On a recent visit to Prague, long overdue among many travels within Europe, I learned that Smetana's "The Moldau" is the unofficial musical anthem of the Czech Republic. There is a lot of Prague's history and civic personality caught up in that observation. First, the music: nowhere else, anywhere among the many places I've visited, is music so appreciated and so ubiquitous...on the streets, in the many squares filled with tourists from around the globe...and especially in the many baroque churches and oratories at night...at least a dozen offerings within a few steps...every night.
Moldau is the German name for the river which brought Prague to life many centuries ago, The Czechs call it the Vltava. The Czech language is a complex Slavic tongue (the furthest West edge of the Slavic blanket of Eastern Europe) that was repressed during the long Hapsburg rule. Only German could be taught in schools and spoken in official public discourse. The ultra-Catholic Hapsburgs were no less intolerant of the strong underlying Protestant theme among the native Czechs. The Peace of Westphalia's cujus regio, ejus religio was in effect in Prague. Finally, the place itself draws its name from the Czech word for "steps", praha, wooden beams across a very shallow ford in the river that brought traders and settlers to this place at its beginning.
Once a major capital, in its own right and as a key center of the Empire, and home to the ancient Charles University (1342), Prague is now a UNESCO World Heritage site. While this intends to capture its medieval, Renaissance, and Baroque architecture and human sense of scale in the older parts of the city, there is a sadness in the sacrifice this makes in stilting its ability to grow and evolve as the rest of the world moves well beyond those eras...like a precious gem whose beauty can never escape its setting. Still a few art deco landmarks and even a daring Frank Gehry building are to be found.
Like a form of temporal bookends, the gleaming Vaclav Havel airport and the King Vaclav (Wenceslaus...of Christmas carol fame) statue mark the boundaries (in time and in geography) of what most visitors see. The most famous strutures, Hradcany Castle (literally the castle on the hill, overlooking the main town) and the monument-festooned Charles Bridge, crossing the river, are overrun by tourists, but still well-worth the obligatory visits. More serene, but in a chilling way, is the nearly abandoned Jewish Quarter, with two synagogues and an incredible, small cemetery, with many layers of gravestones stacked upon each other, marking thousands and thousands of graves of the Prague Jews who were not permitted burial grounds elsewhere. The Nazi invaders exterminated the last of Prague's Jews and those dead have no markers. Only a few Jews have taken up residence since, but solemnly preserve remembrance of the places of their forebears.
As you leave the Jewish Quarter you emerge onto very fashionable Pariser St., where elegant shops and restaurants lead you to the central square of the old town. If you look back, however, across the river, and up a gentle hill, you see a very large Metronome, in constant motion, occupying the site of a long since removed monument to Stalin. One is thus reminded that yet another great historical event occurred at this place: the short-lived Prague Spring of 1968, twenty years too early to witness the final collapse of Communism (at least in Europe). Where it had once been a crime to be without a job (no bourgeois rentiers allowed!), the Metronome sways in permanent mockery of a system where everyone "worked" but no real work was ever done.
Saturday, May 24, 2014
Monday, April 28, 2014
Millions of Tulips
Early spring in Istanbul brought many surprises, the most visually stunning being the blaze of masses of bright tulips...everywhere, in parks, on roadsides, at every freeway interchange, at every tourist destination. There are several themes at work here...from the modernization and beautification that Istanbul has enjoyed in the 14 years since our first visit to the deliberate echoes of the annual festival of tulips presided over by the Ottoman Sultans. The Turks had brought the tulip from its origins in Central Asia to the Mediterranean world and thence to the famous tulip fields of Holland. To achieve the new tulipomania of Istanbul, vast numbers of bulbs had to be re-imported from The Netherlands.
Many attribute the recent economic developments in Turkey... and maybe Istanbul's beautification... to the efforts of its Prime Minister, Reccep Tayip Erdogen, who had previously served as Istanbul's mayor. We arrived on the day of recent lower office elections, which Mr. Erdogan's party won convincingly. From the perspective of many in the West, this seems an uncomfortable confirmation of trends toward a stronger Islamic civic tone and away from the emphatically secular state that Kemal Attaturk bequeathed to Turkey a century ago. I suspect that, most important long term, will be Turkey's ability to continue to advance economically, bringing its large (72 million) and well educated population further into a leading position among largely Islamic countries. But, even more is at stake, I think, in the hearts of Turkish voters. As it has done since Mehmet conquered Constantinople in 1453, Turkey will continue to straddle Europe and Asia. And the city on the Bosporus may once again be among the most influential places on the earth, providing the pivot for East and West...as it has done for most of the past 2000 years.
A little tidbit for my tax policy interested friends: we learned that there is little "tax-awareness" in Turkey. All end consumer prices include VAT, but with no identification of how much it is; and all salaries and wages are quoted in post-tax terms. If you are told that your compensation is to be, say, 4000 Turkish Lira a month, that's what your net paycheck will show...4000TL. While merchants and employers must, of course, be aware of the tax payments they forward on to the revenue authorities, the larger population can easily ignore what tax burden is being carried by the economy as a whole. This of course diminishes the discipline on that tax burden that popular sentiment can provide. Lessons here for the US, where half of all taxpayers pay no federal income tax?
In an interesting coincidence with Republic Day in India this January, election day in Turkey is alcohol free. The FPSB Board's dinner gathering that evening had to be held in a private suite and be served by room service. Even the hotel's public venues weren't permitted to serve that day. Further in response to strict Islam's disdain for alcohol, none can be purchased after 10PM. and no advertising is permitted.
Another surprise to us was how reminiscent parts of Istanbul are of San Francisco. Somehow, on our earlier trip, we have missed the similarities: water...and water craft of all descriptions... in several directions, many hills, grand bridges, and some palm trees looking a little out of place in the quite cool spring climate.
After a week of FPSB meetings, we did have one day to revisit some of the classic tourist sites. My favorite was Aya Sofia (Hagia Sophia in Constantinople days), once the mother church of Eastern Christendom and then the chief mosque of the Ottoman Caliphate, now a museum, much cleaner and with a much tonier tourist entrance than on the first visit 14 years earlier. With the benefit of our tour guide, Onur, I learned much more about the stupendous building itself and its interiors and its history than I had believed I already knew. Onur also took us on our first real visit to Topkapi, the surprisingly modest and very pragmatic palace grounds of the Sultans (before they moved to Dolmabache, built in emulation of the Versailles-inspired royal residences of Western Europe). Commanding the tip of the old city's peninsula, where the Sea of Marmara, the Golden Horn, and the Bosporus converge, Topkapi resembles a collection of tent-like structures, arranged in an apparent haphazard fashion...no grand avenues or symmetrical placements...much more like an encampment of nomads, reflecting the conquering Turks' origins on the Asian steppes. From the old: an obligatory visit again to the Grand Bazaar...maybe the world's first covered shopping mall, where, on the visit in 2000, we bought the carpet we now have in our Santa Barbara living room; this time we were determined not to purchase anything that couldn't be easily added to carry-on luggage... to the new: a museum of contemporary Turkish art - all the works are by Turkish artists - in a set of repurposed warehouse buildings next to the Bosporus.
Many attribute the recent economic developments in Turkey... and maybe Istanbul's beautification... to the efforts of its Prime Minister, Reccep Tayip Erdogen, who had previously served as Istanbul's mayor. We arrived on the day of recent lower office elections, which Mr. Erdogan's party won convincingly. From the perspective of many in the West, this seems an uncomfortable confirmation of trends toward a stronger Islamic civic tone and away from the emphatically secular state that Kemal Attaturk bequeathed to Turkey a century ago. I suspect that, most important long term, will be Turkey's ability to continue to advance economically, bringing its large (72 million) and well educated population further into a leading position among largely Islamic countries. But, even more is at stake, I think, in the hearts of Turkish voters. As it has done since Mehmet conquered Constantinople in 1453, Turkey will continue to straddle Europe and Asia. And the city on the Bosporus may once again be among the most influential places on the earth, providing the pivot for East and West...as it has done for most of the past 2000 years.
A little tidbit for my tax policy interested friends: we learned that there is little "tax-awareness" in Turkey. All end consumer prices include VAT, but with no identification of how much it is; and all salaries and wages are quoted in post-tax terms. If you are told that your compensation is to be, say, 4000 Turkish Lira a month, that's what your net paycheck will show...4000TL. While merchants and employers must, of course, be aware of the tax payments they forward on to the revenue authorities, the larger population can easily ignore what tax burden is being carried by the economy as a whole. This of course diminishes the discipline on that tax burden that popular sentiment can provide. Lessons here for the US, where half of all taxpayers pay no federal income tax?
In an interesting coincidence with Republic Day in India this January, election day in Turkey is alcohol free. The FPSB Board's dinner gathering that evening had to be held in a private suite and be served by room service. Even the hotel's public venues weren't permitted to serve that day. Further in response to strict Islam's disdain for alcohol, none can be purchased after 10PM. and no advertising is permitted.
Another surprise to us was how reminiscent parts of Istanbul are of San Francisco. Somehow, on our earlier trip, we have missed the similarities: water...and water craft of all descriptions... in several directions, many hills, grand bridges, and some palm trees looking a little out of place in the quite cool spring climate.
After a week of FPSB meetings, we did have one day to revisit some of the classic tourist sites. My favorite was Aya Sofia (Hagia Sophia in Constantinople days), once the mother church of Eastern Christendom and then the chief mosque of the Ottoman Caliphate, now a museum, much cleaner and with a much tonier tourist entrance than on the first visit 14 years earlier. With the benefit of our tour guide, Onur, I learned much more about the stupendous building itself and its interiors and its history than I had believed I already knew. Onur also took us on our first real visit to Topkapi, the surprisingly modest and very pragmatic palace grounds of the Sultans (before they moved to Dolmabache, built in emulation of the Versailles-inspired royal residences of Western Europe). Commanding the tip of the old city's peninsula, where the Sea of Marmara, the Golden Horn, and the Bosporus converge, Topkapi resembles a collection of tent-like structures, arranged in an apparent haphazard fashion...no grand avenues or symmetrical placements...much more like an encampment of nomads, reflecting the conquering Turks' origins on the Asian steppes. From the old: an obligatory visit again to the Grand Bazaar...maybe the world's first covered shopping mall, where, on the visit in 2000, we bought the carpet we now have in our Santa Barbara living room; this time we were determined not to purchase anything that couldn't be easily added to carry-on luggage... to the new: a museum of contemporary Turkish art - all the works are by Turkish artists - in a set of repurposed warehouse buildings next to the Bosporus.
Monday, February 17, 2014
New Delhi...a third visit
I'm going to stop counting visits to India since I'm now certain I'll be back again, maybe several times, for business, culture, development work, and of course just to experience more of this hugely fascinating country. I haven't yet seen the Taj Mahal, or taken a tiger safari, or been to the beaches of Kerala... But I did get around enough this time to visit Lodi Gardens on the Republic Day holiday (more on that special day, below) and spent time in both Hindu temples and the great Sikh shrine, Bangla Sahib.
My visit this January was primarily to participate in a Board meeting of The Asia Foundation in New Delhi. I learned, first hand, about the gigantic challenges facing TAF's small India staff as they try to foster several key goals:
- South Asian regional cooperation, particularly regarding shared water resources and movement toward much more robust free inter-regional trade (cross border trade accounts for only 5% of India's GDP!);
- Fighting the deeply rooted culture of corruption, promoting a more open and accountable government at all levels; and
- Enhancing women's security and civil participation.
India's internal politics are very much in the current news as the center-left Congress party looks poised to lose upcoming national elections. But, regardless of that outcome, a more interesting perspective that I learned was that India's current parliamentary system is built on old census data, reflecting a 80/20 rural/urban population. Current data suggest that urban populations are now approximately 37% and growing to 45% soon. Combined with an average 7% GDP growth over the past 15 years, while the population has grown at only a 1.5% rate, this yielded a much larger, on average very much richer, and more demanding urban population, but with far from adequate urban infrastructure to cope with that growth and insufficient incentives to encourage private investment response. The good news is that that growing and relatively wealthy urban population will no longer tolerate local municipal governments' lack of accountability and will force reallocation of revenue from the national and state governments to the 3rd, municipal tier.
Women's Empowerment
Among the most disheartening facts of the Indian cultural landscape is the frequency of violence against women and girls. This has too many ramifications and symptoms to pursue in this little post, but I'll share some things that have especially struck me. First, this is a dynamic moment for change, due to the disgust that the vast majority of Indians feel in response to these problems and their shame from the worldwide publicity around recent incidences of gang rape. We learned of a program called "Ring the (door) Bell!" "Bell Bajao!", encouraging neighbors to exert strong peer pressure against abusive treatment.
Some of the problem stems from the demographic disproportions caused by female fetal abortion and female infanticide, to avoid dowry obligations at the outset; but also from early (very early) child marriages (though illegal, there are some 300,000/yr.) so that dowry requirements are still small.
Another area of hope is how rapidly even long entrenched cultural artifacts can change given how young the population is (70% under 35) and the ubiquity of social media information flow as well as well organized, direct outreach to men and, especially, boys.
South Asian Geopolitics
India's regional foreign policy is burdened (somewhat like the US, globally) by its relative size and power. It also faces real or perceived threats from two large neighbors, Pakistan and China. It is looking for common ground with other Asian countries and Australia and New Zealand in counterweight to China's exertion of power and influence. In this it sees an opportunistic relationship of cordiality with the US.
A novel suggestion proposed was the development of a United States of South Asia, some sort of grand, federal union, with important economic and foreign relations authority lodged in a central government...whose capital would need to be somewhere other than in India. Colombo, perhaps!?!
This development of rapport with other Asian countries was prominently on display at the great Republic Day celebration, where Japanese Prime Minister, Abe, was the Honored Guest for ceremonial wreath laying and parade review.
