Wednesday, August 11, 2010

The Issues


Whether we're talking about jobs, deficits, entitlement programs, terrorism, border issues, energy,  the environment, or Democracy itself,  it's still about the economy. When the economy fails everything else fails with it. When the economy is healthy everything else falls into place.

The key to turning our economy around is relatively straight forward   Our economy is too dependent on consumer spending which means that we are exporting too much of our cash in exchange for goods produced abroad with cheap labor. It also means than when consumers max out their credit cards and begin to run out of money our economy begins to falter. The solution is to diversify our economy by rebuilding our manufacturing capabilities . In order to do that we must first reduce the burden of health insurance on America's businesses so that we can become competitive once again in the global market place. Our long term goal should be to become exporters of products and importers of cash, not the other way around. In the meantime we need to go over government spending with a fine tooth comb eliminating waste and inefficiency. The good news is that consumers appear to be paying down their credit cards, and increasing their savings, and home prices are stabilizing at levels which once again makes home ownership affordable for many Americans. 


Medicare is a tax payer funded, taxpayer owned, Insurance Co-Op, which makes payments to private sector physicians and hospitals just like any other insurance company. However, no private sector insurance company could survive if it were only allowed to collect premiums from the highest risk patients and neither can Medicare. The solution to making Medicare solvent is to expand Medicare to cover every American, healthy or otherwise, so that premiums paid in by the younger healthy section of the population can be used to cover the cost of caring for the elderly. The side benefit of expanding Medicare to cover everyone is that it would reduce the burden of health insurance on America's businesses by at least 50% which amounts to a minimum savings of at least $3,000 per employee per year. This savings alone would be enough to bring our national economy out of the recession almost over night. For those with a soft spot in their hearts for private sector insurance companies keep in mind that expanding Medicare still leaves private sector insurers with the ability to market the highly profitable and low risk supplemental policies for the portion of health care not covered by Medicare or private sector insurance policies. You can see a more detailed analysis of the economics of this by clicking on the health care blog on this site.


Social Security is in trouble because the ratio of working people to retired people is dropping drastically as the baby boomers retire. This problem is going to be with us for at least another 20 years. We can improve the ratio of working people to retired people by passing a guest worker program that requires guest workers to contribute to Social Security like the rest of us do. We can also place limits on people who have enough wealth that the don't need Social Security. Removing the cap of $170,00 on Social Security wages  will also bring additional money into the fund. Finally, we can encourage the boomer population to stay in the work force as long as possible which would have the added benefit of solving the projected shortages of qualified workers in the next few decades.


The most effective way to improve border security is to eliminate the need for it. The majority of the border problems are created by demand in America for drugs and cheap labor. We can take a lesson from our experience during the Prohibition era, when banning alcohol produced the same kind of drug smuggling violence we see today. When we made alcohol legal and taxed liquor sales the problem was solved. Marijuana is no more dangerous, or addictive, than alcohol and making it legal would provide additional revenue to our government and reduce the enormous financial strain on our prisons. There is resistance to legalizing Marijuana because it is considered a drug, compared to alcohol which is considered a "beverage".
In truth, both substances are drugs and alcohol is by far the most destructive and deadly.


Once again we can learn a lesson from the past. Decades ago we established a "Bracero" program which allowed Mexican farm workers to cross the border to work in the fields picking crops. As soon as the program was passed illegal crossings dropped drastically. If we establish a guest worker program that pays fair wages, so that immigrants won't be taking jobs from Americans, we'll see a sharp drop in illegal immigration. Both parties realize that the ultimate solution is to establish a regulated guest worker program but the reason Congress hasn't passed such a bill is because the Democrats insist on tying a guest worker program to a "path to citizenship"- which is unfair to those already in line. On the other hand the Republicans insist that the border must be "secure" before they will sign on, and everybody knows it is physically impossible to completely secure the border. Both sides need to drop their unrealistic demands and pass this legislation.


Over 90% of the voters are unhappy with the partisan battles in Washington.   Clearly what we need here is a shift from combative debates to rational discussions. A shift from trying to defeat one another to honestly working together for the common good.  Lately we're seeing very little effort from either political party to find common ground, nor much willingness to work together as a team for the benefit of all.  We are all truly brothers and sisters in this grand adventure, not mortal enemies bent on destroying one another. If we set aside judgment and ideology and face the facts squarely we'll have a much better chance of finding rational solutions to our challenges.


