It's most probably not much on the minds of most Americans at this time, but with our current federal government debt and large budget deficits, we have a major fiscal problem facing the country which requires serious corrective actions that will have a big impact on virtually all of us, as well as on the whole world economy.
In brief, the major fiscal problem is that our U. S. government debt, commonly called the "public debt" or the "national debt," has grown a great deal in recent years in absolute terms and, more importantly, in relation to the growth of our economy as measured by our gross domestic product (GDP). This has been happening for a number of reasons, but it's largely reflected in our increasing and substantial annual government deficits, primarily the difference between government receipts and spending. Income tax collections and Social Security tax receipts have been increasingly greatly exceeded by expenditures, including especially Medicare and Medicaid, Social Security payments, and defense.
The national debt grew from roughly $2 trillion in 1980 to $5.8 trillion in 2008, and, according to the Congressional Budget Office (CBO), is projected to increase to $14.3 trillion in the next ten years, from 41% of GDP to as much as 68%. The annual deficit for the fiscal year ended 6/30/09 was more than $1.4 trillion, about 11.2% of GDP, the largest deficit as a percent of GDP in the last 60 years. As most Americans probably know, major factors in the deficit in FY 2009, aside from those related to our continuing huge social programs, were the economic stimulus packages to pull us out of our deep recession, and the fast growing expenditures for Homeland Security and fighting the wars in Iraq and Afghanistan.
The major problem these developments pose is that they weaken our country financially, politically and militarily, in both absolute and relative terms. Our federal government will have to spend more and more of government receipts on making interest payments on our national debt (it was $383 billion in FY 2009) and have increasingly lower amounts available for discretionary expenses, including Defense Department money for fighting wars, Homeland Security, expenditures for environmental protection and combatting global warming, as well as energy independence. Potentially impacting our national security and foreign policy flexibility in this regard, about $800 billion or 23% of our national debt is held by China and another $750 billion or 21% by Japan.
The crisis is not something most Americans are thinking or unduly concerned about, because they are understandably much more concerned about their personal financial issues, including getting and keeping their jobs, paying the bills, avoiding home foreclosures, dealing with troubling and expensive medical issues, and trying to save for college educations for their children and grandchildren, as well as to finance their own retirements. Another contributing factor on this subject is that national fiscal issues are rather complicated and not that often discussed in the general media. Senior federal government leaders, including President Obama and his staff, while quite familiar with our fiscal problems, are preoccupied and more concerned with immediate priority issues, like managing the wars in Iraq and Afghanistan, negotiating the final terms of the pending health care reform legislation, promoting their views on financial institutions reform, preparing for mid-term congressional elections next year, and other largely partisan matters.
What can and should be done? Frankly, we're in a tough position and needed corrective actions will be quite difficult, politically very controversial, and, in many cases, not likely to be well received by much of the public. This is especially so given our high unemployment rate, the fragile state of our economic recovery, low consumer spending, state budget deficits, the continuing concern with global terrorism, and the wars in Iraq and Afghanistan with much more aid seemingly to be spent over the next few years in Pakistan. However, we need to move toward a balanced budget as quickly as possible and plan to keep the budget balanced on a continuing basis.
There are three obvious actions for the federal government to pursue: a) cut spending, b) increase taxes, and c) find more ways to eliminate waste and improve efficiency and productivity. Among relatively reasonable actions likely to be well received by most of the public: tougher negotiations with other countries to share more equally in the costs of fighting global terrorism, accelerating plans to implement exit strategies in Iraq and Afghanistan, increasing income taxes and their enforcement on the wealthy and upper level of middle income Americans, and temporarily cutting back salaries and the cost of benefits for at least the upper tier of federal employees. Another long overdue and obvious action is overhauling the IRS and greatly simplifying and streamlining the tax code and our unnecessarily complex and expensive income tax return preparation and reporting process.
Among needed actions which are likely to be unpopular to many or most Americans: reforming and cutting back the future costs of Medicare and Medicaid, imposing a hiring freeze for federal employees, substantially increasing sales taxes on gasoline to create more revenue and serve as an inducement to drive more energy efficient cars and trucks, and eliminating subsidies to agriculture/farmers and religious and most non-profit institutions. These actions should include serious bipartisan efforts to reduce the federal costs of the pending health care legislation, at least for the next three to four years until our economy fully recovers and tax receipts increase to facilitate balanced budgets.
Monday, December 7, 2009
Thursday, December 3, 2009
Obama's Afghanistan Surge
As expected, there were very mixed reviews of President Obama's well-delivered speech at West Point Military Academy to the nation on Tuesday evening on his strategies for dealing with the difficult, complex and increasingly unpopular war in Afghanistan. As could have been predicted, the primary controversial issues had to do with the number of additional troops to be soon deployed, the high costs associated with the surge, and the timetables for transitioning greater responsibility to the Afghan government and for starting to bring our troops back home.
Somewhat ironically, most Republicans in Congress seem to generally support his plans, while a high percentage of Democrats, especially the liberals on the left, his original main base of supporters, seem to have understandable serious objections and concerns, especially with the longer-term costs, expected casualties, and how long we will end up continuing this war, distracting us from adequate progress on important domestic priorities.
It is quite clear President Obama had no easy options with probable outcomes and consequences we could live with. After lengthy deliberations with his many advisors, he basically agreed with the bulk of advice and recommendations made primarily by Defense Secretary Gates and field commander General McChrystal, and, noteworthy, passing on most of the advice of Vice President Joe Biden. Aside from big concerns with expected overall costs and casualties, here are my major concerns:
1. The very uncertain capability of Afghan President Hamid Karzai and his administration to do what they have to do in order for Obama's strategies to work successfully, including gaining broad national support for his weak government, eliminating the deep-rooted and endemic corruption at almost all levels, consistently delivering basic services to the population, dealing effectively with the tribal warlords, and managing the badly needed development and performance of his administration and the national military and police forces. With respect to the latter, part of my concern is based on the significant fact that the overall illiteracy rate in the country is a shocking 72%, while in the Afghan Army it is estimated even higher at 90%!
