Wednesday, April 27, 2011

The better way to measure our debt problem

This is the submission to the Sky Hi Daily News and is unedited. The copyrighted edited version is reproduced at

$16 trillion here and $7 trillion there and before long we are talking real money. Raising the debt ceiling and cutting spending reflected in the 2012 budget are the hot topics   and no one seems to have faith in either party, according to the recent NY Times/CBS poll.  Around 57% disapprove of how the President is handling the federal budget deficit and more disapprove of the way Republicans in Congress are.   In 2012, the choices   will be an “as compared to whom” year.
What are perplexing about the choices voters have to make are the complexity and the sophistication that is needed to get our heads around big dollar numbers.  It makes it easy for politicians to demagogue using fear tactics that hype dire pocket book impacts or to exaggerate the problem’s size. There are other ways to frame the problem.
Economists prefer to use a ratio of   the percentage of the dollar amount of the debt to gross domestic product (the size of the economy, a.k.a. GDP) because we get a more realistic perspective. It is similar to a banker looking at the family income and assets to determine creditworthiness.
Historically, US debt has run at about 40% and rarely above 50%. It is about 62% now but if we had continued with the 2009 trend, we could see 82% by 2019. Projections depend upon how much revenue we can expect and how much cost cutting can take place.  Anything above 82% would cause interest rates to rise and decrease productivity and harm economic growth, according to conservative sources.  In short, we have more of a long term problem than immediately impending doom.
 The Simpson-Bowles debt commission recommended around 60% as a target in the next decade and said a combination of tax increases and spending cuts were necessary. The GOP/Ryan plan hopes for 70% without raising taxes, while drastically cutting Medicare.  The Obama plan proposes  a ratio of 3 spending cuts to tax increases of 1 while keeping Medicare in its current form, though he seeks  another $400 billion in cuts to Medicare over ten years on top of his health reform law already passed.  His debt/GDP ratio is unclear, but his plan contains a failsafe clause that would trigger cuts and tax increases by 2014 if the ratio does not stabilize or decline.
The Ryan/GOP plan sounds tempting, but is it reasonable?  It depends heavily upon the revenue the federal government would expect and the Congressional Budget Office calls the Ryan plan optimistic. A possible scenario per the CBO is that revenue could be less and the debt could rise to 92% of the GDP by 2022.
 In addition, the cuts Ryan is proposing to make may be politically impossible .Martin Wolf,  writing in  London 's Financial Times April 12, commented that  the Ryan plan would require the elderly to bear 68% of the costs of insurance by 2030. He asks, “The US has the highest maternal and infant mortality rates among the high-income countries, and among the lowest life expectancies. The result of these cutbacks …would be further deterioration. Is this really politically acceptable?”
 If the New York Times polls are accurate, the answer is probably no.  Three quarters of Americans think the federal government has a responsibility to provide health care for the elderly and 56 believe it has a similar duty to the poor.
Another possibility is to grow the size of the economy.   Both conservatives and liberals will try to turn their economic theories into proposals which they claim will work the best.  In the past decade, neither lowering taxes nor trickle down theories of Republicans have worked well nor have government stimulus programs primed the pump enough to grow the economy as we hoped. Obama prefers investing in infrastructure.
 Knees will jerk one way or the other, but the only constant would be the Obama failsafe proposal to trigger drastic steps in 2014 no matter whose theories are put into practice.