We all know that we can't keep spending  money that we don't have without  inflicting serious damage to our own economy and the economies of countries who own much of our debt. There are no solutions that are pain free but if we're all willing to make our share of the sacrifices there is no reason why we can't turn things around fairly quickly. Here are a few steps which I submit for your consideration to start moving us in the right direction. I'm sure many of you have suggestions that you would like to add to this list.

1) Federal government employees earn on average  about $100,000 per year, including benefits, compared to employees in the private sector who earn about $50,000. With approximately 4 million Federal employees that differential costs taxpayers 200 billion dollars annually. 

2) One of our other major expenses is the interest on the money we are borrowing to finance our national debt. This expense is going to increase rapidly when interest rates start to rise in the next few years.The first obvious step is to stop borrowing  more money.  Congress should use projections from the Congressional Budget Office to determine the amount of money that can be spent each year without having to borrow additional funds. Congress should be then be required to cut their annual  spending to the level of those projected revenues, after allowing a set aside of 5% annually to start paying down our national debt. .

3) There is  tremendous waste and fraud in our Medicare and Social Security.programs. We can  eliminate that fraud by looking for statistical patterns of abuse and inefficiency . Social Security was designed to help those in need during their retirement years. Many people who don't need Social Security are drawing it anyway. That problem can easily be solved. Additionally, the salary cap on Social Security wages should be completely eliminated which means that the wealthy would be paying Social Security taxes on their entire salaries instead of just the first $106,000 in wages. The wealthy can afford to do without that extra  yacht. 

4) Wasteful military spending has become a national joke. There are thousands of military aides in the Pentagon shuffling papers.There are billions being spent on esoteric weapons development programs under no- bid contracts that never produce anything useful. We're fighting wars that we can no longer afford to fight and it's clear that we don't have the financial resources  to continue acting as  the world's policemen. Osama bin Ladin openly brags that he plans to bankrupt our economy by drawing us into endless wars around the globe - a strategy successfully pioneered by  George Washington, our first President. From a practical standpoint the world  needs our financial stability more than it need our troops.

5)  Tax revenues can be increased by raising the tax rates on the extremely wealthy, which are currently near  record low levels , by cracking down on off shore tax shelters, and by taking the burden of health insurance off  the backs of America's businesses.

6) We've got thousands of agencies with overlapping jurisdictions. We need to bring in some efficiency experts and eliminate, or combine, these agencies.


 The health insurance plan recently passed by Congress is filled with good intentions but the end result is a 2,000 page confusing maze of new agencies, which is financed by smoke and mirrors, that will only serve to drive the costs of health care even higher and make Medicare insolvent.  I've posted a more detailed analysis of Health Insurance on this web site. If you're having a case of insomnia some night and want to read something that will put you to sleep, go back to the first page and click on Health Insurance on the right side of the page to find my  Health Insurance blog. The best and most elegant solutions to any problem are always the ones that are the least complex. The new Health Insurance program fails that test miserably. 

SB 1070
The recent controversial bill passed by Arizona is mostly symbolic and will have little effect in terms of reducing the number of undocumented workers in our State. We're told that there may be as many as 400,000 undocumented workers in Arizona. According to my math that amounts to 400,000 consumers who probably spend about 8 billion dollars a year in the local economy for basics like housing, food, and clothing. In addition they probably pay over a billion dollars a year in State sales taxes and taxes of other types. Imagine what a blow it would be to the economy of Arizona if we were able to round up and deport all of those workers. It would be like losing a major city. Anyone who thinks the Federal Government isn't doing enough to secure the border hasn't been to the border. I own property within a few miles of the border in Cochise County and I don't see anything more that the Government could do that they aren't already doing. The Government has manned a massive effort that is costing us billions of dollars annually but it's physically impossible to completely seal the border.

The best way to solve the undocumented worker problem is to document the workers.  Migration of workers seeking jobs is happening on a massive scale around the world. It's been reported that the amount of money these workers send home to their families amounts to over 300 billion dollars a year globally. Some nations, such as the Philippines, are acting in the role of employment agencies. They train their citizens in various trades and crafts and then send them overseas under  contract with Visas.. This is a  classic example of free enterprise dealing with supply and demand.

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