2. A key and appropriate part of Obama's strategy is working, assisting and coordinating closely with the government and large military of neighboring Pakistan to combat the insurgents and help stabilize this country as well. While very necessary, this is an added burden for the U. S. in terms of financial and equipment resources, manpower and logistics management. This represents another big risk, because if we aren't successful in Pakistan, we probably won't be successful in Afghanistan. Many of the bad guys will simply continue to hide out in Pakistan and move back to Afghanistan when we start eventually withdrawing our troops.
3. Since the 30,000 additional U. S. troops and hoped for additional allied mostly NATO country troops will all not have arrived in Afghanistan until June or July next year at the earliest, it is unrealistic that we will know by December next year whether or not we can start withdrawing some of our forces in the summer of 2011, only six or so months later, as planned by Obama. We should reasonably expect that withdrawal of our 98,000 or so troops will very possibly be stretched out over a longer period, with a concomitant adverse impact on our war costs. If we get out too soon, the Al Qaeda and Taliban insurgents will probably have little difficulty in building up their forces again with new recruiting.
4. Another concern is with our own apparent capability and effectiveness in monitoring the extent to which our equipment, reconstruction and financial aid is appropriately deployed in Afghanistan. This was especially brought to my attention in an interview I heard on the radio yesterday with retired Major General Arnold Fields, Special Inspector General - Afghanistan Reconstruction (SIGAR), whose unit is responsible for much of this. To the interviewer's amazement and my own, General Fields said that only 25-30% of U. S. money for reconstruction ends up being used for the right projects, and roughly 10% is needed for private security. This means that as much as 60-65% of our taxpayer moneys is completely unaccounted for!! That's obviously outrageous and unacceptable.
Considering all the stakes, President Obama took a major risk in deciding on his announced strategies for Afghanistan and Pakistan, at a time when we're still in Iraq, we're concerned with Iran's nuclear build-up, our economy is still in the early stages of recovery from a deep recession, and he's trying to get a highly expensive healthcare reform package approved by the Congress. All Americans should hope he will be at least relatively successful in the Middle East. If his plans don't work, one must expect there's a fair chance that Democrats will lose control of Congress in the elections in 2010 and that he will be fortunate to win reelection in 2012. Much worse, the U. S. will have wasted a great deal of national resources in terms of military casualties and financial assets.
Somewhat ironically, most Republicans in Congress seem to generally support his plans, while a high percentage of Democrats, especially the liberals on the left, his original main base of supporters, seem to have understandable serious objections and concerns, especially with the longer-term costs, expected casualties, and how long we will end up continuing this war, distracting us from adequate progress on important domestic priorities.
It is quite clear President Obama had no easy options with probable outcomes and consequences we could live with. After lengthy deliberations with his many advisors, he basically agreed with the bulk of advice and recommendations made primarily by Defense Secretary Gates and field commander General McChrystal, and, noteworthy, passing on most of the advice of Vice President Joe Biden. Aside from big concerns with expected overall costs and casualties, here are my major concerns:
1. The very uncertain capability of Afghan President Hamid Karzai and his administration to do what they have to do in order for Obama's strategies to work successfully, including gaining broad national support for his weak government, eliminating the deep-rooted and endemic corruption at almost all levels, consistently delivering basic services to the population, dealing effectively with the tribal warlords, and managing the badly needed development and performance of his administration and the national military and police forces. With respect to the latter, part of my concern is based on the significant fact that the overall illiteracy rate in the country is a shocking 72%, while in the Afghan Army it is estimated even higher at 90%!
2. A key and appropriate part of Obama's strategy is working, assisting and coordinating closely with the government and large military of neighboring Pakistan to combat the insurgents and help stabilize this country as well. While very necessary, this is an added burden for the U. S. in terms of financial and equipment resources, manpower and logistics management. This represents another big risk, because if we aren't successful in Pakistan, we probably won't be successful in Afghanistan. Many of the bad guys will simply continue to hide out in Pakistan and move back to Afghanistan when we start eventually withdrawing our troops.
3. Since the 30,000 additional U. S. troops and hoped for additional allied mostly NATO country troops will all not have arrived in Afghanistan until June or July next year at the earliest, it is unrealistic that we will know by December next year whether or not we can start withdrawing some of our forces in the summer of 2011, only six or so months later, as planned by Obama. We should reasonably expect that withdrawal of our 98,000 or so troops will very possibly be stretched out over a longer period, with a concomitant adverse impact on our war costs. If we get out too soon, the Al Qaeda and Taliban insurgents will probably have little difficulty in building up their forces again with new recruiting.
4. Another concern is with our own apparent capability and effectiveness in monitoring the extent to which our equipment, reconstruction and financial aid is appropriately deployed in Afghanistan. This was especially brought to my attention in an interview I heard on the radio yesterday with retired Major General Arnold Fields, Special Inspector General - Afghanistan Reconstruction (SIGAR), whose unit is responsible for much of this. To the interviewer's amazement and my own, General Fields said that only 25-30% of U. S. money for reconstruction ends up being used for the right projects, and roughly 10% is needed for private security. This means that as much as 60-65% of our taxpayer moneys is completely unaccounted for!! That's obviously outrageous and unacceptable.