Wednesday, April 20, 2011

Obama deftly plays debt card

This is the unedited version of my column appearing in the print edition of the Sky Hi News today. I am posting this temprarily until the newspaper gets the column on line.
Honey…we shrunk the  government , at least it is on our wish lists,  crowed   Pres. Barack Obama and Rep. Paul Ryan  last week.  They both embraced similar goals of reducing the debt and  the deficits.. GOP/Ryan plan would cut government spending by $5.8  trillion dollars  over 10 years while Obama’s plan would reduce government spending by 4.6 trillion over 12 years
Neither would eliminate the  $7 trillion deficit projected over the next decade  caused by spending more than  revenue is taking in and would still necessitate borrowing and increasing debt to make up the difference.
 Progressives were wondering if  Obama had  swallowed tea served by the GOP               when he signed on to  shrinking  government.   They should not have been surprised. In May 2009 the President made it clear he believed  the US debt was unsustainable.
While the Democratic left wing  grumbled , the President threw them meaty  bones they could believe in:  substantive cuts in defense spending,, continued support of education and environment,  and proposing to raise one dollar of taxes on the rich  for every three of cuts. The GOP dug themselves deeper into the fox hole of no new taxes  and more tax breaks for the rich.
Why then did  Obama only begin to prioritize  debt/deficit reduction now?  He said he  waited until he felt  the economy recovered sufficiently from the Great Recession to tolerate a cut in government spending.  There was fear until now that drastic cuts made too quickly would hurt the US’s economic growth.
 Growing the economy  (measured as gross domestic product, aka GDP) is one of the keys  to making debt and deficits a smaller percentage of the total and less damaging.  Obama  proposes a lower/ slower implementation of cuts as a way to cushion a negative  impact.   To grow the economy, Ryan  relies on reducing taxes on the rich and corporations.   Obama looks to investing in infrastructure, education, and  alternative energy  as a necessity for  the US to compete  in the world while creating  domestic jobs.
The President’s timing  of announcing his position on fiscal matters was most  likely dictated by a  political strategy. The President could be criticized for  dithering  decision making, but he could not be criticized for not  being clever. 
Timing was everything. The President presented his plan just before some crucial votes in Congress on raising the debt ceiling and debate on the 2012 budget and just after Ryan presented his proposal.  Obama won  the chicken wars by waiting until the Tea Party put enough pressure on the GOP to go first to  propose deficit reductions , knowing  that any proposals were bound to harm the interests of some group of constituents .
 Republicans had tried to set a trap to force the president to go first by questioning his leadership abilities, but the looming deadlines forced the Republicans to walk into the trap themselves, force their hand, and throw away the key to the escape hatch, to boot.  With all but four House Republicans voting on the record  for the Ryan proposal  last week , the plan has become more than Ryan’s; it is now the GOP’s.  GOP candidates will now have to defend their recorded votes on issues that are potentially unpopular with swing voters, and even with some in the GOP’s own base of middle agers   worried about affording to retire.   
Clever, too, was Obama’s strategy to take some large issues off the table:  Less in play is the “whether” issues because there is some degree of agreement that the debt, deficits, and government spending and entitlements need to be cut.  This clears the deck for campaigns to focus on the “how” and “what” red hot buttons such as tax policy fairness and privatization of   Medicare. Republicans will now be forced to play on the Democrats turf defending some proposals that polls show are not popular.  
The President may also have lain to rest questions about his leadership style since “clever is as clever does”.

Tuesday, April 19, 2011

Trump: he may not be a hypocrite, but he is a raging elephant

The Donald  has been trumpeting the Trump this week.  He appears to have been catching on with the extreme right of the Republican party  and promises to turn the Presidential campaign upside down. The ultimate test of his appeal will be the Republican primaries, if he does decide to run.  If I were betting in one of the Casinos he used to own, I would put my money on him to do it. Failing that, I would also expect him to run as a third party candidate. What does he have to lose? He has the money, or at least he boasts he is rich, though somewhere along the line he will have to disclose his personal wealth. He has plenty to gain even if he loses the presidency, since he will soon be an unemployed  TV star.

He is tapping into the gut feeling of so many in this country whose sentiments are in sync with his, but who also like  to ignore any consequences of such actions.  The last straw in any respect I had for him was when he advocated going into Libya and Iraq and seizing the oil fields to pay for our past sins of pre-emptive strikes or the ownership of the companies drilling there or the long standing allies we had in the area.  If those countries were  vacuums, the practicality of doing that (aside from the moral, imperialistic, anti US sentiment generating issues) would not be in question. The problem is: none of these, including the Libyan revolutionaries, would roll over and play dead.  The cost of such military action must be a calculation that would underline the total absurdity of his foreign policy. Our economy cannot even afford the relative limited commitments we have now, much less could he count on   public approval he would need to undertake such effort.  Americans are already tired of those wars.

When it comes to foreign policy, not only is Trump a bull in a china closet, he is a rampaging elephant.

On the hypocrite meter, he deserves credit: at least he would make it clear US foreign policy is not about terrorism or bringing democracy to dictator dominated  nations or even about hatred  and fear of Muslims..  It is about oil without any  idealism attached. 

 His immoral lifestyle past, as one commentator mentioned on Morning Joe, is world class, no doubt...right up there with Berlusconi of Italy.  He would not be wimping "I did not sex with that woman"; he is already   opining "he loves beautiful women".   His newly found religion of pro life is not exactly a trade off  for those who expect our Presidents to be somewhat of a moral leader as well as a political one.  But  on this issue,as well,  he is no hypocrite.

The question is, can most Americans accept his attitudes and policies,  hypocritical or not.