Republic Day is the annual celebration of the adoption of the Indian Constitution on January 26, 1950. On one of only three "dry" days in the year (one of the others is Mahatma Gandhi's birthday), millions of people turn out along Rajpath to watch the great military parade of dazzling troops, marching bands, tanks and rocket launchers, aerial fly-bys, and surprisingly quaint floats representing various regions/peoples/and customs of India. Our TAF group was supposed to have reserved seated viewing, but as we approached our section, we were shrugged-off by guards and officials who explained that some others had simply commandeered them before we arrived. Whether we were naively unaware of bribery opportunities or just the victims of more highly placed usurpers, we'll never know, but we did get standing room, about 20 ranks deep, and the tallest of us actually saw much of the parade. Sadly, I have no pictures, since we were warned not to bring smart phones or cameras (very perfunctory pat-downs did occur); but once in the enclosure, many locals produced their recording devices and flashed away unabashedly.
CFP Certification in India
I also had an opportunity to speak to a group of about 80 CFP practitioners and students in CFP education programs. As everywhere in Asia, there is great eagerness in India to acquire sophisticated planning skills to match the enormous and growing need for financial guidance. As literally hundreds of millions of people accumulate disposable financial resources and face more complex choices, there is huge thirst for clues to building successful and durable businesses to respond to the market opportunity. I hope my comments that day, like my conversations with a number of firms during my last visit to Mumbai and Delhi and Bangalore in 2012 were intended to do, helped to satisfy a small part of the entrepreneurialism coursing through the fledgling planning profession in India.
Sunday, February 2, 2014
Beauty and Horror: A visit to Sri Lanka
The title was taken from a recent commentator on visiting Sri Lanka while the war between the dominant Sinhalese and the breakaway Tamil Tigers was still underway. The war, the horror part, came to an end in 2009, as a result of a crushing defeat of the Tamils by forces loyal to the current President/Stongman, Mahinda Rajapaksa. Some would say that it was much more than a defeat, but a slaughtering of several thousands of unarmed, already surrendered combatants. In any event, even such horror was only a culmination of 30 years of destruction and civil unrest. And, more horror, the great tsunami of December 2004 hit Sri Lanka nearly as hard as it did Thailand and Sumatra. The whole country was exhausted and wishes all of that past.
Much reconciliation is strenuously underway and large sums are being spent to rebuild the north and east of the country (Tamil territory) and to ameliorate long-standing oppression of the Tamil minority. This reconciliation effort is drawing inspiration and technical support from South Africa's famous "Truth and Reconciliation" experience. To the mind of some in the West (particularly the US State Department), this effort is not yet adequate and much truth is still not revealed. Our group of Asia Foundation Trustees was treated to an hour long "conversation" with the Sri Lankan Foreign Minister (he spoke for about 55 minutes of that hour) where he was eager to decry what his Government views as the disproportionately negative stance by the US and its impatience with Sri Lanka's efforts to bring thing right. "You abolished slavery 150 years ago...and look what problems you still have. Our war ended only 5 years ago". In so many words..."Give us a break!"
Meanwhile, Rajapaksa and several brothers and his son run the country in a form of family despotism. The government is formally a democracy and the regime could theoretically be ousted, but the majority Sinhalese are reasonably content. More disturbing: dissent is suppressed, political opponents are assassinated, and religion (think rampaging Buddhist monks) is used to alienate minority Christians. To many Western observers, the rule of law and civil rights seems greatly threatened; to most Sri Lankans, this is much better than war. Their economy is, for the region, strong. Per capita GDP is at $6200/yr, on the verge of the middle range of all countries. Poverty and unemployment are low. Some say that Sri Lanka's 300,000-strong military (from a total population of only 20Million) is not only designed to support the Rajapaksa authority but as a full-employment tactic. Literacy and access to quality health care is high. In contrast to most places in India, for example, the streets are clean, there are no beggars, traffic moves in well-behaved fashion (people actually use turn signals and honking is rare!).
The modern world has caught up with Sri Lanka demographically as well: birthrates are less than at replacement levels. Whether this bodes well or ill for the country depends largely on what the giant players in the region (China and India) do to play Sri Lanka's position to their respective advantage. If, as the regime hopes, Sri Lanka becomes a Singaporean style, value-adding entrepot on the key Indian Ocean sea lanes, a small, highly educated, English speaking population can be a huge advantage. Remaining a "colonial-style" economy, reliant on raw materials exports (tea, rubber, coconut oil and fibre) would leave little room for success in an increasingly competitive world. The Chinese are investing heavily in iconic infrastructure (the new highway from the airport to Colombo, major sports stadium, new ocean port, several world class resort hotels and casinos, repairing the ring railroad built by the British and largely destroyed by the tsunami). India plays little visible role; but, immense and close, it's hardly ignored. The US plays a very subtle role, promoting good governance, free trade policy, and regional cooperation. Not sure that's a match for the swank new cricket grounds, Rajapaksa Stadium, built by Sri Lanka's friends in China.
But, it's only in recent times that the country has been in control of itself. First the Portuguese, then the Dutch ("Zeilan"), and then the British ("Ceylon"), each for about 150 years of colonial dominance and exploitation of spices (cinnamon) and tea (originally coffee, until the coffee plantations were wiped out by a blight). The Europeans left some of their religion (many Christian churches in Colombo), massive colonial administrative structures (especially the British, at their 19th Century zenith), and highly sought after private schools, And they left some of their names, or so at least the Portuguese, who apparently didn't worry about intermarriage like their more uptight northern European cousins; Da Souza, Pereira, De Silva, Fernandino are not uncommon.
I began with horror, let me end with beauty. Island Sri Lanka is green, lush, surrounded by beaches, with a central highland of mist covered hills where, some say, the world's finest teas grow and cinnamon bark is harvested to sweeten the lives of many millions everywhere in the world.
Saturday, November 9, 2013
The Affordable Care Act...Yet Again
The recent failures of the government's "Obamacare" website, combined with the avalanche of existing policy cancellations prompts me to comment on the Affordable Care Act (ACA) once again. Readers of these posts know that I comment on many other things, most of them pleasant. But few present such a compelling combination of important need and bad policy response as this sad topic.
My initial post (March 3, 2010, while the debate in Congress was still underway) tried to walk a path through possible features of a legislative package that could have achieved bi-partisan support (as opposed to what we got...a law enacted without even one Republican vote) and have begun a process of re-orienting the mentality about insuring health care risks, instead of more deeply entrenching the current faulty mentality. Let me continue, 3 and a half years later, with describing the important need and then go on to the better policy response we could still have.
Noble Aims; Bad Strategy.
Almost everyone would agree that American medicine (procedures, hospitals, personnel, and pharmaceuticals) is, in the aggregate, the best in the world and, though imperfectly, very well distributed across a very large and diverse population. No other country anywhere close to the size of the United States does nearly so good a job providing best possible healthcare to so many people. This is not an accident. It stems, I am convinced, from both a strong capitalist system of rewards for excellence and a very robust system of private insurance that can highly customize its offerings and pricing to the preferences, risks, and pocketbooks of independent consumers.
But, while that robust private insurance market is generally a very good thing, the risk calculus is so good that insurers can too easily choose to cover only relatively low risk consumers. This was one of the key objectives of ACA: to force insurers to cover all comers, regardless of pre-existing conditions, with a minimum scope and level of covered services. One of ACA's biggest mistakes is to make that "minimum level and scope" too high and too broad...much more than many highly rational consumers would in fact choose for themselves. So, while forcing insurers and consumers to do something was probably an essential part of the law, ACA is forcing them to do the wrong thing. More on that below.
The other major problem with the pre-ACA health care insurance system is that too many very young and currently very healthy people have opted out entirely, forcing the risk pool to be too heavily tilted toward relatively high risk consumers. Those many "millions of uninsured people" that make for great political sound-bites are mostly young, healthy people that heretofore have made a currently rational decision not to be insured. Getting them into the risk pool to reduce premium costs for everyone is the second key objective of ACA. We should carefully ponder whether our society should impose this generational wealth shift from the young to the old (like similar wealth transfers involved in Social Security and Medicare), so let's at least acknowledge that that is what's going on here; we can debate the wisdom of doing so at some other time. But, if that is what we believe we must do, we have to provide the appropriate motivation to do so. Since the Supreme Court narrowly upheld ACA on the power of Congress to tax (again despite ACA's proponents strenuously assuring the public...and maybe even deluding themselves...in 2010 that there was no such thing at work; see blog post of July 1, 2012), Congress should have done the taxing right. As it is, many of the young and healthy will very rationally submit to a modest tax rather than pay substantially greater premiums.
Better Policy Choices.
The fundamental problem with ACA is that it continues an approach based on "first dollar" medical insurance. Without large deductibles or co-pays in first dollar insurance programs, persons who are in fact medically needy or just so-inclined, are not subject to the normal cost-disciplines about the amount or the character of the services they seek. That's fine, so long as individuals are willing to pay for such luxurious insurance coverage. But to have mandated first dollar insurance coverage - and for an expanded scope and level of "minimum coverage" - was a mistake, particularly since the tax imposed on those who refuse to buy it is far too small. People are not stupid. The millions of young, healthy persons who heretofore have left themselves uninsured are mostly going to continue to do so and pay a small tax rather than pay a much larger premium. Without getting those many low risk people to participate in the pool, the pricing mechanism will force premiums much higher on the older, less healthy, more needy parts of the population. The young/healthies are not going to just play along from a sense of social altruism.
So, if "first dollar" insurance doesn't impose usage discipline, thus forcing usage ...and costs...higher than they need to be and if we're going to tax people sufficiently to make them join the pool to keep even those costs down, what's better? Mandating "last dollar" coverage for everyone...young, old, healthy, and ill...with no coverage exclusions or pre-existing conditions limitations...and taxing anyone who doesn't buy such coverage in an amount that exceeds the premium charge. Since such coverage would only apply to costs above a high threshold, it would be relatively cheap, especially with all those young/healthies in the pool who will almost never get to their ceilings. The penalty tax wouldn't have to be very big to get people to buy the insurance so they can avoid tax.
With that "last dollar" mandated health care insurance regime, our society cures at least one of the greatest ills that now plagues us...the fact that some people are forced to exhaust all their other assets or are even bankrupted by extreme cases of health care costs. Even more importantly, we can gradually shift everyone's expectations about access to basic or pre-catastrophic health care to a more rationally priced system based on actual supply and demand. We rely on self interest and individuals' budget constraints to ration virtually all other goods and services. There is no fundamental difference here with health care. The rich will always get more and better, as they do in everything else; and for those who can afford it or are willing to sacrifice other consumption, most people will be able to buy some version of pre-catastrophic coverage, if they want it. Many people will, rationally, opt out or purchase only the thinnest coverage. That may not be what the more paternalistic among us would prefer, but it is thoroughly consistent with the preferences for free consumer choice we generally hold sacred.
So, the problem in November 2013 is not in the debacle of the healthcare.gov website nor with the President's and the Democratic Congressional majorities' failure to tell the whole truth to the American people when ACA was becoming law in 2010. The problem was and is its having adopted the wrong strategy. Forget about fixing the website; let's fix the strategy!
My initial post (March 3, 2010, while the debate in Congress was still underway) tried to walk a path through possible features of a legislative package that could have achieved bi-partisan support (as opposed to what we got...a law enacted without even one Republican vote) and have begun a process of re-orienting the mentality about insuring health care risks, instead of more deeply entrenching the current faulty mentality. Let me continue, 3 and a half years later, with describing the important need and then go on to the better policy response we could still have.
Noble Aims; Bad Strategy.
Almost everyone would agree that American medicine (procedures, hospitals, personnel, and pharmaceuticals) is, in the aggregate, the best in the world and, though imperfectly, very well distributed across a very large and diverse population. No other country anywhere close to the size of the United States does nearly so good a job providing best possible healthcare to so many people. This is not an accident. It stems, I am convinced, from both a strong capitalist system of rewards for excellence and a very robust system of private insurance that can highly customize its offerings and pricing to the preferences, risks, and pocketbooks of independent consumers.
But, while that robust private insurance market is generally a very good thing, the risk calculus is so good that insurers can too easily choose to cover only relatively low risk consumers. This was one of the key objectives of ACA: to force insurers to cover all comers, regardless of pre-existing conditions, with a minimum scope and level of covered services. One of ACA's biggest mistakes is to make that "minimum level and scope" too high and too broad...much more than many highly rational consumers would in fact choose for themselves. So, while forcing insurers and consumers to do something was probably an essential part of the law, ACA is forcing them to do the wrong thing. More on that below.
The other major problem with the pre-ACA health care insurance system is that too many very young and currently very healthy people have opted out entirely, forcing the risk pool to be too heavily tilted toward relatively high risk consumers. Those many "millions of uninsured people" that make for great political sound-bites are mostly young, healthy people that heretofore have made a currently rational decision not to be insured. Getting them into the risk pool to reduce premium costs for everyone is the second key objective of ACA. We should carefully ponder whether our society should impose this generational wealth shift from the young to the old (like similar wealth transfers involved in Social Security and Medicare), so let's at least acknowledge that that is what's going on here; we can debate the wisdom of doing so at some other time. But, if that is what we believe we must do, we have to provide the appropriate motivation to do so. Since the Supreme Court narrowly upheld ACA on the power of Congress to tax (again despite ACA's proponents strenuously assuring the public...and maybe even deluding themselves...in 2010 that there was no such thing at work; see blog post of July 1, 2012), Congress should have done the taxing right. As it is, many of the young and healthy will very rationally submit to a modest tax rather than pay substantially greater premiums.
Better Policy Choices.
The fundamental problem with ACA is that it continues an approach based on "first dollar" medical insurance. Without large deductibles or co-pays in first dollar insurance programs, persons who are in fact medically needy or just so-inclined, are not subject to the normal cost-disciplines about the amount or the character of the services they seek. That's fine, so long as individuals are willing to pay for such luxurious insurance coverage. But to have mandated first dollar insurance coverage - and for an expanded scope and level of "minimum coverage" - was a mistake, particularly since the tax imposed on those who refuse to buy it is far too small. People are not stupid. The millions of young, healthy persons who heretofore have left themselves uninsured are mostly going to continue to do so and pay a small tax rather than pay a much larger premium. Without getting those many low risk people to participate in the pool, the pricing mechanism will force premiums much higher on the older, less healthy, more needy parts of the population. The young/healthies are not going to just play along from a sense of social altruism.