Considering all the stakes, President Obama took a major risk in deciding on his announced strategies for Afghanistan and Pakistan, at a time when we're still in Iraq, we're concerned with Iran's nuclear build-up, our economy is still in the early stages of recovery from a deep recession, and he's trying to get a highly expensive healthcare reform package approved by the Congress. All Americans should hope he will be at least relatively successful in the Middle East. If his plans don't work, one must expect there's a fair chance that Democrats will lose control of Congress in the elections in 2010 and that he will be fortunate to win reelection in 2012. Much worse, the U. S. will have wasted a great deal of national resources in terms of military casualties and financial assets.
Saturday, November 14, 2009
Fighting the Smoking Plague
Despite much more consumer knowledge about the high risks and required cigarette pack health warnings, each year in the U. S. smoking still kills more people than AIDS, alcohol, other drug abuse, car crashes, murders, suicides, and fires - combined! Causing more than 430,000 deaths annually, it's the leading preventable cause of death, reflected in statistics for those dying from heart disease, cancer and stroke, and direct medical costs are estimated at as much as $50 billion annually, according to the U. S. Center for Disease Control.
It's noteworthy that the estimated cost of implementing the healthcare reform bill approved by the U. S. House of Representatives a week ago is $1.2 trillion over the next ten years, broadly criticized by many as much more than we can really afford, even though that's on average a relatively almost acceptable $120 billion annually. The $50 billion direct medical costs from smoking is nearly 42% of that number. My guess is that after the Senate provides their input, we'll end up with final bill approved by the Congress at a lower ten year cost between $950 billion and $1.0 trillion, increasing the smoking associated 42% number to 50% or more.
Smoking is a societal plague for several reasons, aside from the high medical costs for the nation grappling with our high national debt, large budget deficits and near record unemployment, and the high number of fatalities caused by this source. As individual smokers know, it's a very expensive habit at a time when a great many Americans are needing to hunker down financially, including most likely a high percentage of those 46 million U. S. adults over 18 who were smokers in 2008. At a national average cost of roughly $5 a pack and smoking at a rate of 1 1/2 packs a day, the annual cost is more than $2,700. At two packs a day it's $3,650 annually. This is, of course, aside from any medical costs to be incurred treating diseases caused or contributed to by smoking, costs for trying to contain or eliminate the addiction to tobacco, and the costs of dry-cleaning clothes and cleaning the air in homes fouled by the nasty habit.
Another very troubling fact is that so many teenagers are smoking, fully 28% of high schoolers in this country, and at least 4.5 million are addicted users of cigarettes. Furthermore, 6,000 teenagers under 18 reportedly are picking up the habit every single day and nearly one third of these are expected to become regular adult smokers. Finally, for this post, a further significant concern, as far as I'm concerned, is the completely unnecessary and unacceptable littering done by smokers with their cigarettes and cigars and the concomitant fire danger this can pose.
What can and should be done to better fight this plague? The answers are fairly obvious for the most part, but they still bear repeating:
1. Make sure that no smoking is allowed in any of our schools funded by taxpayer dollars and that there is strict enforcement and sanctions for any violations, for both student violators and uncooperative school officials.
2. More effective teaching of the dangers of smoking beginning in the 7th or 8th grades and through high school.
3. High school sports coaches should be encouraged by school officials, if not done so already, to exclude smokers from their teams and to support efforts of smoking athletes to break the habit.
3. Since smoking rates are in general higher for the less well educated, continue current efforts to improve our education system with higher high school graduation rates and more students going on to college.
4. Increase the cost of tobacco products by even higher federal and state tax levels. It's noteworthy that there's a very substantial difference among state sales tax levels. In New York the state has a sales tax of $2.75 per pack, while in South Carolina it's only $0.07 per pack and in Missouri it's just $0.17 per pack. Interestingly, but not surprisingly, South Carolina and Missouri are among the states with relatively high numbers for percentage of smokers.
5. In the final healthcare reform bill to be approved by Congress, make sure there are adequate provisions to financially incent people to stop smoking or at least to reduce their level of smoking, as well as discouraging people to start. Concerned citizens should immediately contact their senators and representatives to pass on their point of view.
6. Insurance companies providing coverage for health, home and autos should be incented by Congress and/or market competition to establish or increase more meaningful discounts for non-smokers.
7. Fines and community service terms for tobacco product litterers should be increased significantly with appropriate publicity in local newspapers and TV news programs.
It's noteworthy that the estimated cost of implementing the healthcare reform bill approved by the U. S. House of Representatives a week ago is $1.2 trillion over the next ten years, broadly criticized by many as much more than we can really afford, even though that's on average a relatively almost acceptable $120 billion annually. The $50 billion direct medical costs from smoking is nearly 42% of that number. My guess is that after the Senate provides their input, we'll end up with final bill approved by the Congress at a lower ten year cost between $950 billion and $1.0 trillion, increasing the smoking associated 42% number to 50% or more.
Smoking is a societal plague for several reasons, aside from the high medical costs for the nation grappling with our high national debt, large budget deficits and near record unemployment, and the high number of fatalities caused by this source. As individual smokers know, it's a very expensive habit at a time when a great many Americans are needing to hunker down financially, including most likely a high percentage of those 46 million U. S. adults over 18 who were smokers in 2008. At a national average cost of roughly $5 a pack and smoking at a rate of 1 1/2 packs a day, the annual cost is more than $2,700. At two packs a day it's $3,650 annually. This is, of course, aside from any medical costs to be incurred treating diseases caused or contributed to by smoking, costs for trying to contain or eliminate the addiction to tobacco, and the costs of dry-cleaning clothes and cleaning the air in homes fouled by the nasty habit.