Monday, April 11, 2011

The Ryan plan: a political fantasy

Martin Wolf of London 'sFinancial Times, on CNN's' Fareed Zakaria's GPS, yesterday said he had looked closely at the Ryan plan. Ryan's long term projections of  the size of government being around  2.3 of GDP would have returned the government and services to around the level of 1900; no defense department; much less no entitlements; because his plan has no tax increases whatsoever and the US would be shrunk as a world power in the face of China rising.  He called Ryans' plan: a political fantasy.

Wednesday, April 6, 2011

Why separation of church and state is such a treasure

My column in todays' print edition of the Sky Hi Daily News:
Some of the most precious legacies left by our country's founders are separation of church and state and the freedom to worship.

Attacks on those constitutional rights surface time and time again. Most recent examples, subject to court rulings, are a voucher movement to allow taxpayer money to pay for the tuition for students to attend faith-based schools and anti-Muslim fervor proposing laws to restrict the right to practice a certain religion.

In Colorado's Douglas County the local school board voted to offer such vouchers. Others elsewhere wanted to ban mosques in neighborhoods and there have been attempts to restrict the rights to practice the Muslim religion.

Court rulings on the matter consume case law, laying down precedents which protect that legacy, but it does not stop others contesting its meaning and application. The political right, which embraces small government and professes to be libertarian in the matter of government intrusion into personal lives, has been the most eager to pressure governments to violate that separation on both the voucher matter and anti-Muslim laws.

Various countries have approached separation of church and state differently. Through brute political force, Kemal Ataturk turned Turkey into a secular state with secular laws, banning the fez, head covers, and the veil. In the past few years, women students who covered their heads were kicked out of schools and the conflict resulted in the emergence of Islamists gaining more political power as a cultural revolution against secularism got wings.

Post-Mubarak Egypt will be shaped by the conflict between those who desire secular laws and the Muslim Brotherhood who wants an Islamic legal system. One Brotherhood pitch against secularism is that a “secular system means Egypt could allow gay marriage.” Sound familiar?

We often hear those who fear institution of Sharia law as the law of the U.S. point to England which set up Sharia courts to resolve civil issues between mosques. In England, there is no separation of church and state: There is an official religion. It is the Church of England. English history is full of strife between official religions practiced by their monarchs and the religion of their opponents. It was in that frame of reference our founders included separation of church and state in the bill of rights. Contemporary Britain dealing with diverse immigration now has a practice of tolerance applied to all. 

The French follow the secular model of Ataturk, banning the wearing of garb (including headscarves) and any symbols of any religion in public schools. The anger of the Muslim minority added to the frustration of discrimination flared up into scenes reminiscent of Watts during the '60s.

Here is the beauty of the American system that sets us apart and, so long as we uphold our system separating church and state, why some of those kinds of conflicts are less likely to happen here.

The U.S. system does not follow any of these models. Both Constitutional amendments protecting free speech and separation of church and state have taken some causes of conflict off the table. If a person wants to wear a headscarf, a Burka, a yarmulke, a ruffled cap, side curls, saffron robes, a turban, a cross, or a Star of David, one can in our America. Likewise no U.S. government can require anyone to subscribe to a religion. Taxpayer-supported vouchers to underwrite tuition to attend a faith-based school have been interpreted as government support of religion, violating the constitution's prohibition against government's establishment of official religions.

If an exception to these rights is made for one religion, the legal precedent would be established to allow for other exceptions in the future. So long as we uphold these constitutional rights to practice a religion freely, to strictly observe this sacred separation of church and state, forced adherence to certain religious laws or canons will not have a prayer in the U.S. of A.