So, if "first dollar" insurance doesn't impose usage discipline, thus forcing usage ...and costs...higher than they need to be and if we're going to tax people sufficiently to make them join the pool to keep even those costs down, what's better? Mandating "last dollar" coverage for everyone...young, old, healthy, and ill...with no coverage exclusions or pre-existing conditions limitations...and taxing anyone who doesn't buy such coverage in an amount that exceeds the premium charge. Since such coverage would only apply to costs above a high threshold, it would be relatively cheap, especially with all those young/healthies in the pool who will almost never get to their ceilings. The penalty tax wouldn't have to be very big to get people to buy the insurance so they can avoid tax.
With that "last dollar" mandated health care insurance regime, our society cures at least one of the greatest ills that now plagues us...the fact that some people are forced to exhaust all their other assets or are even bankrupted by extreme cases of health care costs. Even more importantly, we can gradually shift everyone's expectations about access to basic or pre-catastrophic health care to a more rationally priced system based on actual supply and demand. We rely on self interest and individuals' budget constraints to ration virtually all other goods and services. There is no fundamental difference here with health care. The rich will always get more and better, as they do in everything else; and for those who can afford it or are willing to sacrifice other consumption, most people will be able to buy some version of pre-catastrophic coverage, if they want it. Many people will, rationally, opt out or purchase only the thinnest coverage. That may not be what the more paternalistic among us would prefer, but it is thoroughly consistent with the preferences for free consumer choice we generally hold sacred.
So, the problem in November 2013 is not in the debacle of the healthcare.gov website nor with the President's and the Democratic Congressional majorities' failure to tell the whole truth to the American people when ACA was becoming law in 2010. The problem was and is its having adopted the wrong strategy. Forget about fixing the website; let's fix the strategy!
Friday, August 9, 2013
Lessons from Motown
In law school in Ann Arbor in the early '70's, I traveled frequently from the then center of my universe, Chicago, into an outer orbit of the city of Detroit. I learned that Ann Arbor was not just the home of the University of Michigan; parts of it also served as a very swank distant suburb of the motor city metropolis 40 miles away. The newspaper, radio, broadcast television (no cable then) all emanated from Detroit. Visiting friends or just getting away from the college town into the "big city" brought me to Detroit many times. But, even more than forty years ago, Detroit seemed to me(in part by comparison to Chicago) smallish, grimy, not very sophisticated, racially and economically segregated, still reeling, more than other cities, from the riot era of the '60's, without much architectural interest, and, despite Lake Huron (out of sight) to the north and Lake Erie (out of sight) to the south, without much natural beauty.
At that time, of course, I had no inkling of the impacts that gigantic changes in the auto industry, enormous white flight, and bad municipal government policy choices would have in the coming decades, but somehow, even then, I sensed that Detroit was well past its prime, with little basis for resurgence. The recent bankruptcy filing seems almost an inevitable ignominy. One can hope that the beginning of pioneering regentrification amid the wasteland of abandoned infrastructure truly takes hold. The outcomes of the bankruptcy will probably help.
I have only a little to add to the many comments that this bankruptcy has spawned. There will be important lessons for municipal bond issuers and investors. The compromises that will likely make their way to the Supreme Court for resolution will, I suspect, be a healthy recalibration of municipal securities pricing and risk assessment and more alert differentiation between bonds serviced by specific revenues and those relying on general tax revenues. Students of constitutional law will have much new material to fit into the constructs of federalism and notions of "full faith and credit". And governments, elsewhere, may now have some greater cover for taking serious action to better manage their own finances...and, one hopes, greater incentive.
Detroit reflects an almost complete failure of the political solution. Politicians were too much beholden to municipal worker unions, promising current and deferred compensation and benefits that were not ultimately affordable, but with no incentive to discipline the process. Tax payers and rate payers had no effective voice in the transaction...and besides, the bill would come due far into the future; the votes are today. So, a resolution by the bankruptcy court, setting the current accounts right and re-organizing pensions and retiree healthcare contracts, becomes the default choice, forcing some degree of pain on everyone involved. Maybe, other cities and states, running huge current deficits and facing mountains of underfunded future obligations will take note, so the pain is perhaps less and the allocation of the pain is subject to some greater political maneuvering while there's still time. One hopes that, in the aggregate, we've elected officials who, however painful it may be for them, would rather be in control of the result than be its victims.
While I'm skeptical, maybe there's even a lesson here for the federal government about taking control of deficits and unfunded or underfunded obligations. Unlike cities and states, the federal government has the unique outlet of virtually limitless debt. Why be disciplined?...we can always borrow more and then just print the money to pay back the lenders. There are some respectable economic commentators who would leave the discussion at that. So long as the US Dollar is the world's reserve currency and so long as there is no significant inflation, there really is no limit to how much money the US can create. Why worry? Well, I 'm concerned that, in time, both of those conditions, no inflation and being the reserve currency, could deteriorate, with "no inflation" being the first to go. There is no bankruptcy court to take the US government to the woodshed. The solution must either be political, with compromises and painful discipline applied internally, or someday, market forces (unwilling bond buyers and competing, more reliable currencies) may have to apply the discipline externally.
At that time, of course, I had no inkling of the impacts that gigantic changes in the auto industry, enormous white flight, and bad municipal government policy choices would have in the coming decades, but somehow, even then, I sensed that Detroit was well past its prime, with little basis for resurgence. The recent bankruptcy filing seems almost an inevitable ignominy. One can hope that the beginning of pioneering regentrification amid the wasteland of abandoned infrastructure truly takes hold. The outcomes of the bankruptcy will probably help.
I have only a little to add to the many comments that this bankruptcy has spawned. There will be important lessons for municipal bond issuers and investors. The compromises that will likely make their way to the Supreme Court for resolution will, I suspect, be a healthy recalibration of municipal securities pricing and risk assessment and more alert differentiation between bonds serviced by specific revenues and those relying on general tax revenues. Students of constitutional law will have much new material to fit into the constructs of federalism and notions of "full faith and credit". And governments, elsewhere, may now have some greater cover for taking serious action to better manage their own finances...and, one hopes, greater incentive.
Detroit reflects an almost complete failure of the political solution. Politicians were too much beholden to municipal worker unions, promising current and deferred compensation and benefits that were not ultimately affordable, but with no incentive to discipline the process. Tax payers and rate payers had no effective voice in the transaction...and besides, the bill would come due far into the future; the votes are today. So, a resolution by the bankruptcy court, setting the current accounts right and re-organizing pensions and retiree healthcare contracts, becomes the default choice, forcing some degree of pain on everyone involved. Maybe, other cities and states, running huge current deficits and facing mountains of underfunded future obligations will take note, so the pain is perhaps less and the allocation of the pain is subject to some greater political maneuvering while there's still time. One hopes that, in the aggregate, we've elected officials who, however painful it may be for them, would rather be in control of the result than be its victims.
While I'm skeptical, maybe there's even a lesson here for the federal government about taking control of deficits and unfunded or underfunded obligations. Unlike cities and states, the federal government has the unique outlet of virtually limitless debt. Why be disciplined?...we can always borrow more and then just print the money to pay back the lenders. There are some respectable economic commentators who would leave the discussion at that. So long as the US Dollar is the world's reserve currency and so long as there is no significant inflation, there really is no limit to how much money the US can create. Why worry? Well, I 'm concerned that, in time, both of those conditions, no inflation and being the reserve currency, could deteriorate, with "no inflation" being the first to go. There is no bankruptcy court to take the US government to the woodshed. The solution must either be political, with compromises and painful discipline applied internally, or someday, market forces (unwilling bond buyers and competing, more reliable currencies) may have to apply the discipline externally.
Monday, July 29, 2013
A Novel Approach to Tax Reform: a True "Maximum Tax"
Sadly, any real attempts at tax "reform" seem to have faded from the current political agenda. Both sides of the debate (lower rates, but broader base, on the one side, and higher rates for top incomes and fewer "loopholes", on the other) seem now to be waiting for either a showdown over the debt ceiling or for the results of the 2014 Congressional elections to tip the scales one way or another. If you take out the common theme (broader base/fewer loopholes), you're left with the impasse of lower rates versus higher rates and no progress can occur given the current political balances and the nearly sacred ideologies underlying those polar views on rates. Sadly, no one seems to want to do the hard work of really developing that common theme so that those opposing ideologies wouldn't be so powerful.
Rep. Kevin Brady (R) Texas cited, in the May 6, 2013 Wall Street Journal, data that tends to inflame economic conservatives. Since 1980, the share of income taxes paid by the top 1% grew from 19.1% to 37.4%, while the share paid by the bottom 50% shrank from 7.1% to 2.4%. The biggest gripe is not really the change, but the end result: 1% of taxpayers pay close to 40% of the total burden while almost half the people pay none. But, of course, that's not the whole story. People at the bottom of the federal income tax ledger may be paying some state income tax and some property tax and are certainly paying sales taxes and (if employed) payroll taxes that account for a much larger share of their total income than those at the upper reaches of the income ledger. But, even that's not a complete picture. The relatively wealthy consume more and thus pay more sales tax and have more valuable houses and thus pay more real estate tax. Local variations on sales tax-exempt items and differentials in "homestead allowances" can make a really thorough and accurate comparison almost impossible.
So, maybe an answer is to approach the total revenue needs of various levels of government within the aggregate fairness notions that society, as a whole, can agree is appropriate. Maybe we could impose upper limits on the total tax that can be extracted, in the aggregate, from all these forms of taxation. I don't pretend that this would be easy. What is the measure? Income, assets, some combination? How would this be enforced? The already flawed "voluntary compliance" system can't easily be relied upon for an asset-based limitation. John Cochrane, finance professor at the Booth School at the University of Chicago (my business school alma mater...but long ago, before it was renamed in honor of David Booth's huge donation, but still with it's strong free market policy orientation) argues (April 15, 2013 Wall Street Journal) for applying this notion at least to the federal income tax take as a percentage of income. As an inviolate promise to entrepreneurs and risk-takers, innovators, and all people willing to work hard, the federal tax law would never take more than X% of income...no matter when the income occurs or how much it is. Once we would adopt that concept, we could then have an interesting, centrist debate about what that "X" should be. And, as a matter of fairness, on some notion that we're all in this together, I would add a true minimum, Y%. Again, we could have an interesting, centrist debate on how much that "Y" should be so that every income contributes at least a little to the common welfare.
Rep. Kevin Brady (R) Texas cited, in the May 6, 2013 Wall Street Journal, data that tends to inflame economic conservatives. Since 1980, the share of income taxes paid by the top 1% grew from 19.1% to 37.4%, while the share paid by the bottom 50% shrank from 7.1% to 2.4%. The biggest gripe is not really the change, but the end result: 1% of taxpayers pay close to 40% of the total burden while almost half the people pay none. But, of course, that's not the whole story. People at the bottom of the federal income tax ledger may be paying some state income tax and some property tax and are certainly paying sales taxes and (if employed) payroll taxes that account for a much larger share of their total income than those at the upper reaches of the income ledger. But, even that's not a complete picture. The relatively wealthy consume more and thus pay more sales tax and have more valuable houses and thus pay more real estate tax. Local variations on sales tax-exempt items and differentials in "homestead allowances" can make a really thorough and accurate comparison almost impossible.
So, maybe an answer is to approach the total revenue needs of various levels of government within the aggregate fairness notions that society, as a whole, can agree is appropriate. Maybe we could impose upper limits on the total tax that can be extracted, in the aggregate, from all these forms of taxation. I don't pretend that this would be easy. What is the measure? Income, assets, some combination? How would this be enforced? The already flawed "voluntary compliance" system can't easily be relied upon for an asset-based limitation. John Cochrane, finance professor at the Booth School at the University of Chicago (my business school alma mater...but long ago, before it was renamed in honor of David Booth's huge donation, but still with it's strong free market policy orientation) argues (April 15, 2013 Wall Street Journal) for applying this notion at least to the federal income tax take as a percentage of income. As an inviolate promise to entrepreneurs and risk-takers, innovators, and all people willing to work hard, the federal tax law would never take more than X% of income...no matter when the income occurs or how much it is. Once we would adopt that concept, we could then have an interesting, centrist debate about what that "X" should be. And, as a matter of fairness, on some notion that we're all in this together, I would add a true minimum, Y%. Again, we could have an interesting, centrist debate on how much that "Y" should be so that every income contributes at least a little to the common welfare.
How Much do we Really Know About Our Future with China?
In yesterday's (July 28, 2013) New York Times Sunday Review (page 5), an article by Richard Rosecrance of Harvard posits that China must come to grips with a "unified West", Europe and America, because of that aggregate's absolute economic size. Not only would such an economic union create extraordinary incremental wealth for it's participants, it would draw China (and other countries) toward it thru its economic gravitational pull. China needs the markets of the West for its exports and it needs raw materials imports, especially hydrocarbons and technology, to drive its internal engine. With that economic gravity would come, Rosecrance argues, an eventually more liberal and democratic political apparatus within China.
This perspective both argues strongly for a more closely economically unified "West" and offers a counterpoint to the fairly common view these days that China's economic ascendancy is both inevitable and largely unreliant on the existing, Western economic powers. That view is expressed, with something of a shudder, by Heriberto Araujo and Pablo Cardenal in the June 2, 2013 Sunday Review. There, they express the fear that China is determined to spread a form of "state capitalism", citing the huge investments China is making in natural resources and infrastructure around the world, but especially in the non-West geography of Africa and the Asian periphery. At the end, however, they come to the same conclusion...but, I think, with less hope for success...that China must adapt to the world, not the other way around. To do that, they would clearly agree with the fundamental Rosecrance premise, that it is "essential that Western governments stick to what has been the core of Western prosperity: the rule of law, political freedom, and fair competition".
In a neighboring piece in that June 2 edition, two voices that I respect enormously, Ian Bremmer and Jon Hunstman (Ambassador to China, 2009-2011, and once, and I hope future, Presidential candidate), argue that China and the US are locked in 21st Century form of MAD...mutually assured destruction...but this time of the economic variety. Both countries are entitled to a sense of "exceptionalism"...a right to make the rules, not just accept those laid down by others. The course they recommend, therefore, is perhaps the obvious one of tireless dialogue and some attempt at compromise, recognizing that both sides have limits to what they can impose on the other.