Another very troubling fact is that so many teenagers are smoking, fully 28% of high schoolers in this country, and at least 4.5 million are addicted users of cigarettes. Furthermore, 6,000 teenagers under 18 reportedly are picking up the habit every single day and nearly one third of these are expected to become regular adult smokers. Finally, for this post, a further significant concern, as far as I'm concerned, is the completely unnecessary and unacceptable littering done by smokers with their cigarettes and cigars and the concomitant fire danger this can pose.
What can and should be done to better fight this plague? The answers are fairly obvious for the most part, but they still bear repeating:
1. Make sure that no smoking is allowed in any of our schools funded by taxpayer dollars and that there is strict enforcement and sanctions for any violations, for both student violators and uncooperative school officials.
2. More effective teaching of the dangers of smoking beginning in the 7th or 8th grades and through high school.
3. High school sports coaches should be encouraged by school officials, if not done so already, to exclude smokers from their teams and to support efforts of smoking athletes to break the habit.
3. Since smoking rates are in general higher for the less well educated, continue current efforts to improve our education system with higher high school graduation rates and more students going on to college.
4. Increase the cost of tobacco products by even higher federal and state tax levels. It's noteworthy that there's a very substantial difference among state sales tax levels. In New York the state has a sales tax of $2.75 per pack, while in South Carolina it's only $0.07 per pack and in Missouri it's just $0.17 per pack. Interestingly, but not surprisingly, South Carolina and Missouri are among the states with relatively high numbers for percentage of smokers.
5. In the final healthcare reform bill to be approved by Congress, make sure there are adequate provisions to financially incent people to stop smoking or at least to reduce their level of smoking, as well as discouraging people to start. Concerned citizens should immediately contact their senators and representatives to pass on their point of view.
6. Insurance companies providing coverage for health, home and autos should be incented by Congress and/or market competition to establish or increase more meaningful discounts for non-smokers.
7. Fines and community service terms for tobacco product litterers should be increased significantly with appropriate publicity in local newspapers and TV news programs.
Monday, November 9, 2009
Healthcare Reform Update
This past Saturday the U. S. House of Representatives finally passed their massive healthcare plan by a very close vote of 220 to 215, with only one Republican supporting it and 39 conservative Democrats voting against the plan. It is now the U. S. Senate's turn to come up with a bill their chamber can approve. President Obama has for many months been hoping he can sign into law before the end of the year a final bill approved by the Congress, but it's very possible the legislative process will drag into January or February, given the strident opposition and filibustering opportunities available to the Republicans in the Senate.
I mentioned in my post on Healthcare Reform in June that I was confident reform legislation would be approved by Congress and signed into law by the end of the year. I'm still confident, but possibly I may have been a little too optimistic on the timing. I also mentioned in June that I was hopeful the legislation would be the product of genuine bipartisan debate and consensus. Unfortunately it's clear this didn't happen. Looked at narrowly, the approval in the House was a victory for President Obama and the Democratic leadership and a loss for Republicans. However, the result in my opinion was not in the best interest of the American people. A bipartisan bill incorporating the best ideas of Democrats, Republicans, as well as Independents, in a more balanced manner would have been much better.
In fact, the bill could most probably have been significantly improved if it also took into account some of the best features of the health care systems employed in several of the other advanced democracies in Europe and Asia, as covered in Frontline's recent TV presentation, "Sick Around the World." Primary among those countries, as I perceived it, were Japan, Taiwan, the U. K., the Scandinavian countries, Germany and Switzerland. Taiwan used this very approach in effectively reforming their apparently very successful system. Some of the main features highlighted in their broad survey were a generally high degree of patient satisfaction with the systems, good quality care, no medical bills for patients, no bankruptcies of patients resulting from high medical bills, limited and improving waiting times for patients, and much lower administrative costs to operate their systems. In the U. S. administrative costs reportedly were about 16% of total healthcare costs versus an average of about 5-6% in these other countries.
Clearly, huge savings in healthcare costs could be achieved if we could learn from the experiences of these other countries and follow their leads in substantially reducing administrative expenses. Has this been seriously explored by politicians and medical experts advising them? Or have both groups essentially been dissuaded by the private sector healthcare industry and their lobbyists?
It's not too late, but I'm not optimistic about a good bill coming out of the Senate within a reasonable timeframe. I'm afraid serious ideological differences, as well as motivation by Republican leaders to do what they can to deter President Obama from achieving a major legislative victory on a high priority issue, will make it unlikely the Senate will come up with a sensible, pragmatic and bipartisan result that best serves the great majority of the American people. Another obstacle will be the impact of expected campaign contributions for the approaching congressional elections. I hope I'm wrong and that these points can be overcome.
I mentioned in my post on Healthcare Reform in June that I was confident reform legislation would be approved by Congress and signed into law by the end of the year. I'm still confident, but possibly I may have been a little too optimistic on the timing. I also mentioned in June that I was hopeful the legislation would be the product of genuine bipartisan debate and consensus. Unfortunately it's clear this didn't happen. Looked at narrowly, the approval in the House was a victory for President Obama and the Democratic leadership and a loss for Republicans. However, the result in my opinion was not in the best interest of the American people. A bipartisan bill incorporating the best ideas of Democrats, Republicans, as well as Independents, in a more balanced manner would have been much better.
In fact, the bill could most probably have been significantly improved if it also took into account some of the best features of the health care systems employed in several of the other advanced democracies in Europe and Asia, as covered in Frontline's recent TV presentation, "Sick Around the World." Primary among those countries, as I perceived it, were Japan, Taiwan, the U. K., the Scandinavian countries, Germany and Switzerland. Taiwan used this very approach in effectively reforming their apparently very successful system. Some of the main features highlighted in their broad survey were a generally high degree of patient satisfaction with the systems, good quality care, no medical bills for patients, no bankruptcies of patients resulting from high medical bills, limited and improving waiting times for patients, and much lower administrative costs to operate their systems. In the U. S. administrative costs reportedly were about 16% of total healthcare costs versus an average of about 5-6% in these other countries.
