also keep in mind that there are 45 million enrolled in Medicare, most of whom could not find private insurance because of pre-existing conditions. Additionally, even if they could find private insurance, the cost would probably be prohibitive for 90% of them. There are 42 + million receiving Medicaid (42 million as of 2006, the latest figure I could find), people who can't afford private insurance. Some of the people receiving Medicaid also receive Medicare. The number is probably relatively small, but to be conservative, I will estimate that 35 million are receiving Medicaid but not Medicare. The bottom line is that, in addition to the 47 million who don't have health insurance, another 77 million are receiving government insurance because they can't get private insurance. Thus, if we look at the number of uninsured against the number of people who are in the private insurance pool, it is 47 million out of about 223 million, not 47 out of 300 (the US population). This means that 21% of the people in the eligible population are uninsured, not the 16% usually cited. Medicare and Medicaid figures come from cms.hhs.gov/medicare and questionsmedicare.gov. Additionally, the Commonwealth Fund in June, 2007 estimated that 25 million are underinsured. If you add that to the 47 million uninsured, that means that the percentage of people who are uninsured or under insured, as a proportion of the private pool, is 32% (72 million out of 223 million). CONCLUSION--Almost one in three people who are in the private pool are either uninsured or underinsured. I hope these numbers do not confuse you, but they do indicate that the problem is greater than usually supposed.
Next, let's look at the effects of uninsurance and underinsurance. A 2007 Harvard study (see Business Week, 1/4/09) found that 62% of bankruptcies are due to medical expenses. There are approximately 1 million bankruptcies (certain to be higher this year), so that means over 600,000 bankruptcies a year are due to medical expenses. Further, the Harvard study found that 60% of these bankruptcies struck families who had (inadequate) medical insurance. This means that about 360,000 bankruptcies are due to medical expenses which hit people with insurance (the underinsured). Additionally, it is estimated that 1.5 million lose their home to foreclosure due to health costs (National Coalition on Health Care, web site cited below).
In a 2002 study (Institute of Medicine, Care Without Coverage, pp. 161-165), it was estimated that 18,000 people die each year because of lack of medical insurance.
Because the uninsured go to emergency rooms for much of their care and most of the time they can't pay, it has been estimated that this additional cost adds approximately $1100 per year to the average insurance premium.
Even if you are covered with an excellent plan, expect the cost of that plan to continue to rise until it is unaffordable for the average American family. Most of the following information can be found at nchc.org/facts/cost.shtml which has a lot of interesting data. Since 1999, the cost of employment based premiums has increased 120%, compared to a 44% increase in inflation and a 29% increase in average wages. By 2017, the cost of premiums will take from 40 to 50% of the average family's income if nothing is changed. Not surprisingly, the primary reason for non insurance is the high cost of health insurance. The Kaiser Commission study found that 80% of the uninsured are "working poor." Unless you are rich or in Medicare or Medicaid, you, too may join the ranks of the working poor unless something is done. Think your employer will cover the increased cost? Fewer are doing so every year or are passing along increases to their employees. The number of employees getting their insurance through their employers went from 66% in 2000 to 61% in 2004 (Kaiser Commission study). It is certain to be declining more and more rapidly with the recession.
Next, let's look at the overall national picture. Nation-wide, total health care expenses are estimated at $2.5 trillion, which is approximately 17% of Gross Domestic Product. It is projected that that total will reach 20% by 2017 (nchc.org). By way of comparison, the country which is second highest in spending as a percentage of their GDP is Switzerland which spends about 11% of their GDP on health care. If we spent the same percentage in the US as Switzerland does, we would spend about $800 billion less per year on health care. On a per capita basis, we spend approximately twice as much as other developed countries such as Canada, England, Germany, France, etc. Despite spending half as much, the citizens in those countries live longer on average and they cover everybody in their country.
Next, problems and solutions.
Friday, August 21, 2009
Sotomayor Silliness
With Sonia Sotomayor having taken her rightful place on the Supreme Court, we can get past, I hope, some of the ridiculous claims and statements made by her opponents. Also, it gives me an opportunity to tell a story I find interesting that is very relevant to the issue.