I would add another, hopeful, perspective: time. The West is typically in a hurry, China understands it operates on a much longer scale of events. Still, the imperatives of human nature, the freedom and prosperity that each individual (or family, or local community, or region) naturally desires probably outweighs the benefits of stability and harmony over time. Given enough time, the outcomes seem almost certain to me. But careful understanding, respect, and cooperation along the way will probably make that result occur sooner and with less risk
This perspective both argues strongly for a more closely economically unified "West" and offers a counterpoint to the fairly common view these days that China's economic ascendancy is both inevitable and largely unreliant on the existing, Western economic powers. That view is expressed, with something of a shudder, by Heriberto Araujo and Pablo Cardenal in the June 2, 2013 Sunday Review. There, they express the fear that China is determined to spread a form of "state capitalism", citing the huge investments China is making in natural resources and infrastructure around the world, but especially in the non-West geography of Africa and the Asian periphery. At the end, however, they come to the same conclusion...but, I think, with less hope for success...that China must adapt to the world, not the other way around. To do that, they would clearly agree with the fundamental Rosecrance premise, that it is "essential that Western governments stick to what has been the core of Western prosperity: the rule of law, political freedom, and fair competition".
In a neighboring piece in that June 2 edition, two voices that I respect enormously, Ian Bremmer and Jon Hunstman (Ambassador to China, 2009-2011, and once, and I hope future, Presidential candidate), argue that China and the US are locked in 21st Century form of MAD...mutually assured destruction...but this time of the economic variety. Both countries are entitled to a sense of "exceptionalism"...a right to make the rules, not just accept those laid down by others. The course they recommend, therefore, is perhaps the obvious one of tireless dialogue and some attempt at compromise, recognizing that both sides have limits to what they can impose on the other.
I would add another, hopeful, perspective: time. The West is typically in a hurry, China understands it operates on a much longer scale of events. Still, the imperatives of human nature, the freedom and prosperity that each individual (or family, or local community, or region) naturally desires probably outweighs the benefits of stability and harmony over time. Given enough time, the outcomes seem almost certain to me. But careful understanding, respect, and cooperation along the way will probably make that result occur sooner and with less risk
Monday, June 10, 2013
Differing World Views
This past weekend, two influential economic commentators, Niall Ferguson and Robert Shiller, pronounced importantly different views of what is needed for a continuing successful future for our society. Perhaps characteristic of the venues, Ferguson wrote in the weekend (June 8-9) Wall Street Journal, drawing from his new book, "The Great Degeneration.." and Shiller wrote in the June 9th Sunday New York Times.
It won't surprise readers of this blog that I am much more sympathetic to the views of Niall Feguson, who presents startling...and embarrassing statistics... showing a deteriorating position for the US for economic freedom, regulatory efficiency, reliable legal apparatus and defense of property rights, and global competitiveness. At one time, the US was the world's unparalleled standard bearer on these dimensions and many US institutions are founded and run on fostering these characteristics for the rest of the world. If the change in relative position were a case of the pupils excelling their teacher, we could be happier about this result. Ferguson believes, and I suspect he's right, that instead, this decline reflects a true degeneration. He cites classic theory to suggest that it may be the inevitable outcome of all republics (governments of the people, by the people, for the people) "giving way to oligarchy or tyranny", where the chief benefits of a society flow only to the powerful. More optimistically, he cites many ongoing advantages to American society, relative to other already developed economies, but still faults many poor policy choices, especially in the tax and regulatory environment, and particularly at the federal level. His cure would be an honest look at and a careful dismantling of the impediments we've created to economic success.
At the outset of Robert Shiller's piece, I was excited to see a well respected voice argue for a more nuanced approach to fixing the funding/benefits problem looming in Social Security. As I've commented in this blog ( "Elections have Consequences..." November, 2012) and elsewhere, there are many ways to fix the problem. No one of them needs to do all the work; and, in any case, trying to solve the problem on only one dimension is probably...and appropriately...politically impossible, even if it could be economically viable. Instead, small doses of those many forms of medicine will probably need to be combined in some form of generally tolerable prescription for the aggregate change to have any political viability.
Thanks to Shiller for adding another: benefit changes (presumably down as well as up) to reflect changes in real GD,P per capita, rather than in mere CPI, chained or unchained. As he puts it, this would better insure that one generation doesn't bear too much or enjoy too little of real changes in society's overall welfare. Bravo! But, to my dismay, Shiller several times mentions, as if just in passing, that tax rates or the contribution base for employees, and employers, might have to be raised...as if that were an unimportant consideration. "So, be it", he says, "...keeping our eyes on the integrity of Social Security, which is crucial to our identity as a civil society". This sounded to me more like the classic logical fallacy of assuming the very thing to be proven ("begging the question") and a politician's pronouncement than the cooler perspective of a social scientist. Similarly, he makes only very brief mention of the relative size of respective generations, thus dismissing probably the most important element in the arithmetic of inter-generational economic justice. How we divide up the per capita GDP of the economy as a whole will be hugely reliant on how many capita there are in one generation or another.
It won't surprise readers of this blog that I am much more sympathetic to the views of Niall Feguson, who presents startling...and embarrassing statistics... showing a deteriorating position for the US for economic freedom, regulatory efficiency, reliable legal apparatus and defense of property rights, and global competitiveness. At one time, the US was the world's unparalleled standard bearer on these dimensions and many US institutions are founded and run on fostering these characteristics for the rest of the world. If the change in relative position were a case of the pupils excelling their teacher, we could be happier about this result. Ferguson believes, and I suspect he's right, that instead, this decline reflects a true degeneration. He cites classic theory to suggest that it may be the inevitable outcome of all republics (governments of the people, by the people, for the people) "giving way to oligarchy or tyranny", where the chief benefits of a society flow only to the powerful. More optimistically, he cites many ongoing advantages to American society, relative to other already developed economies, but still faults many poor policy choices, especially in the tax and regulatory environment, and particularly at the federal level. His cure would be an honest look at and a careful dismantling of the impediments we've created to economic success.
At the outset of Robert Shiller's piece, I was excited to see a well respected voice argue for a more nuanced approach to fixing the funding/benefits problem looming in Social Security. As I've commented in this blog ( "Elections have Consequences..." November, 2012) and elsewhere, there are many ways to fix the problem. No one of them needs to do all the work; and, in any case, trying to solve the problem on only one dimension is probably...and appropriately...politically impossible, even if it could be economically viable. Instead, small doses of those many forms of medicine will probably need to be combined in some form of generally tolerable prescription for the aggregate change to have any political viability.
Thanks to Shiller for adding another: benefit changes (presumably down as well as up) to reflect changes in real GD,P per capita, rather than in mere CPI, chained or unchained. As he puts it, this would better insure that one generation doesn't bear too much or enjoy too little of real changes in society's overall welfare. Bravo! But, to my dismay, Shiller several times mentions, as if just in passing, that tax rates or the contribution base for employees, and employers, might have to be raised...as if that were an unimportant consideration. "So, be it", he says, "...keeping our eyes on the integrity of Social Security, which is crucial to our identity as a civil society". This sounded to me more like the classic logical fallacy of assuming the very thing to be proven ("begging the question") and a politician's pronouncement than the cooler perspective of a social scientist. Similarly, he makes only very brief mention of the relative size of respective generations, thus dismissing probably the most important element in the arithmetic of inter-generational economic justice. How we divide up the per capita GDP of the economy as a whole will be hugely reliant on how many capita there are in one generation or another.
Monday, January 21, 2013
Hope on Inauguration Day
Today we witnessed one of our country's most magnificent events, a Presidential Inauguration, celebrating our ability to be governed by officials who are elected only for specified terms. It also ennobles all of us by causing us to recognize that, despite very important differences, we all respect the process even when it produces results we don't prefer.
As readers of this blog have gathered, I am among those tens of millions of American voters who would have preferred a different result this time around. And I am still annoyed by the commonly expressed narrative that President Obama achieved a "great victory". In fact, it was one of the narrowest popular vote victories in history (about 1%), especially for a re-elected incumbent, with very small margins in states that gave him his electoral vote win, which, itself, was smaller than the first time around. In any event, he won and let us all hope that he and his administration can work with the co-equal Legislative Branch (let's not forget the basics of how our government is intended to work) to achieve good results for our country over the next four years. A lot of our future, for better or for worse, will depend on what we're able to accomplish in this short time.
Like many, I was surprised, but pleased, by the specificity of the President's inaugural address. Rather than mere thematic platitudes about America's exceptional natural and human endowment and its unique set of core values leading us to continued greatness as a nation, we heard a long list of intentions for particular results. I was personally very pleased to hear the calls to better deal with gun violence, a much more welcoming policy for immigration, gay rights, tax reform, and better managing the costs of entitlements. It would be hard to disagree with the broad goals; the problems will lie in the details of how those goals are to be achieved. And I would have preferred him to say more about cooperative engagement with those who don't share all his views and less continuing to divide the nation on economic terms. There was a lot of "code" in his speach to reassure his electoral base that they could count on him to further their agendae; there was little to suggest that he genuinely respected the views of those not in that base. And most fundamentally, there was little to suggest that he is prepared to truly grapple with the most fundamental of all the problems we face...the completely unsustainable mismatch of government expenditures and revenue. That problem must be set on a credible course of correction or all of the other goals will be impossible to achieve.
Still, today, I am prepared to be hopeful, both because that's in the spirit of celebration of our success as a democratic republic and because our newly inaugurated President should be looking to how history will judge him over all future time. If he is as wise as he is smart, he will not want to waste this fabulous opportunity to do some very good things...that the country is actually able to pay for indefinitely. Still, I'm glad that the next election is only about 21 months away, just in case.
As readers of this blog have gathered, I am among those tens of millions of American voters who would have preferred a different result this time around. And I am still annoyed by the commonly expressed narrative that President Obama achieved a "great victory". In fact, it was one of the narrowest popular vote victories in history (about 1%), especially for a re-elected incumbent, with very small margins in states that gave him his electoral vote win, which, itself, was smaller than the first time around. In any event, he won and let us all hope that he and his administration can work with the co-equal Legislative Branch (let's not forget the basics of how our government is intended to work) to achieve good results for our country over the next four years. A lot of our future, for better or for worse, will depend on what we're able to accomplish in this short time.
Like many, I was surprised, but pleased, by the specificity of the President's inaugural address. Rather than mere thematic platitudes about America's exceptional natural and human endowment and its unique set of core values leading us to continued greatness as a nation, we heard a long list of intentions for particular results. I was personally very pleased to hear the calls to better deal with gun violence, a much more welcoming policy for immigration, gay rights, tax reform, and better managing the costs of entitlements. It would be hard to disagree with the broad goals; the problems will lie in the details of how those goals are to be achieved. And I would have preferred him to say more about cooperative engagement with those who don't share all his views and less continuing to divide the nation on economic terms. There was a lot of "code" in his speach to reassure his electoral base that they could count on him to further their agendae; there was little to suggest that he genuinely respected the views of those not in that base. And most fundamentally, there was little to suggest that he is prepared to truly grapple with the most fundamental of all the problems we face...the completely unsustainable mismatch of government expenditures and revenue. That problem must be set on a credible course of correction or all of the other goals will be impossible to achieve.
Still, today, I am prepared to be hopeful, both because that's in the spirit of celebration of our success as a democratic republic and because our newly inaugurated President should be looking to how history will judge him over all future time. If he is as wise as he is smart, he will not want to waste this fabulous opportunity to do some very good things...that the country is actually able to pay for indefinitely. Still, I'm glad that the next election is only about 21 months away, just in case.
Friday, November 23, 2012
Another Country
With apologies to James Baldwin for using his 1962 title to caption this post, I'll share a few comments on a trip that Penelope and I made to the United Kingdom in October. I emphasize both words, united and kingdom, since both contain some irony. It's also an opportunity to recall some often-confused geo-political basics. England is a country, occupying part of an island, Great Britain, which in turn is only a part of the political entity, the United Kingdom, which takes the northeastern chunk of another island to complete.
After just one quick day in London upon arrival (beautiful room, with a great view, in gorgeous fall weather, at the Sheraton Towers in Knightsbridge...dangerously close to Harrods), we traveled by car to Wales for a meeting of the Financial Planning Standards Board. Just past Bristol, the road signs changed to include a Celtic language, in addition to English. The driver explained that we were now in "another country", Wales...and quickly added that the Welsh and the English don't necessarily get along too well. English weekend homeowners sometimes find their Welsh properties put to the torch. Hmmm.
I also remninded myself that Charles is the "Prince" of this place and that Will and Harry have "Wales", not Windsor, as their surname. If Charles ever gets to the throne, one presumes that Will will take over the Princedom. "Poor" Harry stays a mere Duke.
The country is green and wet and blustery in October; the sky changed dramatically from dark overcast to brilliant sun several times a day. Because FPSB kept me busy during the days at The Celtic Manor (home to the Ryder Cup a few years earlier), there was little opportunity to explore; but Penelope took the train from Newport to Cardiff one day and had fun shopping and negotiating lunch to avoid cream, butter, and cheese.
We were treated to a large Welsh Choir's performance (excellent!) one evening and a trip to a nearby castle for dinner theatre on another night. Getting there was quite an adventure. The driver of our bus (one of two) made a woefully wrong turn and, with much skepticism from those at the front of the bus, took us a long way down a very narrow, unpaved (so quite muddy), one lane road till we reached a firm barrier. On either side were deep ditches and wheel swallowing mud, so we had no choice but to back up...at least a mile and an half, in total darkness...it was interesting to observe the range of responses, from great humor to near panic from the 40 or so international attendees, all of whom are accustomed to being "in control" in their own spheres. I think the driver nearly had a heart attack and many of us were much more concerned about him. Eventually, now very late, we found the castle and joined with our colleagues from the other bus who were refused (unexplainedly) anything to drink until the whole group had arrived.