Clearly, huge savings in healthcare costs could be achieved if we could learn from the experiences of these other countries and follow their leads in substantially reducing administrative expenses. Has this been seriously explored by politicians and medical experts advising them? Or have both groups essentially been dissuaded by the private sector healthcare industry and their lobbyists?
It's not too late, but I'm not optimistic about a good bill coming out of the Senate within a reasonable timeframe. I'm afraid serious ideological differences, as well as motivation by Republican leaders to do what they can to deter President Obama from achieving a major legislative victory on a high priority issue, will make it unlikely the Senate will come up with a sensible, pragmatic and bipartisan result that best serves the great majority of the American people. Another obstacle will be the impact of expected campaign contributions for the approaching congressional elections. I hope I'm wrong and that these points can be overcome.
Friday, October 2, 2009
Afghanistan War Strategy Revisited
President Obama is still debating with his national security team and certain NATO leaders how the Administration and the Congress should respond to the recent report and recommendations of the U. S. commander in Afghanistan, General Stanley McChrystal, which includes a substantial increase in U. S. troop strength in that country. Obama is definitely right to take his time and make a well considered decision. He's in a very difficult situation and will likely be seriously criticized no matter what he ends up doing.
As was evident in my post on this subject back in December 2008, I've had very mixed feelings about our engagement there for a long time. I have more concerns now than I had then.
Our original mission when the war began exactly eight years ago, in response to the 9/11 attacks, was to find Bin Laden and other high-ranking Al Qaeda leaders, put them on trial, destroy the organization, and remove the allied Taliban regime which supported Al-Qaeda and gave them protection. With NATO partners we've had some success in killing and capturing some mid-level leaders and removing the Taliban regime, but we haven't found Bin Laden or destroyed the organization. And the Taliban appears to be getting stronger and stronger. Now our mission seems to be moving towards a prime focus on nation-building and winning the hearts and minds of the Afghan people.
It's a noble mission, but should that be our role and can we really afford what that entails in terms of much larger resources and a much longer time commitment, given our country's poorer financial position, other international obligations, and, more importantly, our critical domestic policy needs?? I don't think so! According to the Congressional Research Service, we've already spent $223 billion in Afghanistan for war costs alone! Separate from war costs, we've also spent a great deal of money on development aid and it's growing annually. It was $982 million in 2003 and it grew to $9.3 billion in 2008! And what about the immeasurable costs in military casualties, which number seem to be increasing on an almost daily basis?
A year ago we had 48,250 troops in the country. Now the total is very close to 60,000, and General McChrystal wants that increased substantially up to 40,000 more with a goal to make Afghanistan a relatively stable country. It would be nice to have Afghanistan a stable country, but is that realistically achievable, and at what costs and expected timeframe, and, importantly, should the U. S. be paying for the bulk of this?? I think not. How many other "unstable" countries are there in the world with Al Qaeda cells present? There are several dozen in Africa, including especially Somalia. And what about the Palestinian territories? How about Cambodia? We simply can't stabilize every country. And we can't go to war in every country that has Al Qaeda or Taliban insurgents.
Aside from the costs and other factors referred to above, I have big concerns with the widespread corruption in the Karzai government, clear fraud in their recent national election, the problems posed by the powerful, independent and untrustworthy warlords in the tribal regions with their own private militias, and the vast opium fields which heroin, surpassing 90% of the world's production, financing much of Al-Qaeda and the Taliban's total needs.
What to do? We need to make it very clear to the Afghan leaders, like we did in Iraq, that, while we want to continue helping them, we will not have combat troops there for an extended, indefinite period and we need to see more tangible results from them. The results must include a satisfactory clearing of the air surrounding the recent election, a strong and satisfactory commitment evidenced by specific actions to largely eliminating governmental corruption, and more productive negotiations with the warlords to gain their support and cooperation. We also need to develop a more effective program to deal with the opium fields and helping farmers move to other crops that can provide a decent living.
The U. S. and our NATO allies are not the only countries that have strong strategic interests in achieving a stable Afghanistan and that goes also for neighboring Pakistan. We shouldn't continue to bear the brunt of needed military actions, the resultant casualties, development aid, and the direct and indirect financial costs involved. India and China should also play significant roles, and so should the oil rich countries in the Persian Gulf, of course including Saudi Arabia. Isn't this a virtual no-brainer?
As was evident in my post on this subject back in December 2008, I've had very mixed feelings about our engagement there for a long time. I have more concerns now than I had then.
Our original mission when the war began exactly eight years ago, in response to the 9/11 attacks, was to find Bin Laden and other high-ranking Al Qaeda leaders, put them on trial, destroy the organization, and remove the allied Taliban regime which supported Al-Qaeda and gave them protection. With NATO partners we've had some success in killing and capturing some mid-level leaders and removing the Taliban regime, but we haven't found Bin Laden or destroyed the organization. And the Taliban appears to be getting stronger and stronger. Now our mission seems to be moving towards a prime focus on nation-building and winning the hearts and minds of the Afghan people.
It's a noble mission, but should that be our role and can we really afford what that entails in terms of much larger resources and a much longer time commitment, given our country's poorer financial position, other international obligations, and, more importantly, our critical domestic policy needs?? I don't think so! According to the Congressional Research Service, we've already spent $223 billion in Afghanistan for war costs alone! Separate from war costs, we've also spent a great deal of money on development aid and it's growing annually. It was $982 million in 2003 and it grew to $9.3 billion in 2008! And what about the immeasurable costs in military casualties, which number seem to be increasing on an almost daily basis?