One of the arguments made by her opponents is her perceived liberal bias and the statement/belief that justices should be like umpires, calling balls and strikes. In this view, things are unconstitutional or not and there is a clear delineation that should be obviously apparent. Oh, if only it were so. People who make this claim are either being disingenuous or have no knowledge or experience with the courts. By the time something gets to the Supreme Court, it does so because the issues are not clear. I have personal experience with this.
Unfortunately, laws often are written either in a non-specific way, or may be specific but fail to anticipate how they will be used or abused in the future. As an example of the former, let's say that a law is written that says government shall establish regulations to do such and such and reasonable fees established to enforce the provisions of the law. Further, the law will say that fees or provisions shall be examined regularly and updated when warranted. What is a reasonable fee? How often is regular? If laws are written too specifically, then they will fail to deal with many future occurrences. If they are written broadly enough to cover future contingencies, they must be necessarily vague which means they will be open to interpretation.
I was a plaintiff in a case, which was ultimately thrown out because "it fell between the cracks." There was law and court decisions for many different classes of people, but I fell into a small class for which no precedent or specific law applied. The judge could have ruled in my favor by deciding to apply the law in one way, but chose to apply it in another. Later, in a case which I read about in the papers in a similar situation, the same judge ruled in favor of some plaintiffs and allowed the case to go to trial. There was no clear choice in this matter, and this situation occurs frequently.
In another instance, I wrote a law for the State of California. By way of background, there was a petition taken to the City of San Diego for an initiative ballot measure to revise the City's Charter. The petition was not certified because it did not have enough signatures as established by the City's Election Code. However, a judge ruled that the City had to follow the State Elections code for this particular type of initiative. So, I wrote a change to State law so that future petitions would be consistent with our past requirements, which everyone agreed were more sensible than the State requirement. The law was reviewed by the City Attorney's Office, a resolution supporting it passed the City Council. A local assemblyman, a lawyer who was later appointed to a judgeship, agreed to carry the bill for us. We worked closely with the Secretary of Stat's office and the attorneys in their Elections Division and they all reviewed and approved it. It sailed through both houses and was signed by the governor as a non-controversial item. I figured the case was closed. About six months after going into effect, I received phone calls from Oakland from two different people who had found out that I was the original author. They both asked me what my intent was for an election situation which had nothing to do with city charter initiatives. I went back and re-read the new law. Sure enough, the issue they were asking about could be applied to the law which we had so narrowly crafted to apply to another very specific issue. Had I gone to court and been asked how the law should have been applied in the case the people from Oakland were interested in, I would have had no clue as to how to answer. I wouldn't have wanted to be the judge who decided how that law applied.
The point should be obvious. You can't just be an umpire, decisions/solutions are not clear cut and judicial decisions will of necessity be influenced, if not determined, by a judge's past experiences, leanings, and biases. To say otherwise is pure sophistry.
Another attack on Sotomayor was to attack Obama's statement that he wanted a judge with empathy. I guess it is better to have a judge with no empathy? Kudos to L.A. Times columnist Michael Hiltzik (I think I'm spelling his name correctly). He brought to his readers' attention the Supreme Court case of Buck vs. Bell in which the Supreme Court ruled in favor of the State of Virginia for the forced sterilization of a woman who was judged mentally retarded by the State. No proof was ever presented to support that claim by the State. Had there been a woman on the court, might the court have ruled differently? Similarly, the forced relocation/internment of people of Japanese acestry during World War II led to Korematsu vs. U.S. which is arguably one of the worst Supreme Court decisions in history, right up there with Dred Scott and Plessy vs. Ferguson. Had there been a minority on the court, especially one with foreign born parents, might not a more enlightened viewpoint from that kind of justice led to a more just decision? One would hope so. Given the ambiguity one often finds in the law, I much prefer a judge with emnpathy. I know I wish I had had one in my case since I got royally screwed and wasn't even allowed to bring my case to trial despite a clear case of denial of due process.
One of the arguments made by her opponents is her perceived liberal bias and the statement/belief that justices should be like umpires, calling balls and strikes. In this view, things are unconstitutional or not and there is a clear delineation that should be obviously apparent. Oh, if only it were so. People who make this claim are either being disingenuous or have no knowledge or experience with the courts. By the time something gets to the Supreme Court, it does so because the issues are not clear. I have personal experience with this.