After Wales, we flew to Edinburgh for several days of history (there is much: start with Edinburgh castle itself), art, great food, sighseeing, in town as well as in the wild and beautiful Highlands, and getting into the spirit of yet another country. So, of course I bought a kilt, learning that not many people really take specific tartans into account anymore, so my having not a drop of Scottish blood was no obstacle. A taxi driver later explained to me that the outfit wouldn't be complete without a "dirk", the small blade true Scotsmen always carry in their stocking and that always gets him in trouble with our TSA.
We visited the Parliament of Scotland (it proudly has a separate one; and something like 40% of the population say they favor separation, "devolution", from the British crown) and so much of the history of this place is framed in terms of it's soveriegnty struggles and actual battles, some won, some lost, with the English. A Scottish joke asks why God was so generous with Scotland: great beauty, fertile land, clever, handsome people; it seems unfair. The response, "but look who he gave them as neighbors!"
Hail Britannia
Still, Edinburgh won the competition to be the permanent home of the recently decommissioned royal yacht, Brittania. Touring it, complete with the Queen's and Prince Phillip's private quarters and the decidedly more modest quarters for the non-officer crew, brought to life the very strange (to Americans) situation of a hereditary monarchy living an almost other-worldly existence, now deep into the 21st century. It's not just that the family is extraordinarily rich, and enjoys a healthy budget provided by taxpayers as well, it's that they are treated almost as if a superior species.
After just one quick day in London upon arrival (beautiful room, with a great view, in gorgeous fall weather, at the Sheraton Towers in Knightsbridge...dangerously close to Harrods), we traveled by car to Wales for a meeting of the Financial Planning Standards Board. Just past Bristol, the road signs changed to include a Celtic language, in addition to English. The driver explained that we were now in "another country", Wales...and quickly added that the Welsh and the English don't necessarily get along too well. English weekend homeowners sometimes find their Welsh properties put to the torch. Hmmm.
I also remninded myself that Charles is the "Prince" of this place and that Will and Harry have "Wales", not Windsor, as their surname. If Charles ever gets to the throne, one presumes that Will will take over the Princedom. "Poor" Harry stays a mere Duke.
The country is green and wet and blustery in October; the sky changed dramatically from dark overcast to brilliant sun several times a day. Because FPSB kept me busy during the days at The Celtic Manor (home to the Ryder Cup a few years earlier), there was little opportunity to explore; but Penelope took the train from Newport to Cardiff one day and had fun shopping and negotiating lunch to avoid cream, butter, and cheese.
We were treated to a large Welsh Choir's performance (excellent!) one evening and a trip to a nearby castle for dinner theatre on another night. Getting there was quite an adventure. The driver of our bus (one of two) made a woefully wrong turn and, with much skepticism from those at the front of the bus, took us a long way down a very narrow, unpaved (so quite muddy), one lane road till we reached a firm barrier. On either side were deep ditches and wheel swallowing mud, so we had no choice but to back up...at least a mile and an half, in total darkness...it was interesting to observe the range of responses, from great humor to near panic from the 40 or so international attendees, all of whom are accustomed to being "in control" in their own spheres. I think the driver nearly had a heart attack and many of us were much more concerned about him. Eventually, now very late, we found the castle and joined with our colleagues from the other bus who were refused (unexplainedly) anything to drink until the whole group had arrived.
After Wales, we flew to Edinburgh for several days of history (there is much: start with Edinburgh castle itself), art, great food, sighseeing, in town as well as in the wild and beautiful Highlands, and getting into the spirit of yet another country. So, of course I bought a kilt, learning that not many people really take specific tartans into account anymore, so my having not a drop of Scottish blood was no obstacle. A taxi driver later explained to me that the outfit wouldn't be complete without a "dirk", the small blade true Scotsmen always carry in their stocking and that always gets him in trouble with our TSA.
We visited the Parliament of Scotland (it proudly has a separate one; and something like 40% of the population say they favor separation, "devolution", from the British crown) and so much of the history of this place is framed in terms of it's soveriegnty struggles and actual battles, some won, some lost, with the English. A Scottish joke asks why God was so generous with Scotland: great beauty, fertile land, clever, handsome people; it seems unfair. The response, "but look who he gave them as neighbors!"
Hail Britannia
Still, Edinburgh won the competition to be the permanent home of the recently decommissioned royal yacht, Brittania. Touring it, complete with the Queen's and Prince Phillip's private quarters and the decidedly more modest quarters for the non-officer crew, brought to life the very strange (to Americans) situation of a hereditary monarchy living an almost other-worldly existence, now deep into the 21st century. It's not just that the family is extraordinarily rich, and enjoys a healthy budget provided by taxpayers as well, it's that they are treated almost as if a superior species.
Saturday, November 10, 2012
Elections Have Consequences...Not Necessarily Obvious Ones.
It's now a few days after the election of 2012 and I'm still searching for something to be optimistic about in the results. As I suggested in recent posts, this was to be an opportunity for a choice about the nation we want to be, the emphasis we want to pursue. Sadly, my view is that the choice we've actually made is probably the wrong one on the economic and fiscal policy fronts. And, my home state of California has gone even further in a continuing wrong direction than at the federal level.
Mitt Romney is indeed a very good man, smart, compassionate, and very generous, worthy of respect and admiration. I disagree with several aspects of his announced social agenda, but I would be much more optimistic about good economic results in the coming years with him in the White House. I am convinced that we've got to get the economics right before we can effectively tackle whatever social agenda is appropriate for any government to pursue...and, for me, that's not really very much. I would feel much more comfortable having government, with its potential for the tyranny of the majority and its susceptibility to influence by very committed, though small, interest groups, exert its huge power in favor of no social agenda at all. So, I could tolerate a few cringe-worthy social policy perspectives, from either left or right, in order to get the really higher priority economic issues on a better path.
We did come very close to what I think would have been, overall, a better result. If the election were a few days earlier, before Hurricane Sandy took Romney off the front page and put the President in the role of Rescuer in Chief... or a few days later, after the further doubts about Benghazi emerged in the main stream press, and Petraeus resigned in shame, and the increasing Katrina-ization of Sandy's aftermath, Romney could have squeaked thru. As it is, Obama's "victory" was less emphatic (a narrower popular vote margin and fewer electoral votes) than his initial election 4 years ago; and it was pretty thin in any event. 50 million plus people voted for the other guy...and some of Obama's crucial electoral college wins were in fact very close.
Still, as everyone now observes, the Romney/Republican campaign failed to adequately capture the confidence of key...and growing...segments of the electorate, especially the young, women, and Hispanics and other immigrants. If they fail to better welcome and respond to these groups, shame on them. They won't deserve future electoral victory and they probably won't get it, despite the very high relevance to these groups of the key Republican themes of smaller, less intrusive government, self-reliance, and upward economic mobility thru one's own effort. It now seems clearer that they won't get enough people to adhere to this set of values unless they also share more common ground on important social issues as well. If Democrats, in turn, can also move from their current stance closer to the center on issues of long range fiscal discipline, we could all celebrate a very happy new day in American politics and be much more optimistic about the life of our nation going forward.
A Time for Compromise
Everyone says that they hope for it, and the "fiscal cliff" at year-end provides a deadline to get serious about it, but the actual political and structural fundamentals for compromise don't look especially promising. Yesterday, three days after the election, Obama, still in hot campaigning mode, had selected citizens standing on risers behind him...in the East Room of the White House (!)...as he claimed a popular mandate and brandished his pen in a challenge to Republicans to send him legislation to sign that met his requirements of increasing taxes on wealthier Americans. Meanwhile, the Republicans claim a mandate of their own, retaining control of the House and still having filibuster capability in the Senate. Whatever mandate that is, however, is also pretty skinny; they now will hold fewer seats in both houses than before.
So, maybe those chastened positions, on both sides, provide an environment for progress; and maybe the first element of a recipe for collaborative success relies on a careful parsing of the respective rhetoric on taxes. For a long time now, there's been a deliberate obfuscation (particularly, I think, by Democrats) of the crucial difference between rates of tax, on the margin, and absolute volumes of tax collected. Republicans insist on no increase in rates (and argue strongly for even reducing them); Democrats insist on making the "millionaires and billionaires" pay more. Instead of comparing warren Buffet's, or Mitt Romney's, tax rate with the rate their secretaries pay, let's have both sides acknowledge that you can increase the amount of tax anyone pays, without increasing the marginal rate...or even when lowering it... if allowances or deductions are reduced or eliminated and if additional categories of income are subjected to tax.
With the right leadership, the American people are smart enough to grasp this structural choice and the arithmetic involved and to at least then intelligently debate the merits of marginal rate increases or decreases as incentives or disincentives toward economic growth. The data, such as exists, is regrettably not conclusive on this. For now, it's more a matter of faith and logic on the side in favor of low marginal rates and a sense of distributive fairness on the other. But, if the wealthy have their allowances reduced such that they actually pay more than they do now, even with no rate increase, the revenue increase the Democrats want should occur. And, if the no increase in marginal rates that Republicans insist on actually does spur economic growth, there will be a potentially huge bonus in the resulting increased revenue across the board.
Romney alluded to this in the first debate, almost in passing...suggesting a cap on itemized deductions of a certain dollar amount (or perhaps a certain percentage of income) that can be used for whatever item (mortgage interest, charitable contributions, state taxes, etc.) that is most salient for each individual wealthy tax-payer. No-one's favorite deduction has to bear the entire burden. And, if that cap is small enough, the amount of tax actually collected from the wealthy can increase even if their marginal rates come down. Victory is available to both sides here.
A Bigger Fight over Entitlements.
More revenue from the wealthy, alone, won't solve the problem of annual trillion dollar deficits. There isn't enough income or wealth among the wealthy to solve the problem even if the government confiscated all of it (and what's left then for a second act?). Much reduced spending is even more essential than revenue increases, particularly reductions in the area of our expected "entitlements" committments. Here, the Democrats have the longest road to travel. At least they are no longer asserting that there is no problem. There is...and a very big one. The demographics are working against these programs and the reserve "funding" is imaginary: the government's own IOU's. Major structural changes are necessary, and fast.
The Democrats will need to quickly abandon their pledges never to do anything to change these programs' benefits nor ever employ viable alternative funding mechanisms.
To me, it seems that the only politically workable solution is to employ a combination of some form of grandfathering for current beneficiaries with many partial solutions for the future so that opposition to any one of them is too small to wreck the whole package:
The American people are neither stupid nor blindly self-interested. Let's abandon all the pretenses. With a sensible plan and effective leadership, we can solve these problems. To quote President Obama's closing exhortation
yesterday: "Let's get busy!" Regardless of our vote on election day, we can all agree with that.
Mitt Romney is indeed a very good man, smart, compassionate, and very generous, worthy of respect and admiration. I disagree with several aspects of his announced social agenda, but I would be much more optimistic about good economic results in the coming years with him in the White House. I am convinced that we've got to get the economics right before we can effectively tackle whatever social agenda is appropriate for any government to pursue...and, for me, that's not really very much. I would feel much more comfortable having government, with its potential for the tyranny of the majority and its susceptibility to influence by very committed, though small, interest groups, exert its huge power in favor of no social agenda at all. So, I could tolerate a few cringe-worthy social policy perspectives, from either left or right, in order to get the really higher priority economic issues on a better path.
We did come very close to what I think would have been, overall, a better result. If the election were a few days earlier, before Hurricane Sandy took Romney off the front page and put the President in the role of Rescuer in Chief... or a few days later, after the further doubts about Benghazi emerged in the main stream press, and Petraeus resigned in shame, and the increasing Katrina-ization of Sandy's aftermath, Romney could have squeaked thru. As it is, Obama's "victory" was less emphatic (a narrower popular vote margin and fewer electoral votes) than his initial election 4 years ago; and it was pretty thin in any event. 50 million plus people voted for the other guy...and some of Obama's crucial electoral college wins were in fact very close.
Still, as everyone now observes, the Romney/Republican campaign failed to adequately capture the confidence of key...and growing...segments of the electorate, especially the young, women, and Hispanics and other immigrants. If they fail to better welcome and respond to these groups, shame on them. They won't deserve future electoral victory and they probably won't get it, despite the very high relevance to these groups of the key Republican themes of smaller, less intrusive government, self-reliance, and upward economic mobility thru one's own effort. It now seems clearer that they won't get enough people to adhere to this set of values unless they also share more common ground on important social issues as well. If Democrats, in turn, can also move from their current stance closer to the center on issues of long range fiscal discipline, we could all celebrate a very happy new day in American politics and be much more optimistic about the life of our nation going forward.
A Time for Compromise
Everyone says that they hope for it, and the "fiscal cliff" at year-end provides a deadline to get serious about it, but the actual political and structural fundamentals for compromise don't look especially promising. Yesterday, three days after the election, Obama, still in hot campaigning mode, had selected citizens standing on risers behind him...in the East Room of the White House (!)...as he claimed a popular mandate and brandished his pen in a challenge to Republicans to send him legislation to sign that met his requirements of increasing taxes on wealthier Americans. Meanwhile, the Republicans claim a mandate of their own, retaining control of the House and still having filibuster capability in the Senate. Whatever mandate that is, however, is also pretty skinny; they now will hold fewer seats in both houses than before.
So, maybe those chastened positions, on both sides, provide an environment for progress; and maybe the first element of a recipe for collaborative success relies on a careful parsing of the respective rhetoric on taxes. For a long time now, there's been a deliberate obfuscation (particularly, I think, by Democrats) of the crucial difference between rates of tax, on the margin, and absolute volumes of tax collected. Republicans insist on no increase in rates (and argue strongly for even reducing them); Democrats insist on making the "millionaires and billionaires" pay more. Instead of comparing warren Buffet's, or Mitt Romney's, tax rate with the rate their secretaries pay, let's have both sides acknowledge that you can increase the amount of tax anyone pays, without increasing the marginal rate...or even when lowering it... if allowances or deductions are reduced or eliminated and if additional categories of income are subjected to tax.
With the right leadership, the American people are smart enough to grasp this structural choice and the arithmetic involved and to at least then intelligently debate the merits of marginal rate increases or decreases as incentives or disincentives toward economic growth. The data, such as exists, is regrettably not conclusive on this. For now, it's more a matter of faith and logic on the side in favor of low marginal rates and a sense of distributive fairness on the other. But, if the wealthy have their allowances reduced such that they actually pay more than they do now, even with no rate increase, the revenue increase the Democrats want should occur. And, if the no increase in marginal rates that Republicans insist on actually does spur economic growth, there will be a potentially huge bonus in the resulting increased revenue across the board.