GOP plan to privatize Medicare depends on a non existent free market system

One of the most indelible impressions I had attending town halls in the 2008 presidential campaign was the look of fear and anger on the faces of some waiving signs:” Do not let the government take away my Medicare”. Funny: Medicare is a government program.  In 2010 the under  55 crowd ought to be waiving signs that read: “do not let the Republicans take away my Medicare”.
 The fear that “Obamacare” would have taken $400 billion from the Medicare program became an issue exploited by the GOP who beat the drums of deceptive talking points to raise the fear levels   every chance they had. The Democrats responded, meekly and weakly, that the $400 billion did not change the benefits seniors received, it only ended the 13% markup private insurers charged the government to administer a Medicare on the government’s behalf.  The amount of money saved by cutting the administrative costs of Medicare, intense prosecution of frau d and abuse funded in the health reform law and greater use of home health care and other more efficient use of senior care funding, would  help save  billions over 10 years and trillions later.
 So important was the savings to Medicare afforded by health care reform law, that the Simpson Bowles debt commission concluded that reform be retained to help cut the deficit in the future.   The Republicans, of course, have not given up their attempt to defund or cripple “Obamacare”. Neither have private insurers and they are using their muscle:   Per  health insurers spent over $21 million on lobbyists in 2010.
In the name of deficit reduction, the Republicans last week repackaged their 40 year old platform of privatizing Medicare with a proposal to give seniors vouchers to buy private insurance.   This privatization scheme is based upon a theory that   the insurers would compete for your voucher, driving down costs.  To head off voter outrage, seniors over 55 would see no change. Only their children and grandchildren would be shortchanged in the name of reducing the debt burden..
  The problem with the free market theory is that here is little free market in health insurance.  In fact, there is an oligopoly …a few companies in the market who are free to set prices and terms of coverage among themselves and carve out markets. .  What it means for seniors is that, for example, if you have a choice of between three similar plans.  Without real competition, insurers are free to provide customers with a choice of three with the highest price and lowest benefits   agreed upon among the insurers.
What?  Isn’t that illegal? No.  Health insurers are exempted from antitrust laws.     Ok, you say, and then we will go to another state and buy our insurance (the same argument was used to provide a very insufficient substitute for “Obamacare”).  The problem is that if you go to a neighboring state to avoid the high cost of an insurer like Blue Cross, Blue Shield, or United Health Care, you have a great chance of having to choose  between a Blue Cross/Blue Shield, United Health Care plan or their subsidiaries in that state as well. Vouchers change nothing if the market is not free.   
  There is also no assurance that a voucher would be sufficiently subsidized to give seniors the ability to afford a policy that would offer benefits similar to the current ones.    The amount of those subsidies is critical since insurance policies issued just for seniors would be very expensive. Senior care costs most because it covers deteriorating health. 
                The greatest beneficiaries of GOP policies would be the private insurers, who would be freed to charge an administrative markup, to set anti-competitive prices, and limit care to increase their profit margins. Without  free market competition there is nothing in the GOP plan to control costs except by reducing subsidies.   Without addressing these realities, those younger than 55 would either be the biggest losers or the deficit would still be their problem.
    Data on the lack of competition in the health insurance industry is from a study released in Feb 2010 conducted by the American Medical Association.  From an AMA press release:

AMA Study Shows Competition Disappearing in the Health Insurance Industry

For immediate release:
Feb. 23, 2010

CHICAGO – Competition in the health insurance industry is disappearing with more markets across the country dominated by one or two insurers, according to the American Medical Association’s newly released edition of Competition in Health Insurance:  A Comprehensive Study of U.S. Markets.
In 24 of the 43 states reported in the new AMA report, the two largest insurers had a combined market share of 70 percent or more.  Last year, just 18 of 42 states had two insurers with a combined market share of 70 percent or more.
“The near total collapse of competitive and dynamic health insurance markets has not helped patients,” said AMA President J. James Rohack, M.D. “As demonstrated by proposed rate hikes in California and other states, health insurers have not shown greater efficiency and lower health care costs. Instead, patient premiums, deductibles and co-payments have soared without an increase in benefits in these increasingly consolidated markets.”
The new AMA study analyzed 43 states and 313 metropolitan markets against an index used by federal regulators for measuring market concentration. Markets that rate “highly concentrated” according to the federal index are areas of the country where insurer consolidation may have harmful effects on patients, physicians, employers and the economy.
By reviewing enrollments in private health maintenance organizations (HMOs) and preferred provider organizations (PPOs), the new AMA study found:
  • Ninety-nine percent of metropolitan markets are “highly concentrated” according to federal merger guidelines (up from 94 percent metropolitan markets the year before).
  • In 54 percent of metropolitan markets, at least one insurer had a market share of 50 percent or greater (up from 40 percent of metropolitan markets the year before).
  • In 92 percent of the metropolitan markets, at least one insurers had a market share of 30 percent or greater (up from 89 percent of metropolitan markets the year before).
“An absence of competition in health insurance markets is clearly not in the best economic interest of patients,” said Dr. Rohack. “The AMA has urged the Department of Justice (DOJ) and state agencies to more aggressively enforce antitrust laws that prohibit harmful mergers.”
To restore a competitive balance to health insurance markets, the AMA has also urged the DOJ to consider the following steps:
  • Perform a retrospective study of health insurance mergers similar to that performed by the Federal Trade Commission on hospital mergers;
  • Commission new research to identify causes and consequences of health insurer market power; and
  • Create a system for predicting the effects health insurer mergers will have on consumer and provider markets.
Competition in Health Insurance: A Comprehensive Study of U.S. Markets is free to AMA members. Non-members can purchase the study for $150. To order the study, please visit the AMA Bookstore online, or call (800) 621-8335 and mention AMA Bookstore item number OP427109.