Unfortunately, laws often are written either in a non-specific way, or may be specific but fail to anticipate how they will be used or abused in the future. As an example of the former, let's say that a law is written that says government shall establish regulations to do such and such and reasonable fees established to enforce the provisions of the law. Further, the law will say that fees or provisions shall be examined regularly and updated when warranted. What is a reasonable fee? How often is regular? If laws are written too specifically, then they will fail to deal with many future occurrences. If they are written broadly enough to cover future contingencies, they must be necessarily vague which means they will be open to interpretation.
I was a plaintiff in a case, which was ultimately thrown out because "it fell between the cracks." There was law and court decisions for many different classes of people, but I fell into a small class for which no precedent or specific law applied. The judge could have ruled in my favor by deciding to apply the law in one way, but chose to apply it in another. Later, in a case which I read about in the papers in a similar situation, the same judge ruled in favor of some plaintiffs and allowed the case to go to trial. There was no clear choice in this matter, and this situation occurs frequently.
In another instance, I wrote a law for the State of California. By way of background, there was a petition taken to the City of San Diego for an initiative ballot measure to revise the City's Charter. The petition was not certified because it did not have enough signatures as established by the City's Election Code. However, a judge ruled that the City had to follow the State Elections code for this particular type of initiative. So, I wrote a change to State law so that future petitions would be consistent with our past requirements, which everyone agreed were more sensible than the State requirement. The law was reviewed by the City Attorney's Office, a resolution supporting it passed the City Council. A local assemblyman, a lawyer who was later appointed to a judgeship, agreed to carry the bill for us. We worked closely with the Secretary of Stat's office and the attorneys in their Elections Division and they all reviewed and approved it. It sailed through both houses and was signed by the governor as a non-controversial item. I figured the case was closed. About six months after going into effect, I received phone calls from Oakland from two different people who had found out that I was the original author. They both asked me what my intent was for an election situation which had nothing to do with city charter initiatives. I went back and re-read the new law. Sure enough, the issue they were asking about could be applied to the law which we had so narrowly crafted to apply to another very specific issue. Had I gone to court and been asked how the law should have been applied in the case the people from Oakland were interested in, I would have had no clue as to how to answer. I wouldn't have wanted to be the judge who decided how that law applied.
The point should be obvious. You can't just be an umpire, decisions/solutions are not clear cut and judicial decisions will of necessity be influenced, if not determined, by a judge's past experiences, leanings, and biases. To say otherwise is pure sophistry.
Another attack on Sotomayor was to attack Obama's statement that he wanted a judge with empathy. I guess it is better to have a judge with no empathy? Kudos to L.A. Times columnist Michael Hiltzik (I think I'm spelling his name correctly). He brought to his readers' attention the Supreme Court case of Buck vs. Bell in which the Supreme Court ruled in favor of the State of Virginia for the forced sterilization of a woman who was judged mentally retarded by the State. No proof was ever presented to support that claim by the State. Had there been a woman on the court, might the court have ruled differently? Similarly, the forced relocation/internment of people of Japanese acestry during World War II led to Korematsu vs. U.S. which is arguably one of the worst Supreme Court decisions in history, right up there with Dred Scott and Plessy vs. Ferguson. Had there been a minority on the court, especially one with foreign born parents, might not a more enlightened viewpoint from that kind of justice led to a more just decision? One would hope so. Given the ambiguity one often finds in the law, I much prefer a judge with emnpathy. I know I wish I had had one in my case since I got royally screwed and wasn't even allowed to bring my case to trial despite a clear case of denial of due process.
The Overriding Importance of Health Care Reform
In all the hullabaloo over health care, there is one thing which I hope progressives, especially those in the Federal government, don't overlook. There has been much talk about the impact this fight has on President Obama's presidency (Senator Jim Demint saying it could be his Waterloo) or on the elctions in 2010 and 2012. However, I think it goes beyond even these future events.
If we look at history and the development of government and party politics, especially in the 20th Century, some trends become clear. Beginning with Teddy Roosevelt, we saw the beginning of an activist government led by a strong executive to bring about change for the benefit of the people. Taft disappointed Roosevelt and the progressives, leading to the divisive 1912 campaign and the election of Wilson who continued the thrust of the Roosevelt presidency. After World War I, the country was ready for a more settled time and, in Coolidge's famous words, the business of government was business. Andrew Mellon, one of the richest and biggest establishment figures in the country was a mainstay of Republican government during this decade. The Republicans believed that government's function was to promote free enterprise and get out of the way. This fell apart with the stock market crash in October, 1929 and the subsequent Depression. Franklin Delano Roosevelt, Teddy's cousin and nephew by marriage, expanded on the first Roosevelt presidency and used government to lead the country out of depression, something that had never been done before.