Romney alluded to this in the first debate, almost in passing...suggesting a cap on itemized deductions of a certain dollar amount (or perhaps a certain percentage of income) that can be used for whatever item (mortgage interest, charitable contributions, state taxes, etc.) that is most salient for each individual wealthy tax-payer. No-one's favorite deduction has to bear the entire burden. And, if that cap is small enough, the amount of tax actually collected from the wealthy can increase even if their marginal rates come down. Victory is available to both sides here.
A Bigger Fight over Entitlements.
More revenue from the wealthy, alone, won't solve the problem of annual trillion dollar deficits. There isn't enough income or wealth among the wealthy to solve the problem even if the government confiscated all of it (and what's left then for a second act?). Much reduced spending is even more essential than revenue increases, particularly reductions in the area of our expected "entitlements" committments. Here, the Democrats have the longest road to travel. At least they are no longer asserting that there is no problem. There is...and a very big one. The demographics are working against these programs and the reserve "funding" is imaginary: the government's own IOU's. Major structural changes are necessary, and fast.
The Democrats will need to quickly abandon their pledges never to do anything to change these programs' benefits nor ever employ viable alternative funding mechanisms.
To me, it seems that the only politically workable solution is to employ a combination of some form of grandfathering for current beneficiaries with many partial solutions for the future so that opposition to any one of them is too small to wreck the whole package:
- postponed retirement ages
- increased payroll tax rates
- larger taxable base
- means-testing of benefits
- partial privatized accounts (maybe increased IRA and HSA opportunities, funded by a part of the payroll tax)
- vouchers for parts of Medicare/Medicaid benefits (see blog post of March 3, 2010)
- mandated catastrophic insurance coverage, in addition to or in lieu of mandated "first dollar" coverage (also see blog post of March 3, 2010)
- portions of governmental components' prefunding committed to real, third-party investments, instead of Treasuries.
- and, probably some additional solutions as well.
The American people are neither stupid nor blindly self-interested. Let's abandon all the pretenses. With a sensible plan and effective leadership, we can solve these problems. To quote President Obama's closing exhortation
yesterday: "Let's get busy!" Regardless of our vote on election day, we can all agree with that.
Monday, November 5, 2012
Voting for Vengeance?
It's the day before election day and like, I'm sure, most Americans, I'm exhausted by this presidential campaign...eager for it to be over, almost regardless of who wins the White House. I yearned, throughout, for a more substantive discussion of the very serious issues facing our country, but there was very little of that from either side. What is, however, increasingly clear is that there is a real choice in front of the American people about what kind of nation we will strive to be; where we will put our emphasis in the next several years. Though I am not a fan of harnessing the coercive power of government to any particular social agenda, my instincts favor most (but not all) of what the Obama administration and its supporters on the left would also prefer. So, despite that personal preference, my vote has long been decided in favor of the Romney/Ryan ticket for what I believe it will do to foster good results in the more important (and more governmentally appropriate) and the more immediately urgent issues of economic growth, fiscal discipline, tax reform, and structural changes necessary to solve the entitlements disaster looming on the near horizon.
So, I hope the Republican ticket wins. Less important, I hope that Barack Obama loses. I had voted for him in 2008 and hoped that he would be a true agent for change and the pragmatist he was reputed to be. Instead, I'm afraid we got an inexperienced ideologue. I still find him an attractive personality, but I'm convinced he does not belong in the role of our nation's head of state and our government's chief servant. I would be enthused to have him as a delightful dinner companion or an enjoyable weekend houseguest. I would be eager to engage in spirited interchange with an obviously very intelligent, eloquent, and deeply commited person; but I do not trust him in a position of enormous power precisely because I do not share his convictions.
If I needed further convincing of that, it came a few days ago, where, at a campaign rally, in response to a comment from the crowd, he urged his supporters to "vote; it's the best revenge".
Really!?!
Revenge for what? What wrongs have been perpetrated, by whom, against whom, does he feel need to be avenged? And in what way would an election be the proper vengeance in any event. If you saw and heard Obama's statement, it's obvious that this remark did not appear on his teleprompter. It was instinctual, in the moment, unscripted, coming from the man's gut, revealing him as the class warrior and unreconstructed community organizer many fear. It was an expression of genuine, unguarded belief not worthy of a man who should be President of all of the people of the United States.
So, I hope the Republican ticket wins. Less important, I hope that Barack Obama loses. I had voted for him in 2008 and hoped that he would be a true agent for change and the pragmatist he was reputed to be. Instead, I'm afraid we got an inexperienced ideologue. I still find him an attractive personality, but I'm convinced he does not belong in the role of our nation's head of state and our government's chief servant. I would be enthused to have him as a delightful dinner companion or an enjoyable weekend houseguest. I would be eager to engage in spirited interchange with an obviously very intelligent, eloquent, and deeply commited person; but I do not trust him in a position of enormous power precisely because I do not share his convictions.
If I needed further convincing of that, it came a few days ago, where, at a campaign rally, in response to a comment from the crowd, he urged his supporters to "vote; it's the best revenge".
Really!?!
Revenge for what? What wrongs have been perpetrated, by whom, against whom, does he feel need to be avenged? And in what way would an election be the proper vengeance in any event. If you saw and heard Obama's statement, it's obvious that this remark did not appear on his teleprompter. It was instinctual, in the moment, unscripted, coming from the man's gut, revealing him as the class warrior and unreconstructed community organizer many fear. It was an expression of genuine, unguarded belief not worthy of a man who should be President of all of the people of the United States.
Sunday, August 12, 2012
A Clearer Choice: Hooray!!
Romney's selection of Paul Ryan as his running mate will, we can hope, move this Presidential campaign beyond trivia, name calling, and defamation. The American people are hungry for genuine consideration of serious policy choices and are capable of discerning attractive resolutions within the unavoidable complexity. The time for division, demogogic over-simplification, and class warfare should never have arisen; but it is now high time for it to depart.
So, for the first time in a long while, we can hope for a clear set of choices. If the current administration has superior approaches to foreign policy matters, let them bring them to the public floor. If the Republican challengers have more articulate plans for economic growth and rational tax policy, let's hear them, clearly (if not loudly, thank you!). If candidates have a set of possible solutions to the problems around the long term viability of Social Security and Medicare (see blog post of March 3, 2010), let's bring them forward for careful consideration. And, in any event, let's agree that there are problems with these entitlements systems. The most disingenuous position of the Democrats is that everything here is just fine. The demographics/economics of these systems (in the US and almost everwhere else in the world...and especially in some parts of the developing world) are definitely not fine. Either a great inter-generational injustice or a sudden retraction of long-standing promises...or both... is about to be inflicted. Financial professionals have a duty to our fellow citizens, everywhere, to blow the whistle on this!
My sentiments among these choices favor the challengers. I understand, of course, that there are many nuances here and I strongly believe that we should not harness the power of government to any set of social policies...Left or Right. While, on a personal level, I am deeply sympathetic to the "social justice" components of their overall motivations, I see the general thrust of the Left's economic policies being very seriously flawed: some version of redistribution of income and wealth from the more successful to the less so and a large role for government in economic decision-making. Despite genuine good intentions, this choice repeats the error now on display in most of Europe and seems to ignore the great, failed economic experiment of the 20th century: Soviet Communism, which made everyone under its sway poor. And, while I wince (or worse) at some of the social policy perspectives of the Right, I concur with their general desire for limited government intrusion and for incentives to foster individual economic success and to impose disincentives on failure to exert effort.
The debate, then, should be joined over which is the greater good: reducing disparities in relative wealth or enhancing virtually everyone's absolute wealth, across generations, despite even greater relative disparity. It's not a case of "either/or", but of emphasis. It's also a matter of understanding and accepting tolerable costs for that desired emphasis. How do we get to what we decide is the greater good? Let's understand the costs...we're smart enough to do this; let's decide, as a society, what costs, and how much of them, we're willing to bear...we're fair enough to do this; and let's agree on the benefits we desire...we're insightful enough and optimistic enough to accomplish this.
I vote for everyone's greater absolute wealth... even at the cost of greater disparity in relative wealth. History is on my side. Even the "poorest" people today, almost anywhere on the planet, have much better health, longer life span, greater access to movement and communication, and greater freedom of choice of economic outcomes than the "richest" people of just 100 years ago. Not many well-informed persons of 2012 would trade places with even the wealthiest person of 1912. Maybe it would be fun for a day or a week...but not many would make that permanent switch.
So, America has a now clearer choice this November: do we want to be, in the words of our national anthem, more of "the land of the free and the home of the brave" or instead move further toward being the land of the indebted and entitled and the home of the timid and dependent? We get to choose; we have to choose!
So, for the first time in a long while, we can hope for a clear set of choices. If the current administration has superior approaches to foreign policy matters, let them bring them to the public floor. If the Republican challengers have more articulate plans for economic growth and rational tax policy, let's hear them, clearly (if not loudly, thank you!). If candidates have a set of possible solutions to the problems around the long term viability of Social Security and Medicare (see blog post of March 3, 2010), let's bring them forward for careful consideration. And, in any event, let's agree that there are problems with these entitlements systems. The most disingenuous position of the Democrats is that everything here is just fine. The demographics/economics of these systems (in the US and almost everwhere else in the world...and especially in some parts of the developing world) are definitely not fine. Either a great inter-generational injustice or a sudden retraction of long-standing promises...or both... is about to be inflicted. Financial professionals have a duty to our fellow citizens, everywhere, to blow the whistle on this!
My sentiments among these choices favor the challengers. I understand, of course, that there are many nuances here and I strongly believe that we should not harness the power of government to any set of social policies...Left or Right. While, on a personal level, I am deeply sympathetic to the "social justice" components of their overall motivations, I see the general thrust of the Left's economic policies being very seriously flawed: some version of redistribution of income and wealth from the more successful to the less so and a large role for government in economic decision-making. Despite genuine good intentions, this choice repeats the error now on display in most of Europe and seems to ignore the great, failed economic experiment of the 20th century: Soviet Communism, which made everyone under its sway poor. And, while I wince (or worse) at some of the social policy perspectives of the Right, I concur with their general desire for limited government intrusion and for incentives to foster individual economic success and to impose disincentives on failure to exert effort.
The debate, then, should be joined over which is the greater good: reducing disparities in relative wealth or enhancing virtually everyone's absolute wealth, across generations, despite even greater relative disparity. It's not a case of "either/or", but of emphasis. It's also a matter of understanding and accepting tolerable costs for that desired emphasis. How do we get to what we decide is the greater good? Let's understand the costs...we're smart enough to do this; let's decide, as a society, what costs, and how much of them, we're willing to bear...we're fair enough to do this; and let's agree on the benefits we desire...we're insightful enough and optimistic enough to accomplish this.
I vote for everyone's greater absolute wealth... even at the cost of greater disparity in relative wealth. History is on my side. Even the "poorest" people today, almost anywhere on the planet, have much better health, longer life span, greater access to movement and communication, and greater freedom of choice of economic outcomes than the "richest" people of just 100 years ago. Not many well-informed persons of 2012 would trade places with even the wealthiest person of 1912. Maybe it would be fun for a day or a week...but not many would make that permanent switch.
So, America has a now clearer choice this November: do we want to be, in the words of our national anthem, more of "the land of the free and the home of the brave" or instead move further toward being the land of the indebted and entitled and the home of the timid and dependent? We get to choose; we have to choose!
Tuesday, August 7, 2012
ENOUGH!!...about Romney's Tax Returns
If I were Romney, I would publish the tax returns that his political opponents are clamoring for...but not because he has a duty to do so; but only to get this issue behind him. And I wouldn't do it in the way they request.
I respect his right to privacy about his returns. We all should. We should understand that he is already complying with the existing laws relating to disclosure. If the degree of disclosure is not enough to satisfy legitimate needs for understanding better his financial circumstances, then change the law and make more extensive disclosure mandatory. But, meanwhile, it would probably be good, as a political expedient, to volunteer to do more than is now actually required.
And, I believe that there are ways to do that that will not compromise his and his family's legimate privacy interests.
But, first, a comment on the apparently malicious, or at least ignorant, charge or innuendo that his acknowledged holding of overseas accounts must mean that he is somehow avoiding the payment of appropriate US taxes. It is fundamental that all US citizens must pay income taxes on all income, from anywhere in the world. If Romney were using foreign accounts to avoid paying proper US taxes, he would be, already, in very serious violation of the tax law and would no doubt be disqualified from any political candidacy. The continued implication of this wrongdoing, and the glee with which the media reports and repeats it, is shameful. The only excuse would be that the accusers are truly ignorant of this fundamental principle of taxation of worldwide income and ignorant of the many legitimate reasons for persons of even modest wealth to pursue the protections offered by certain overseas jurisdictions. Many medical professionals, for example, maintain "asset protection" accounts in places like Switzerland or the Caymans as a way of shielding those assets from the scrutiny of opportunists (but not from the scrutiny of the IRS) and from the claims of unjustified creditors. But no US citizen can, legally, use them to avoid income taxation of the income they may generate. If knowingly false accusations would be shameful, the alternative of ignorance is nearly as bad.
So, here's what I would do if I were Romney: enlist a small group of impeccably highly qualified persons (say, the heads of the personal income tax practice at each of the Big 4 accounting firms) to review the returns and then report, publicly, their findings on two points:
I respect his right to privacy about his returns. We all should. We should understand that he is already complying with the existing laws relating to disclosure. If the degree of disclosure is not enough to satisfy legitimate needs for understanding better his financial circumstances, then change the law and make more extensive disclosure mandatory. But, meanwhile, it would probably be good, as a political expedient, to volunteer to do more than is now actually required.
And, I believe that there are ways to do that that will not compromise his and his family's legimate privacy interests.