A year ago we had 48,250 troops in the country. Now the total is very close to 60,000, and General McChrystal wants that increased substantially up to 40,000 more with a goal to make Afghanistan a relatively stable country. It would be nice to have Afghanistan a stable country, but is that realistically achievable, and at what costs and expected timeframe, and, importantly, should the U. S. be paying for the bulk of this?? I think not. How many other "unstable" countries are there in the world with Al Qaeda cells present? There are several dozen in Africa, including especially Somalia. And what about the Palestinian territories? How about Cambodia? We simply can't stabilize every country. And we can't go to war in every country that has Al Qaeda or Taliban insurgents.
Aside from the costs and other factors referred to above, I have big concerns with the widespread corruption in the Karzai government, clear fraud in their recent national election, the problems posed by the powerful, independent and untrustworthy warlords in the tribal regions with their own private militias, and the vast opium fields which heroin, surpassing 90% of the world's production, financing much of Al-Qaeda and the Taliban's total needs.
What to do? We need to make it very clear to the Afghan leaders, like we did in Iraq, that, while we want to continue helping them, we will not have combat troops there for an extended, indefinite period and we need to see more tangible results from them. The results must include a satisfactory clearing of the air surrounding the recent election, a strong and satisfactory commitment evidenced by specific actions to largely eliminating governmental corruption, and more productive negotiations with the warlords to gain their support and cooperation. We also need to develop a more effective program to deal with the opium fields and helping farmers move to other crops that can provide a decent living.
The U. S. and our NATO allies are not the only countries that have strong strategic interests in achieving a stable Afghanistan and that goes also for neighboring Pakistan. We shouldn't continue to bear the brunt of needed military actions, the resultant casualties, development aid, and the direct and indirect financial costs involved. India and China should also play significant roles, and so should the oil rich countries in the Persian Gulf, of course including Saudi Arabia. Isn't this a virtual no-brainer?
Wednesday, June 17, 2009
Healthcare Reform
Healthcare reform is needed and there will very probably be reform legislation approved by the Congress and signed into law by President Obama by the end of the year. The big question is what will be incorporated into the legislation. Hopefully it will be the product of genuine bipartisan debate and consensus.
While a significant percentage of Americans are apparently reasonably happy or at least satisfied with their current personal healthcare providers and the relative costs, there is no question that there are substantial weaknesses in our overall healthcare system when looked at from an objective and national basis. I don't see how any informed American can honestly disagree with President Obama that healthcare status quo is "untenable." That's really a no-brainer. However, clearly one can disagree with what changes should be made, what it would cost, and how the changes should be financed.
Probably the biggest weakness, as almost everyone knows, is the fact that healthcare is quite expensive for most Americans on an absolute and relative basis and its costs are growing unsustainably fast, with serious consequences for the majority of American families, businesses providing healthcare benefits, the healthcare industry and the nation as a whole, reflected in the troubling outlook for Medicare and Medicaid, the federal budget, and the national debt. What's the evidence? Healthcare costs in the U. S. were at 9% of GDP (Gross Domestic Product) in 1980 and doubled to 18% of GDP in 2008, compared to an average for OECD countries (30 higher income, developed countries) of just 8.5%, less than half of our rate! It is widely considered unsustainable, because if we don't make major changes to correct the trend, the projections indicate that costs will rise approximately 2.5% faster than GDP each year and grow to as much as 50% of GDP by 2080! It doesn't take a rocket scientist to understand that's not going to work.
No matter what else is included in our reform legislation, unless government, businesses, the healthcare industry, and individual Americans all take effective actions to seriously contain costs, we will be in big trouble.
Another major weakness is the fact that more than 15% of our population, about 46 million people, have no health insurance, and, very importantly, millions of other who have some insurance are underinsured, are not covered for pre-existing conditions, are vulnerable to losing it they lose their job or leave their job voluntarily, or are having trouble paying healthcare costs without cutting their tight budgets for other vital needs such as housing, college education for children or savings for retirement. A critical related factor is that a great many families have had to experience personal bankruptcy, or are fearful of going bankrupt, due to highly expensive and critical unforeseen medical operations or treatments that to a large extent may be outside of their control.
On this subject I must say very frankly that I don't think we should feel obligated to find viable solutions and finance healthcare costs for our 12-15 million illegal immigrants, except basic care for their children under, say, 18 years old. Although most of them come here to find work at higher wages, so they can help their poor families living in the countries they came from, providing free or subsidized healthcare is another incentive for many of them. We need more disincentives. If this is adhered to, we will very materially reduce the number of uninsured we need to account for to less than 34 million.
Healthcare reform is a complicated subject and I certainly don't have all the answers, but I feel strongly that components of legislation and actions by stakeholders, meaning all of us, should prioritize: a system characterized by more widespread coverage, high quality care, simplicity, efficiency, fairness and affordability; individual choice of insurance providers and doctors and dentists; and individual accountability with meaningful financial incentives for good healthy behavior within one's own control. By the latter I'm talking about fitness, diet, and exercise to optimize personal health and thereby limiting healthcare expenses.
On the subject of behavior I was impressed by an article written by the CEO of Safeway, Inc., the large supermarket chain, that was printed in the Opinion section of the Wall Street Journal on o6/12/09. He indicated that they have a healthcare plan for their non-union employees where the combined costs for the company and the employees have not increased on a per capita basis for the last four years, compared to a reported 38% increase for most American companies. The key for them, he indicated, is that their plan rewards healthy behavior, influenced heavily by their striking finding that 70% of all healthcare costs are the direct result of behavior! With their particular plan they have determined that the rewards have reduced average annual premiums for individuals by up to $780 and for families by up to $1,560. That's substantial.