FDR's presidency was a massive paradigm shift in American politics. Government was now seen as beneficial and even necessary for shepherding the economy and the country to prosperity. Many of the reforms enacted then are still with us today and some lasted until just recently. This also set the stage for the ascendancy of the Democratic Party for the next 36 years. Only the Vietnam War interrupted this ascendancy. Eisenhower, because he was a war hero, was an aberration.
The election of Ronald Reagan in 1980 marked the beginning of another paradigm shift. Reagan, through his personal popularity, changed the political dialogue so that government was no longer seen as the solution, but the problem. Even Bill Clinton famously said that the era of big government was over. As with the 20's, the overreach by the Republicans and their corporate allies has led to another economic collapse. The election of President Obama, the promises he made and the challenges he faces have set the stage for another paradigm shift back to that established by FDR. If Obama takes a successful, activist role he can show that government is the solution, not the problem. In so doing, he can control the political dialogue and set the stage for Democratic ascendancy for the next 30 or 40 years.
The two biggest domestic challenges the President and his party face are the economy and fixing the health care system. As readers of this blog know, I firmly believe that his steps in the first area are in the right direction, but do not go far enough. While there needs to be major restructuring of the economy, especially in the financial sector, Obama and his major advisers, Larry Summers and Timothy Geithner, seem content to tweak the system, not truly reform it. Nevertheless, while I agree with Paul Krugman that the stimulus program needs to be larger, it is large enough to stop the recession and begin the turnaround.
Here is where health care reform is crucial. Health care expenditures now total close to 20% of the total GDP. If we can reduce expenditures down to the level found in the next highest expenditure as a percentage of GDP (Switzerland), we could reduce health care expenditures by $800 BILLION PER YEAR, freeing up that money for economic expansion. As Medicare and Social Security did in the past, health care with a strong government option will show the efficacy of government and expose the lies of the Cassandras in the conservative movements. Under FDR's policies, this country has experienced its longest uninterrupted periods of economic growth and expansion. The greatest economic crashes in our history have occurred after periods of Republican laissez-fare policies. It is time to return to the policies that have made this country great. Obama can make this happen if he remains firm and pushes a strong health care reform with a government option.
If we look at history and the development of government and party politics, especially in the 20th Century, some trends become clear. Beginning with Teddy Roosevelt, we saw the beginning of an activist government led by a strong executive to bring about change for the benefit of the people. Taft disappointed Roosevelt and the progressives, leading to the divisive 1912 campaign and the election of Wilson who continued the thrust of the Roosevelt presidency. After World War I, the country was ready for a more settled time and, in Coolidge's famous words, the business of government was business. Andrew Mellon, one of the richest and biggest establishment figures in the country was a mainstay of Republican government during this decade. The Republicans believed that government's function was to promote free enterprise and get out of the way. This fell apart with the stock market crash in October, 1929 and the subsequent Depression. Franklin Delano Roosevelt, Teddy's cousin and nephew by marriage, expanded on the first Roosevelt presidency and used government to lead the country out of depression, something that had never been done before.
FDR's presidency was a massive paradigm shift in American politics. Government was now seen as beneficial and even necessary for shepherding the economy and the country to prosperity. Many of the reforms enacted then are still with us today and some lasted until just recently. This also set the stage for the ascendancy of the Democratic Party for the next 36 years. Only the Vietnam War interrupted this ascendancy. Eisenhower, because he was a war hero, was an aberration.
The election of Ronald Reagan in 1980 marked the beginning of another paradigm shift. Reagan, through his personal popularity, changed the political dialogue so that government was no longer seen as the solution, but the problem. Even Bill Clinton famously said that the era of big government was over. As with the 20's, the overreach by the Republicans and their corporate allies has led to another economic collapse. The election of President Obama, the promises he made and the challenges he faces have set the stage for another paradigm shift back to that established by FDR. If Obama takes a successful, activist role he can show that government is the solution, not the problem. In so doing, he can control the political dialogue and set the stage for Democratic ascendancy for the next 30 or 40 years.