But, first, a comment on the apparently malicious, or at least ignorant, charge or innuendo that his acknowledged holding of overseas accounts must mean that he is somehow avoiding the payment of appropriate US taxes. It is fundamental that all US citizens must pay income taxes on all income, from anywhere in the world. If Romney were using foreign accounts to avoid paying proper US taxes, he would be, already, in very serious violation of the tax law and would no doubt be disqualified from any political candidacy. The continued implication of this wrongdoing, and the glee with which the media reports and repeats it, is shameful. The only excuse would be that the accusers are truly ignorant of this fundamental principle of taxation of worldwide income and ignorant of the many legitimate reasons for persons of even modest wealth to pursue the protections offered by certain overseas jurisdictions. Many medical professionals, for example, maintain "asset protection" accounts in places like Switzerland or the Caymans as a way of shielding those assets from the scrutiny of opportunists (but not from the scrutiny of the IRS) and from the claims of unjustified creditors. But no US citizen can, legally, use them to avoid income taxation of the income they may generate. If knowingly false accusations would be shameful, the alternative of ignorance is nearly as bad.
So, here's what I would do if I were Romney: enlist a small group of impeccably highly qualified persons (say, the heads of the personal income tax practice at each of the Big 4 accounting firms) to review the returns and then report, publicly, their findings on two points:
- had there been any illegitmate manipulation of the tax law?
- had the Romneys taken advantage of tax planning any more agressively than they would have condoned for any of their similarly situated clients?
Monday, August 6, 2012
It's Not Too Late
Only a little over two weeks since Aurora, (see post of July 22, 2012) America again faces the pain and frustration of a mass shooting. What incredibly sad irony, the killing and wounding of Sikhs, and first responder police, within their temple, and during a worship service. The Sikhs are gentle, tolerant, peace-loving people. It's hard to imagine a religious group less likely to inspire violence against them. And, here again, the murderer gave little indication of the huge threat he posed to those around him and, I suspect we'll learn, acquired his weapon or weapons fully legally.
It is well past time...and it's not too late...to seriously address the significant problems of public safety that our current culture and law of gun tolerance presents. Joe Klein, in the current issue of TIME Magazine, presents very sobering statistics about the prevalence of these mass shootings throughout at least the past 35 years and how prior assault weapons controls showed no apparent relief from the carnage. However, that implies a logical fallacy. Because that particular legislation failed to lessen the violence it does not follow that no legislation, no cultural shift can do so. Klein also, with chagrin and apparent resignation, also cites polling data that shows much reduced support for stricter gun controls over the past 20 years. I am more optimistic about the future.
The data are what they are, but they are not destiny. With strong and persistent leadership, from public opinion-makers, from legislators, from whoever resides in the White House, we can effect a change in this mentality toward access to weapons and toward aggressive treatment of mental illness that threatens us all. The current balance between individual liberties and public welfare and safety is just plain wrong. We can do better. We must. Shame on us all if we don't even try.
It is well past time...and it's not too late...to seriously address the significant problems of public safety that our current culture and law of gun tolerance presents. Joe Klein, in the current issue of TIME Magazine, presents very sobering statistics about the prevalence of these mass shootings throughout at least the past 35 years and how prior assault weapons controls showed no apparent relief from the carnage. However, that implies a logical fallacy. Because that particular legislation failed to lessen the violence it does not follow that no legislation, no cultural shift can do so. Klein also, with chagrin and apparent resignation, also cites polling data that shows much reduced support for stricter gun controls over the past 20 years. I am more optimistic about the future.
The data are what they are, but they are not destiny. With strong and persistent leadership, from public opinion-makers, from legislators, from whoever resides in the White House, we can effect a change in this mentality toward access to weapons and toward aggressive treatment of mental illness that threatens us all. The current balance between individual liberties and public welfare and safety is just plain wrong. We can do better. We must. Shame on us all if we don't even try.
Sunday, July 22, 2012
Let's Get Serious about Gun Control!
This weekend's events in Aurora, Colorado are tragic, senseless, and, I think, should make us all very angry on two fronts.
Where are our cultural leaders daring to speak out about the glorification of violence that, in deeply sad irony, was on the screen as backdrop to the killing and wounding. Dark Knight is only one, the latest, of a long line of films, videos, and "games" that trivialize the pain and destruction that guns inflict, in some subtle way making us all feel that gun-play is normal and even fun. While we may not be able or want to "ban" such violence, we don't have to culturally aggrandize it...the commentary in the entertainment news about how much Dark Knight's first weekend box-office take was going to be now leaves me feeling sick. I understand and support the notion of freedom of expression involved here, but we don't have to permit the manufacturers to promote violence as entertainment. Just like it's now illegal for tobacco to advertise in most media, we could make the advertisement of gratuitously violent fiction subject to considerably more stringent limitation. But even more important, our cultural leaders (high among them being our 24/7 media) can help to make that violence very "uncool"...just like most young children these days find smoking a nasty, anti-social act. It takes time, and leadership, but it's not impossible to gradually change mentality on this.
And where are our political leaders, at all levels of government, calling for us to do something more...maybe much more...about the accessability of these deadly weapons. That the Aurora murderer apparently acquired his arsenal of guns and ammunition and explosive devices legally is eloquent in its condemnation of our existing legal restrictions. These situations are of course the work of insane people...but people who did not display their deadly insanity in advance to put the world on notice. the University of Texas Tower sniper, Columbine, Viginia Tech, and now Aurora quickly come to mind and in each of these, and far too many others, the insane person was able to wreak so much death and destruction because of guns. If we can't prevent the work of madmen, at least we can make it much more difficult for them to do so much harm.
Today, President Obama visited the wounded and consoled many of the families of those who lost their lives. As always, he spoke with passion and moved us with his calls for recovery from this sadness and his confidence in the goodness of the American people. But I was greatly disappointed that he didn't take this ocassion to move beyond the role of Consoler in Chief. I hoped for, and even half-expected, him to move from that tone to close on a tone of righteous anger, saying something to this effect:
"It is now time...it is now way past time...to get serious about truly effective gun control in this country. That the shooter in this tragedy acquired his weapons "legally" tells us there is something terribly wrong with what is "legal" in our land. I know of course that there is Constitutional protection for the use and possession of firearms, but I also know that the Second Amendment has important limiting language about "a well-regulated militia..."as the basis for that protection, and our Constitution embraces many compromises and balancing acts. The current situation regarding guns is clearly out of balance.
I am aware of all the arguments against more effective gun control; some of them have some merit. But overall, I believe the American people are no longer convinced. I believe the American people are ready to strike a new balance. I believe the American people should hold all their leaders accountable to make significant improvements in public safety from gun violence. The right to expect that public safety is at least as important as the many other rights our governments go to great lengths to protect. We've fallen far too short here. We must make this better!
I pledge the balance of my term as President...and my next term if the people give it to me...to do everything I can to lead Congress to enact legislation and to insist that every department of my Administration does everything in its power to reduce this blight on our country. For example, I will redeploy some of Homeland Security's TSA army to help prevent this horrible domestic terrorism which has done so much more harm to our country than any foreign terrorists have been able to accomplish. If it takes a Constitutional amendment... and it might...I pledge to you that I will do everything I can to bring that about."
Alas, he didn't say that or anything like it. That leaves it to Governor Romney to depart from the agenda of one slice...maybe a small one... of what people identify as his "base". The American people are, I'm convinced, ready for some brave leadership on this issue. Like Johnson on the Civil Rights legislation, like Nixon in his opening to China, like Clinton on welfare reform, it may take the perceived tribune of the status quo to achieve a real breakthrough. Please Mr. Romney, be your own man; do the right thing...even if it does cost you the prospect of being elected. You may just be surprised. There are many people out there, at every point of the political spectrum, hungry for a man of principle to step forward on this. Be that man!
Where are our cultural leaders daring to speak out about the glorification of violence that, in deeply sad irony, was on the screen as backdrop to the killing and wounding. Dark Knight is only one, the latest, of a long line of films, videos, and "games" that trivialize the pain and destruction that guns inflict, in some subtle way making us all feel that gun-play is normal and even fun. While we may not be able or want to "ban" such violence, we don't have to culturally aggrandize it...the commentary in the entertainment news about how much Dark Knight's first weekend box-office take was going to be now leaves me feeling sick. I understand and support the notion of freedom of expression involved here, but we don't have to permit the manufacturers to promote violence as entertainment. Just like it's now illegal for tobacco to advertise in most media, we could make the advertisement of gratuitously violent fiction subject to considerably more stringent limitation. But even more important, our cultural leaders (high among them being our 24/7 media) can help to make that violence very "uncool"...just like most young children these days find smoking a nasty, anti-social act. It takes time, and leadership, but it's not impossible to gradually change mentality on this.
And where are our political leaders, at all levels of government, calling for us to do something more...maybe much more...about the accessability of these deadly weapons. That the Aurora murderer apparently acquired his arsenal of guns and ammunition and explosive devices legally is eloquent in its condemnation of our existing legal restrictions. These situations are of course the work of insane people...but people who did not display their deadly insanity in advance to put the world on notice. the University of Texas Tower sniper, Columbine, Viginia Tech, and now Aurora quickly come to mind and in each of these, and far too many others, the insane person was able to wreak so much death and destruction because of guns. If we can't prevent the work of madmen, at least we can make it much more difficult for them to do so much harm.
Today, President Obama visited the wounded and consoled many of the families of those who lost their lives. As always, he spoke with passion and moved us with his calls for recovery from this sadness and his confidence in the goodness of the American people. But I was greatly disappointed that he didn't take this ocassion to move beyond the role of Consoler in Chief. I hoped for, and even half-expected, him to move from that tone to close on a tone of righteous anger, saying something to this effect:
"It is now time...it is now way past time...to get serious about truly effective gun control in this country. That the shooter in this tragedy acquired his weapons "legally" tells us there is something terribly wrong with what is "legal" in our land. I know of course that there is Constitutional protection for the use and possession of firearms, but I also know that the Second Amendment has important limiting language about "a well-regulated militia..."as the basis for that protection, and our Constitution embraces many compromises and balancing acts. The current situation regarding guns is clearly out of balance.
I am aware of all the arguments against more effective gun control; some of them have some merit. But overall, I believe the American people are no longer convinced. I believe the American people are ready to strike a new balance. I believe the American people should hold all their leaders accountable to make significant improvements in public safety from gun violence. The right to expect that public safety is at least as important as the many other rights our governments go to great lengths to protect. We've fallen far too short here. We must make this better!
I pledge the balance of my term as President...and my next term if the people give it to me...to do everything I can to lead Congress to enact legislation and to insist that every department of my Administration does everything in its power to reduce this blight on our country. For example, I will redeploy some of Homeland Security's TSA army to help prevent this horrible domestic terrorism which has done so much more harm to our country than any foreign terrorists have been able to accomplish. If it takes a Constitutional amendment... and it might...I pledge to you that I will do everything I can to bring that about."
Alas, he didn't say that or anything like it. That leaves it to Governor Romney to depart from the agenda of one slice...maybe a small one... of what people identify as his "base". The American people are, I'm convinced, ready for some brave leadership on this issue. Like Johnson on the Civil Rights legislation, like Nixon in his opening to China, like Clinton on welfare reform, it may take the perceived tribune of the status quo to achieve a real breakthrough. Please Mr. Romney, be your own man; do the right thing...even if it does cost you the prospect of being elected. You may just be surprised. There are many people out there, at every point of the political spectrum, hungry for a man of principle to step forward on this. Be that man!
Sunday, July 1, 2012
Solving the Health Care Mess: an Update
I've recently reviewed what I wrote on this topic more than two years ago (Solving the Health Care Mess, March 3, 2010), and am even more convinced that I was onto the right combination of solutions. This past week's Supreme Court ruling on the consitutionality of The Affordable Care Act validates several of my concerns then and now, but still leaves unfulfilled a comprehensive result that only legislatures and executive leadership can give us.
First, as a lawyer and student of and great admirer of our Constitutional system, a few comments on the Supreme Court ruling itself and its immediate political aftermath.
First, the tax should used to directly solve the problems of "adverse selection" (being a free-rider until you actually need the medical coverage). Insurance works, in every realm, where people buy it because they want to protect themselves from an unaffordable financial consequence, or are forced to do so, well in advance of ever needing the coverage. The most sucessful homeowners insurance situation is never actually having your house burn down, or losing your roof to a storm, or suffering other major calamities. So, if we're going to tax free-riders, we need to make the tax big enough to actually motivate the desired action. Not many healthy young people are going to volunteer to buy a $5000 or more insurance policy merely to avoid a $1000 tax. Assuming that a small tax, all by itself, will prompt appropriate, but more expensive, societal behavior is naive. Most people will make the rational economic decision to pay the small tax until they actually need the more expensive insurance. So, the "free-rider" situation doesn't go away until the tax is as stiff or stiffer than the cost of the insurance. And, then, with that tax revenue, the government should actually buy the insurance coverage (thru 3rd party commercial insurers) that the taxed individual never got around to doing him or herself. That would put everyone in the same third-party intermediated, individual choice of care situation.
Pre-existing conditions coverage, covered medical exams, etc. can all be part of the mandated coverage. "Buy it yourself or we'll buy it for you with money we'll take out of your pocket! And if you're too poor, so we can't tax you, we'll give you a voucher you can only use to buy it. But, however you get it, once you've got it, you're on your own to use it wisely". With everybody in that insurance pool, healthy and sick, young and old, actual premiums would likely come down. And, they could come down much more if the realm of covered costs made more sense.
So, even more important that getting to universal coverage is to change what is covered. This will take lots of leadership and a patient effort at re-educating the public, but the most significant change would be shifting the insurance mentality from "first dollar" to "last dollar" coverage. Some grandfathering of existing beneficiaries (eg, for those already in the Medicare system) and some gradualism, maybe over decades, will no doubt be necessary, but the ultimate solution is to put individuals in charge of their first dollar costs so that competition among providers and careful prioritization by consumers applies to medical care as it does to everything else. To my thinking, the " much better" would be a tax rationalized individual mandate used to purchase catastrophic, not basic, insurance coverage, with the tax cost on a par with the premium cost of such coverage. Putting people squarely in control of... and insisting that they take financial responsibility for...their everyday and elective medical care needs, but as a society making sure that catastrophic, non-elective costs don't bankrupt individuals through universal insurance against that risk, will be the real revolutionary solution to the mess we have now.