In terms of solutions, the most contentious political issue seems to be President Obama's proposal for a government insurance option for Americans unhappy with private insurers' policies currently available. Many Republican leaders, including Newt Gingrich, strongly oppose a government option, claiming it would drive private insurers out of business and fairly quickly lead to an undesirable and unsatisfactory one option universal healthcare situation run by the government. I don't buy that at all, but of course it would depend on how the government option is set up and financed. It also obviously depends on how private insurers would react and adjust.
Not everyone will be entirely happy with the final outcome of the federal reform legislation and the associated resultant actions taken by private insurers, businesses, and state governments. But the outcome should hopefully provide access to an acceptable level of affordable quality healthcare for every American and put Medicare and Medicaid on a well thought-out path towards financial viability over the long term. It's also important that the outcome helps to contribute to a) healthcare costs not growing more than GDP on a consistent basis; b) balance in our federal budgets and sustainable national debt levels; and c) a competitive, healthy, efficient, and innovative healthcare industry over the longer term.
While a significant percentage of Americans are apparently reasonably happy or at least satisfied with their current personal healthcare providers and the relative costs, there is no question that there are substantial weaknesses in our overall healthcare system when looked at from an objective and national basis. I don't see how any informed American can honestly disagree with President Obama that healthcare status quo is "untenable." That's really a no-brainer. However, clearly one can disagree with what changes should be made, what it would cost, and how the changes should be financed.
Probably the biggest weakness, as almost everyone knows, is the fact that healthcare is quite expensive for most Americans on an absolute and relative basis and its costs are growing unsustainably fast, with serious consequences for the majority of American families, businesses providing healthcare benefits, the healthcare industry and the nation as a whole, reflected in the troubling outlook for Medicare and Medicaid, the federal budget, and the national debt. What's the evidence? Healthcare costs in the U. S. were at 9% of GDP (Gross Domestic Product) in 1980 and doubled to 18% of GDP in 2008, compared to an average for OECD countries (30 higher income, developed countries) of just 8.5%, less than half of our rate! It is widely considered unsustainable, because if we don't make major changes to correct the trend, the projections indicate that costs will rise approximately 2.5% faster than GDP each year and grow to as much as 50% of GDP by 2080! It doesn't take a rocket scientist to understand that's not going to work.
No matter what else is included in our reform legislation, unless government, businesses, the healthcare industry, and individual Americans all take effective actions to seriously contain costs, we will be in big trouble.
Another major weakness is the fact that more than 15% of our population, about 46 million people, have no health insurance, and, very importantly, millions of other who have some insurance are underinsured, are not covered for pre-existing conditions, are vulnerable to losing it they lose their job or leave their job voluntarily, or are having trouble paying healthcare costs without cutting their tight budgets for other vital needs such as housing, college education for children or savings for retirement. A critical related factor is that a great many families have had to experience personal bankruptcy, or are fearful of going bankrupt, due to highly expensive and critical unforeseen medical operations or treatments that to a large extent may be outside of their control.
On this subject I must say very frankly that I don't think we should feel obligated to find viable solutions and finance healthcare costs for our 12-15 million illegal immigrants, except basic care for their children under, say, 18 years old. Although most of them come here to find work at higher wages, so they can help their poor families living in the countries they came from, providing free or subsidized healthcare is another incentive for many of them. We need more disincentives. If this is adhered to, we will very materially reduce the number of uninsured we need to account for to less than 34 million.
Healthcare reform is a complicated subject and I certainly don't have all the answers, but I feel strongly that components of legislation and actions by stakeholders, meaning all of us, should prioritize: a system characterized by more widespread coverage, high quality care, simplicity, efficiency, fairness and affordability; individual choice of insurance providers and doctors and dentists; and individual accountability with meaningful financial incentives for good healthy behavior within one's own control. By the latter I'm talking about fitness, diet, and exercise to optimize personal health and thereby limiting healthcare expenses.
On the subject of behavior I was impressed by an article written by the CEO of Safeway, Inc., the large supermarket chain, that was printed in the Opinion section of the Wall Street Journal on o6/12/09. He indicated that they have a healthcare plan for their non-union employees where the combined costs for the company and the employees have not increased on a per capita basis for the last four years, compared to a reported 38% increase for most American companies. The key for them, he indicated, is that their plan rewards healthy behavior, influenced heavily by their striking finding that 70% of all healthcare costs are the direct result of behavior! With their particular plan they have determined that the rewards have reduced average annual premiums for individuals by up to $780 and for families by up to $1,560. That's substantial.
In terms of solutions, the most contentious political issue seems to be President Obama's proposal for a government insurance option for Americans unhappy with private insurers' policies currently available. Many Republican leaders, including Newt Gingrich, strongly oppose a government option, claiming it would drive private insurers out of business and fairly quickly lead to an undesirable and unsatisfactory one option universal healthcare situation run by the government. I don't buy that at all, but of course it would depend on how the government option is set up and financed. It also obviously depends on how private insurers would react and adjust.
Not everyone will be entirely happy with the final outcome of the federal reform legislation and the associated resultant actions taken by private insurers, businesses, and state governments. But the outcome should hopefully provide access to an acceptable level of affordable quality healthcare for every American and put Medicare and Medicaid on a well thought-out path towards financial viability over the long term. It's also important that the outcome helps to contribute to a) healthcare costs not growing more than GDP on a consistent basis; b) balance in our federal budgets and sustainable national debt levels; and c) a competitive, healthy, efficient, and innovative healthcare industry over the longer term.