The two biggest domestic challenges the President and his party face are the economy and fixing the health care system. As readers of this blog know, I firmly believe that his steps in the first area are in the right direction, but do not go far enough. While there needs to be major restructuring of the economy, especially in the financial sector, Obama and his major advisers, Larry Summers and Timothy Geithner, seem content to tweak the system, not truly reform it. Nevertheless, while I agree with Paul Krugman that the stimulus program needs to be larger, it is large enough to stop the recession and begin the turnaround.
Here is where health care reform is crucial. Health care expenditures now total close to 20% of the total GDP. If we can reduce expenditures down to the level found in the next highest expenditure as a percentage of GDP (Switzerland), we could reduce health care expenditures by $800 BILLION PER YEAR, freeing up that money for economic expansion. As Medicare and Social Security did in the past, health care with a strong government option will show the efficacy of government and expose the lies of the Cassandras in the conservative movements. Under FDR's policies, this country has experienced its longest uninterrupted periods of economic growth and expansion. The greatest economic crashes in our history have occurred after periods of Republican laissez-fare policies. It is time to return to the policies that have made this country great. Obama can make this happen if he remains firm and pushes a strong health care reform with a government option.
Friday, April 24, 2009
A New Mideast Policy--Part III
The U.S. needs a more even-handed policy regarding the Palestinian problem, needs to distance itself from unpopular, undemocratic regimes, and work towards energy independence so that we can disengage ourselves militarily from the Middle East. We need to engage in a more realistic foreign policy, acting on what is, not what we would like things to be.
The key to better relations with all the Arab states and the Arab "man in the street" is an even-handed approach that recognizes legitimate Palestinian grievances and promises a two state solution. The Saudi proposal (which has been accepted by all the major Arab states) to recognize Israel and normalize relations on the basis of a two state solution, with Israel abandoning its settlements and returning to its pre-1967 boundaries, should be the policy pushed by the U.S. We should guarantee those boundaries and promise to aid Israel should her territorial integrety be threatened. We should also say that any non-retaliatory WMD attack on Israel will be considered the same as an attack on the United States. In return for the Palestinians giving up their "right of return", they should be gifted all the domiciles built by the Israelis on the West Bank and money currently being suppliied to Israel for military aid should be shifted to the Palestinians, with one-half going in the form of direct payments to Palestinians and one-half going to development projects in the new state of Palestine. In addition, we should greatly reduce military aid to our allies Egypt, Jordan, and Saudi Arabia and close almost all of our military bases in the area except for a few military training missions and maybe a couple of listening posts.
The fact is, if there were no oil in the Middle East, it would be of no strategic importance to the United States. We should strive for energy independence through the development of alternative energy so that Middle Eastern oil is not of great importance to us. This will also allow us to disentangle ourselves from the corrupt Saudi royal family. I am convinced that some day they will be overthrown and it is best that we not be identified with them when that happens. Likewise, the increasingly repressive Mubarak regime in Egypt is another government we should disassociate ourselves from. We should seek to promote democracy in both states but, if as likely will happen, those states make no moves to broaden their bases of popular support, we should move away from them before they become albatrosses around our neck.
We should push Israel to negotiate with Syria over the return of the Golan Heights. The outlines of a deal are clear: in return for the Golan Heights, to remain demilitarized while under Syrian control, Syria would agree to stop funding and supporting Hezbollah in Lebanon. Syria should also agree to reduce its involvement in internal Lebanese affairs. In return, not only would it get the Golan Heights and normalized relations with Israel, the U.S. should pledge giving monetary aid to Syria for a limited time period (such as three years) with the promise that the period could be extended if Assad opened up the society and allowed more freedom and participation by his people in the political system.
In short, we should associate ourselves with the promotion of democratic principles but not insist on or require them. We should not become closely associated with regines that do not promote democratic principles. We should not intervene in the internal affairs of the area's nation states and not support any state in the area which intervenes in the internal affairs of another of the area's states. We should promote regional organizations. We should disentangle ourselves from the region and engage in a neo-isolationist policy.