First, as a lawyer and student of and great admirer of our Constitutional system, a few comments on the Supreme Court ruling itself and its immediate political aftermath.
- I was very pleased to see the Court's strong majority (7 - 2) upholding a key element of federalism (the respective sovereignties of the States and the federal government) by voiding penalties imposed on States which do not participate in certain Medicaid aspects of the law. The core genius of our governmental system is in limiting the risk of too much power lodged in any one branch or level and in reserving to the States those aspects of governmental power that are likely to have the most immediate impact on most people. Most of the evolution of this power balance has been from the States to the federal government over many, many years, but it's gratifying to see the Court come down strongly on the notion that there are still some limits on the exercise of power on the federal level.
- I was also pleased to see the majority (though only 5 to 4, here) rejecting the notion that the "individual mandate" was a valid exrcise of the Commerce Clause power. While we learned in law school years ago that the federal government's power to pre-empt State regulation of inter-state commerce is almost without limit [Europe should have taken an important lesson here that commerce among sovereign entities needs some central arbiter to avoid protectionism within a single national entity...but that's something for another post at another time], it was encouraging to see the Court draw the line on that power to void an attempt to impose affirmative duties on individuals to engage in a commercial act that they otherwise choose not to do. If it were legitimate to base the individual mandate on a Commerce Clause notion, that notion could justify the federal government's requiring individuals to do just about anything. On the federalism theme, nobody doubts that the States have such power to compel action; the issue was whether the federal government had any basis for exercising it.
- So, the mandate was declared constitutional (a different 5 to 4 majority) on a theory that the Administration and slim Congressional majorities denied was at work when the law was passed in 2010. Words matter; theories and rationales matter. If the only basis for the mandate's constitutionality lies in the undisputed power of the federal government to tax individuals for reasonable(whether wise or unwise) purposes, then the political establishment must live with that reality. Calling it a "penalty" or "fine" simply won't work...and is frankly disrespectful of the Court's decision and of the people's strong desire for less spin, more transparency in government. The American people...with most of them in the center... are smart enough to grasp these distinctions and I don't think they'll let the Democrats get away with wanting to have it both ways.
- And, the Republicans, so far, are missing the most important part of the message they can respond with. The American people...at the center...are also not going to be comfortable with a strident "Repeal, Repeal, Repeal! solution. Their message should quickly emphasize it's next thought..."and replace with something much better!"
First, the tax should used to directly solve the problems of "adverse selection" (being a free-rider until you actually need the medical coverage). Insurance works, in every realm, where people buy it because they want to protect themselves from an unaffordable financial consequence, or are forced to do so, well in advance of ever needing the coverage. The most sucessful homeowners insurance situation is never actually having your house burn down, or losing your roof to a storm, or suffering other major calamities. So, if we're going to tax free-riders, we need to make the tax big enough to actually motivate the desired action. Not many healthy young people are going to volunteer to buy a $5000 or more insurance policy merely to avoid a $1000 tax. Assuming that a small tax, all by itself, will prompt appropriate, but more expensive, societal behavior is naive. Most people will make the rational economic decision to pay the small tax until they actually need the more expensive insurance. So, the "free-rider" situation doesn't go away until the tax is as stiff or stiffer than the cost of the insurance. And, then, with that tax revenue, the government should actually buy the insurance coverage (thru 3rd party commercial insurers) that the taxed individual never got around to doing him or herself. That would put everyone in the same third-party intermediated, individual choice of care situation.
Pre-existing conditions coverage, covered medical exams, etc. can all be part of the mandated coverage. "Buy it yourself or we'll buy it for you with money we'll take out of your pocket! And if you're too poor, so we can't tax you, we'll give you a voucher you can only use to buy it. But, however you get it, once you've got it, you're on your own to use it wisely". With everybody in that insurance pool, healthy and sick, young and old, actual premiums would likely come down. And, they could come down much more if the realm of covered costs made more sense.
So, even more important that getting to universal coverage is to change what is covered. This will take lots of leadership and a patient effort at re-educating the public, but the most significant change would be shifting the insurance mentality from "first dollar" to "last dollar" coverage. Some grandfathering of existing beneficiaries (eg, for those already in the Medicare system) and some gradualism, maybe over decades, will no doubt be necessary, but the ultimate solution is to put individuals in charge of their first dollar costs so that competition among providers and careful prioritization by consumers applies to medical care as it does to everything else. To my thinking, the " much better" would be a tax rationalized individual mandate used to purchase catastrophic, not basic, insurance coverage, with the tax cost on a par with the premium cost of such coverage. Putting people squarely in control of... and insisting that they take financial responsibility for...their everyday and elective medical care needs, but as a society making sure that catastrophic, non-elective costs don't bankrupt individuals through universal insurance against that risk, will be the real revolutionary solution to the mess we have now.
Saturday, June 23, 2012
Three Days in May in Mongolia
Direct from the Asia Foundation meeting, about 30 of us continued on to Ulaan Baator ("UB"), Mongolia's modern capital and home to nearly half of its people.
As we approached the grey/brown landscape of central Mongolia by air, the plane took a very wide circle around the city below and eventually landed. Only a little later did we learn that at this time of year, the winds crossing the single runway are so strong that many landings are aborted for windshear. One more pass and we would have headed back to Beijing. "Chinggis Kahn International Airport" in bold letters above the terminal were among the last words in Roman letters we were to see. A big surprise is that almost everthing is rendered in the Cyrilic alphabet, even signage on major, new buildings.
Russia made Mongolia its first satellite...in 1921...not long after the revolution and imposed its alphabet on the pronunciation of the native Mongolian tongue. There were other displacements, of course, including the near destruction of Buddhist teachings and all but one or two monasteries. Among the first, imposing but ugly, things you notice on the very bad road from the airport are several gigantic power plants. These provide light, and heat, and hot water to the city through a form of physical grid unknown in America, but common in the old Soviet sphere. Giant pipes bring warm air and hot water to individual buildings throughout the city like a system of capillaries. One wonders how much of this is an attempt at efficiency in the very cold winter climes of the old Soviet world and how much it served as a method of control and coercion. We're of course accustomed to every edifice supplying its own heat and hot water thru small, very local devices...how quaint...how inefficient...but how independent....and how very Mongolian.
The life of the traditional, nomadic herder today is little changed from the days of the great Kahn, except that the ger (we call them "yurts") now has satellite TV and a small solar panel to power the electronics. When the herders pick up their complete belongings and move to (literally) greener grass several times a year, their 21st century equipment moves with them. In any event, spring was just beginning to arrive in Mongolia (most, but not all, of the trees were first showing green buds) and the gargantuan urban heating system was undergoing some seasonal readjustment, resulting in unapologetically unreliable access to hot water the first day we were there.
For its vast size, Mongolia has surprisingly few people...only about 2.7million in the whole country. That wouldn't comprise even a middling city in China now. That stupendous land area...and few people... are landlocked between two even vaster neighbors. Cultivating good relations with the US, as its "3rd Neighbor", gives Mongolia an even stronger hand in playing Russia and China off against eachother as the only foreign policy available. Most countries can take for granted their access to open seas for trade and defense. Imagine the complications of having to rely on everything coming in or going out over some other country's land or airspace. Happily for Mongolia, China's huge supply of labor and immense appetite for natural resources could rapidly enrich the relatively few native Mongolians...or more likely, in the near term, the Australian and Canadian mining companies now at work extracting coal and copper and rare earths. For now, however, the people are still "poor", but not impoverished in spirit. Each person receives a small, monthly stipend from the government and is entitled to a small plot of free land, enough for a sizable family to assemble a workable homesite and garden. But, somehow, it seems very inapt to try to endow a many centuries old nomadic people by rooting them to a particular piece of land.
On our way to the Tuul River Lodge, we were able to visit a small herder family, a strong, handsome young man and a beautiful young woman with their rambunctious 6 yr old son. The boy was just "home" from a long stint at boarding school and a daughter, a little older, was to return to the ger soon. All Mongolian children must attend school to age 16, most in a boarding situation in town, and spend their summers with their parents and, if herders, their flocks. That nomadic life must be coming to an end, soon, though. Our host was one of 11 children, but the only one still living the life of a nomad. It's hard to imagine that the boy, now loving his freedom and the very sweet affections of his parents and riding and herding with his father, will ever actually take up that life. The jobs in the mines or the offices in town will offer too much more comfort and ease. But not necessarily more wealth. With hundreds of livestock (horses, goats, sheep, and cows), the father could be considered rich by Mongolian standards...but it is such a hard life...and the long, cold winter is the worst enemy. We learned how to tell direction from the positions of gers. The one door always faces south, because the brutal winds tend to come from the north. Not infrequently, the cold is so deep for so long, the dzud, that virtually all the animals die.
As we approached the grey/brown landscape of central Mongolia by air, the plane took a very wide circle around the city below and eventually landed. Only a little later did we learn that at this time of year, the winds crossing the single runway are so strong that many landings are aborted for windshear. One more pass and we would have headed back to Beijing. "Chinggis Kahn International Airport" in bold letters above the terminal were among the last words in Roman letters we were to see. A big surprise is that almost everthing is rendered in the Cyrilic alphabet, even signage on major, new buildings.
Russia made Mongolia its first satellite...in 1921...not long after the revolution and imposed its alphabet on the pronunciation of the native Mongolian tongue. There were other displacements, of course, including the near destruction of Buddhist teachings and all but one or two monasteries. Among the first, imposing but ugly, things you notice on the very bad road from the airport are several gigantic power plants. These provide light, and heat, and hot water to the city through a form of physical grid unknown in America, but common in the old Soviet sphere. Giant pipes bring warm air and hot water to individual buildings throughout the city like a system of capillaries. One wonders how much of this is an attempt at efficiency in the very cold winter climes of the old Soviet world and how much it served as a method of control and coercion. We're of course accustomed to every edifice supplying its own heat and hot water thru small, very local devices...how quaint...how inefficient...but how independent....and how very Mongolian.
The life of the traditional, nomadic herder today is little changed from the days of the great Kahn, except that the ger (we call them "yurts") now has satellite TV and a small solar panel to power the electronics. When the herders pick up their complete belongings and move to (literally) greener grass several times a year, their 21st century equipment moves with them. In any event, spring was just beginning to arrive in Mongolia (most, but not all, of the trees were first showing green buds) and the gargantuan urban heating system was undergoing some seasonal readjustment, resulting in unapologetically unreliable access to hot water the first day we were there.
The Ulaan Baator Hotel claims to be UB's first 5 star hotel. "First" is an important part of that claim since the place was built in 1961 (Krushchev was still master of the Kremlin then) and the definitions of stardom have no doubt evolved in the intervening half century. The hotel hasn't changed much so you can easily imagine a group of commissars making themselves at home, toasting with vodka, singing The Internationale, while they plot their next opportunity to get back west of the Urals. Our suite (living room, dining room, bedroom, two weird closets, and a bath and a half) was, I imagined, the site of some intrigues over those early years. Penelope was convinced that there were blood stains on the very old and patched carpet. There are much nicer and newer hotels in the city, but none with its cachet...or location right at the center of power in Mongolia.
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| The "5 Star" Ulaan Baator Hotel |
Aside from the very new Government House anchoring the main square, the other buildings at this city center (Opera, banks, offices) all seem to date from the '20's and look much like the architecture and bear the colors of early Soviet style. You could imagine yourself in St. Petersburg for a short moment...especially, again, since the script everywhere is Cyrilic. The Government House is home to both Parliament and the President's office and, out front, a huge statue of Chinggis Kahn makes it clear where the self-recognized history of the Mongolian people begins. His visage appears on all the money (tugrics) as well. The Asia Foundation party spent a lot of time in this part of town, enjoying a reception by the US Ambassador, meetings with members of Parliament, Supreme Court Justices, and a breakfast meeting with President Elbegdorj Takhia. Elbegdorj was a key revolutionary at the fall of the old Soviet satellite leadership in 1990 and subsequently studied at Harvard before going into domestic Mongolian politics and rising to be head of state of the parliamentary democracy that supplanted the old Communist regime.
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| Government House, Sukhbaator Square |
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| Double E-Ticket in Mongolia-land! |
Getting to the Lodge was the greatest adventure of the trip. I had envisioned a permanent set of buildings..."lodge"...rather it was a temporary, a la nomade, set of gers on the side of a gentle slope looking down on a river meandering among woods and greening fields. Very pretty. It was "civilization" after the trip over the mountain to get there. Normally, getting to the lodge is a matter of taking off-road vehicles around and thru the river after leaving the paved road from UB. For us, recent rains and the melt of recent snow ruled out that passage. Instead, in old Russian military vehicles, looking a lot like something out of Mad Max, we went over the mountain, literally, no switch-backs, just straight up one side and straight down the other. We should have had headgear, inside the vehicle! We dubbed it the "super, double-E ticket in Mongolia-land!" Getting back, later that night as the sun was setting in a beautiful purple aura, was even more harrowing. We were in the last vehicle to leave, a long while after others so there was no one ahead...or behind. As we began the steepest part of the climb, now in total darkness, the engine started to smoke and gave off the smell of burning cables. The two Mongolian drivers seemed reasonably unperturbed as the six Western passengers shared half-hearted words of encouragement and not very funny jokes about having to spend the night in old Russian hardware before a search party would venture out for us. Happily, we had thought to bring a spare bottle of wine as a roadie. After some consultation and Mongolian cursing and, Penelope is convinced, the application of some chewing gum, the old crate lurched back into life.
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| Outside a ger at Tuul River Lodge |
A final note on the contrast between the modern urban environment of UB and the ancient nomadic past: on one of our evenings in town, there was a reception at the Museum of Contemporary Art, for the who's who of the capital to honor the Asia Foundation visit. Many of the women and quite a few of the men were wearing traditionally inspired formal attire and drank good wine and grazed on a broad array of foods and listened to a string quartet playing Mozart, followed by a contemporary Mongolian rock/traditional band. And the art and photography forming the backdrop was worth the visit in its own right. Hard to imagine a place further away from the sophisticated cities of the "first world" than Ulaan Baator, but that night, one would have found it hard to tell any real difference.
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