Friday, June 12, 2009
Executive Compensation Revisited
In a lead article in yesterday's Los Angeles Times Business section, "Plans to Rein in Exec Pay Announced," we read about President Obama's latest plans to clamp down on executive pay. As expected, they have generated support from most Democrats and vocal opposition from many leading Republicans. None of this is surprising. Why write about this and what's going to happen?
My regular readers may remember that I posted two blogs on this subject in past months. On 1/31/09 I commented that the strong and widespread criticism of substantial and inappropriate bonuses paid Wall Street executives were in most cases highly justified. My conclusion then was that meaningful actions to deal with this will most probably be taken by the Congress, the Obama Administration, the regulators, some boards of directors and many shareholder groups. On 8/29/08 my blog commented on the then recent historical trend of excessive compensation, defining what was excessive, who's responsible and what possible actions might be taken.
In my view it's still appropriate to write about executive compensation, because it has a bearing on what's going on in our poor though hopefully slowly improving economy, on a likely changing corporate culture, as well as the pluses and minuses of the federal government's growing influence and control over our overall economy and our vital business community. Executive compensation has had a very significant bearing on our economy because it has in too many cases, through its structuring, led to imprudent high risk taking, which in turn has led to corporate failures, needs for federal taxpayer funded rescues, massive layoffs, and huge adverse impacts on federal and state financial budgets affecting all of us. Furthermore, all of this has been instrumental in contributing greatly to the world-wide recession and clearly been a major factor in falling stock and bond markets, eroding the values of savings and retirement portfolios of tens of millions of American families.
One prominent and controversial part of the Administration's plan is to appoint a "pay czar" to approve compensation for the highest paid employees of major companies, like Bank of America, Citigroup and AIG, as well as others who have received bailout funds from the federal government. Another part involves support for legislation to give shareholders a larger voice in compensation issues. Treasury Secretary Geithner also laid out broad principles on executive compensation, such as tying incentives more to long-term performance to contain short-term risk-taking, particularly by bond, currency and commodities traders. The various restrictions would likely last until the companies repay their bailout moneys and other financial obligations. Geithner stressed that the government does not intend to cap how much executives would be paid.
Ideally, executive compensations should be decided by an effective, independent company board of directors or its compensation committee, guided by experienced compensation consultants, often supported by recommendations of the CEO for compensations for those who report to him or her. The problem has been that to many directors and CEO's didn't do their jobs well, and too many directors were not really independent. Another contributing, but less important weakness has been that company auditors and rating agencies have not generally commented critically on compensation practices.
I think an executive compensation bill will pass, but it will probably require some concessions on both sides. I'd expect it to include more power for shareholder groups to vote, perhaps non-binding, on compensation for the top 4-5 executives and also pressure from regulators and the SEC to enforce more independence of the board directors. I'd expect more companies to expedite repayment of bailout moneys to generate some more freedom in compensation matters. I'm also sure that most company directors in future will be more sensitive to imprudent compensation structures and act more responsibly. Finally, I'd hope the "pay czar" position would be eliminated as the economy gets solidly back on its feet and the several stakeholders have learned their lessons on how best to deal with this.
My regular readers may remember that I posted two blogs on this subject in past months. On 1/31/09 I commented that the strong and widespread criticism of substantial and inappropriate bonuses paid Wall Street executives were in most cases highly justified. My conclusion then was that meaningful actions to deal with this will most probably be taken by the Congress, the Obama Administration, the regulators, some boards of directors and many shareholder groups. On 8/29/08 my blog commented on the then recent historical trend of excessive compensation, defining what was excessive, who's responsible and what possible actions might be taken.
In my view it's still appropriate to write about executive compensation, because it has a bearing on what's going on in our poor though hopefully slowly improving economy, on a likely changing corporate culture, as well as the pluses and minuses of the federal government's growing influence and control over our overall economy and our vital business community. Executive compensation has had a very significant bearing on our economy because it has in too many cases, through its structuring, led to imprudent high risk taking, which in turn has led to corporate failures, needs for federal taxpayer funded rescues, massive layoffs, and huge adverse impacts on federal and state financial budgets affecting all of us. Furthermore, all of this has been instrumental in contributing greatly to the world-wide recession and clearly been a major factor in falling stock and bond markets, eroding the values of savings and retirement portfolios of tens of millions of American families.
One prominent and controversial part of the Administration's plan is to appoint a "pay czar" to approve compensation for the highest paid employees of major companies, like Bank of America, Citigroup and AIG, as well as others who have received bailout funds from the federal government. Another part involves support for legislation to give shareholders a larger voice in compensation issues. Treasury Secretary Geithner also laid out broad principles on executive compensation, such as tying incentives more to long-term performance to contain short-term risk-taking, particularly by bond, currency and commodities traders. The various restrictions would likely last until the companies repay their bailout moneys and other financial obligations. Geithner stressed that the government does not intend to cap how much executives would be paid.
Ideally, executive compensations should be decided by an effective, independent company board of directors or its compensation committee, guided by experienced compensation consultants, often supported by recommendations of the CEO for compensations for those who report to him or her. The problem has been that to many directors and CEO's didn't do their jobs well, and too many directors were not really independent. Another contributing, but less important weakness has been that company auditors and rating agencies have not generally commented critically on compensation practices.
I think an executive compensation bill will pass, but it will probably require some concessions on both sides. I'd expect it to include more power for shareholder groups to vote, perhaps non-binding, on compensation for the top 4-5 executives and also pressure from regulators and the SEC to enforce more independence of the board directors. I'd expect more companies to expedite repayment of bailout moneys to generate some more freedom in compensation matters. I'm also sure that most company directors in future will be more sensitive to imprudent compensation structures and act more responsibly. Finally, I'd hope the "pay czar" position would be eliminated as the economy gets solidly back on its feet and the several stakeholders have learned their lessons on how best to deal with this.
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