The biggest obstacle to this policy will probably be Israel and the Israel lobby. With the election of the latest government, it seems very unlikely that Israel will be ready any time soon to accept such a solution. Even worse from our point of view, our internal pro-Israel lobby will make it extremely difficult for the U.S. government to put any pressure on the Israeli government. However, this is what we must do because the solving of the Palestinian problem is not only the key to Mid East peace, that and our subsequent withdrawal from the area is key to diffusing Muslim terrorism against the United States. I believe that if we were to follow and implement these policies much of the terrorist threat will dissipate.
During World War II, Britons used to grouse that there were three things wrong with American soldiers: they were overpaid, oversexed, and over here. And these were our closest allies! Our presence in the Middle East is several orders of magnitude worse than what the English complained about. This is definitely one case where absence will make the heart grow fonder. If we remove ourselves from the Middle East, our popularity there will probably soar.
Next, what we should do about Iraq, Iran, and Afghanistan.
The key to better relations with all the Arab states and the Arab "man in the street" is an even-handed approach that recognizes legitimate Palestinian grievances and promises a two state solution. The Saudi proposal (which has been accepted by all the major Arab states) to recognize Israel and normalize relations on the basis of a two state solution, with Israel abandoning its settlements and returning to its pre-1967 boundaries, should be the policy pushed by the U.S. We should guarantee those boundaries and promise to aid Israel should her territorial integrety be threatened. We should also say that any non-retaliatory WMD attack on Israel will be considered the same as an attack on the United States. In return for the Palestinians giving up their "right of return", they should be gifted all the domiciles built by the Israelis on the West Bank and money currently being suppliied to Israel for military aid should be shifted to the Palestinians, with one-half going in the form of direct payments to Palestinians and one-half going to development projects in the new state of Palestine. In addition, we should greatly reduce military aid to our allies Egypt, Jordan, and Saudi Arabia and close almost all of our military bases in the area except for a few military training missions and maybe a couple of listening posts.
The fact is, if there were no oil in the Middle East, it would be of no strategic importance to the United States. We should strive for energy independence through the development of alternative energy so that Middle Eastern oil is not of great importance to us. This will also allow us to disentangle ourselves from the corrupt Saudi royal family. I am convinced that some day they will be overthrown and it is best that we not be identified with them when that happens. Likewise, the increasingly repressive Mubarak regime in Egypt is another government we should disassociate ourselves from. We should seek to promote democracy in both states but, if as likely will happen, those states make no moves to broaden their bases of popular support, we should move away from them before they become albatrosses around our neck.
We should push Israel to negotiate with Syria over the return of the Golan Heights. The outlines of a deal are clear: in return for the Golan Heights, to remain demilitarized while under Syrian control, Syria would agree to stop funding and supporting Hezbollah in Lebanon. Syria should also agree to reduce its involvement in internal Lebanese affairs. In return, not only would it get the Golan Heights and normalized relations with Israel, the U.S. should pledge giving monetary aid to Syria for a limited time period (such as three years) with the promise that the period could be extended if Assad opened up the society and allowed more freedom and participation by his people in the political system.
In short, we should associate ourselves with the promotion of democratic principles but not insist on or require them. We should not become closely associated with regines that do not promote democratic principles. We should not intervene in the internal affairs of the area's nation states and not support any state in the area which intervenes in the internal affairs of another of the area's states. We should promote regional organizations. We should disentangle ourselves from the region and engage in a neo-isolationist policy.
The biggest obstacle to this policy will probably be Israel and the Israel lobby. With the election of the latest government, it seems very unlikely that Israel will be ready any time soon to accept such a solution. Even worse from our point of view, our internal pro-Israel lobby will make it extremely difficult for the U.S. government to put any pressure on the Israeli government. However, this is what we must do because the solving of the Palestinian problem is not only the key to Mid East peace, that and our subsequent withdrawal from the area is key to diffusing Muslim terrorism against the United States. I believe that if we were to follow and implement these policies much of the terrorist threat will dissipate.
During World War II, Britons used to grouse that there were three things wrong with American soldiers: they were overpaid, oversexed, and over here. And these were our closest allies! Our presence in the Middle East is several orders of magnitude worse than what the English complained about. This is definitely one case where absence will make the heart grow fonder. If we remove ourselves from the Middle East, our popularity there will probably soar.
Next, what we should do about Iraq, Iran, and Afghanistan.
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