Limited Government – Page 5

Government Shutdown, Who’s to Blame?

G’Day!

Our federal government is facing the distinct possibility of a shutdown this week. If the government is shut down, President Obama and the Democrats will have no one to blame for the crisis other than themselves.

Last year Obama and the Democrats devoted their time and effort on passing an ill-advised and budget-busting healthcare bill, which added significantly to an already unsustainable debt problem for our country. During this same period, President Obama and the Democrats, with total control of Congress and the Administration did not even pass a budget for our current 2011 Federal Fiscal Year!! This is not leadership and represents a total disregard of their responsibility to our country. If Obama and Democrats had performed their duties to the American people last year, the current budget crisis would have been avoided and there would be no possibility of a government shut down this week. They have NOT performed responsibly and did not fulfill their obligations to the nation.

As bad as last year’s performance was, it is now history and must be corrected by the new Congress with the old President. So, what has happened in 2011 to handle the current Democrat-created budget crisis? The new Republican-led House of Representatives passed a bill over 40 days ago repealing the Obamacare healthcare fiscal disaster, passed a bill calling for only $61 billion in spending reductions this year (approximately 6 days of government spending, see “Is Our Government Broken?”), agreed to Continuing Resolutions to keep our government functioning until April 8, and have just proposed another Continuing Resolution to avoid a government shutdown.

On the Democrat’s side, Obama submitted his 2012 Budget to Congress (an irresponsible fiscal and debt-busting budget disaster), which ADDS an expected $1.6 trillion to the deficit next year and $7.2 trillion over the next 10 years (see “Is Our Government Broken?”). The President’s 2012 Budget Proposal includes NONE of the suggestions from the Bowles-Simpson Debt Reduction Commission Proposal submitted in December, (see “Bowles & Simpson Have it Right!”). Until this week when, at the 12^th hour, he finally called Congressional Leaders together, Obama has been absent from the process of resolving this critical problem. Even the Democrats have complained about his lack of leadership on this issue. In addition, Obama has rejected the current Republican’s proposal for another Continuing Resolution beyond April 8. Obama has, however, found sufficient time during the first 3 months of 2011 to engage in golf, political speeches and fundraisers, and “Presidential Tourism”, while displaying a remarkable lack of leadership in the various Middle East crises, especially Libya. For their part, the Democrats in the Senate have failed to pass ANY bills regarding the budget problem, have stifled any progress on legislation to resolve it, and have engaged in political posturing by persistently blaming Republicans, especially the “Tea Party”, for the stalemate. Specifically, they did initially offer $10 billion in spending reductions this year (1 day’s government spending) and, reportedly are now offering a “non-specific” reduction of $33 billion (3 day’s government spending). It is important to repeat that the Senate, under the direction of Harry Reid (D-NV), has FAILED TO PASS a single piece of legislation on this year’s budget issue except the Continuing Resolutions, which end April 8. The House, under the direction of John Boehner (R-OH), passed legislation over 40 days ago.

It seems absolutely clear that President Obama and the Congressional Democrats are not serious about resolving the issue of this year’s spending and resolving the limit on our National Debt. My suspicions are they want a government shutdown and expect the Republicans will get the blame. I believe the history and facts are clear, if non-essential government services are forced to close, President Obama and Democrats in the Senate are fully responsible for the closure. I also believe that the American people are sufficiently intelligent and informed to recognize this and will properly hold President Obama and the Democratic Party accountable at the next election in 2012.

Frankly, as I have said before, other than national defense and essential services, shutting down the Federal Government might be a good thing. Certainly our government is too big and its growth, especially under Obama and the Democrats, is out of control. If all “non-essential” government workers were furloughed, we should have a clear indication of what size our government should be. By definition, “non-essential” means unnecessary. A case can always be made for “desirable” but “unnecessary” services. The key is the cost to the American taxpayer of the “desirable” service provided. The American people cannot afford to pay for every “desirable” idea and should not be forced to do so through taxation.

“Big Government Is Our Problem” and we MUST stop its growth and reduce its size. We need to return to our nation’s principles of free markets, sound fiscal and monetary policy, and limited government. Let’s elect national and state leaders that support these views.

The Old Guy PhD

Bowles & Simpson Have it Right!

G’Day!

In my previous posts, “Big Government IS Our Problem” and “Is Our Government Broken”, I laid out the current and projected fiscal and debt problems facing our nation and argued that significant contraction in government spending is immediately essential. Also essential is tax reform. Our taxes MUST be simplified, the tax base broadened, and tax rates reduced (especially business taxes), if we are to be able to compete in a global economy.

The Debt Reduction Commission’s “Co-Chair’s Proposal” released in December 2010 by the Co-Chairs, Democrat Erskine Bowles and Republican Alan Simpson and submitted to the President in February 2011, is an excellent and understandable overview of the recommendations, which, with minor modification, were approved by 11 of the 18 bipartisan members (61% approval) in December 2010. Unfortunately, the final vote fell short of the 14 votes necessary for the “Supermajority” needed to directly submit the recommendations to Congress. While the Co-Chair’s Draft Proposal differs slightly from the final report submitted to the President, it is worth reviewing for its importance, focus, clarity, and brevity. They have done an excellent job and their proposal deserves the immediate attention of the President and Congress. While no one will be fully happy with all of the commission’s proposals, rational behavior combined with cooperation and compromise by our elected government is necessary if we are to remain a solvent and great nation. The time for government to act is NOW!

The bipartisan Debt Reduction Commission worked from April – December 2010 to develop and present overall comprehensive recommendations to solve our country’s short and long term fiscal and debt crises. They have done their work well. The report addresses all the necessary areas required to resolve the issues including setting out ten (10) objectives, “Guiding Principles and Values”, beginning with “#1-We have a patriotic duty to come together on a plan that will make America better off tomorrow than it is today”; and “#2-The Problem is REAL – the Solution is Painful – There’s no Easy Way Out – Everything Must Be On the Table – and Washington Must Lead”. The other 8 can be read by clicking the link in paragraph above. After establishing the Guiding Principles, the following comprehensive “Five Part Plan” is recommended:

Enact tough discretionary spending caps and provide $200 billion in illustrative domestic and defense savings in 2015.
Pass tax reform that dramatically reduces rates, simplifies the code, broadens the base, and reduces the deficit.
Address the “Doc Fix” not through deficit spending but through savings from payment reforms, cost-sharing, and malpractice reform, and long-term measures to control health care cost growth.
Achieve mandatory savings from farm subsidies, military and civil service retirement.
Ensure Social Security solvency for the next 75 years while reducing poverty among seniors.

Implementation of the comprehensive Five Part Plan is projected to achieve nearly $4 trillion in deficit reduction through 2020, in addition to other specific improvements in debt and budget reductions summarized below:

Achieves nearly $4 trillion in deficit reduction through 2020: 50+ specific ways to cut outdated programs and strengthen competitiveness by making Washington cut and invest, not borrow and spend.
Reduces the deficit to 2.2% of GDP by 2015, exceeding President’s goal of primary balance (about 3% of GDP).
Reduces tax rates, abolishes the AMT, and cuts backdoor spending in the tax code.
Caps revenue at or below 21% of GDP and gets spending down to 22% and eventually to 21%.
Stabilizes debt by 2014 and reduces debt to 60% of GDP by 2024 and 40% by 2037.
Ensures lasting Social Security solvency, prevents projected 22% cuts in 2037, reduces elderly poverty, and distributes burden fairly.

The proposal outlines how to achieve the above results through specific recommended actions to improve revenues through “Comprehensive Tax Reform” alternatives, to reduce spending through “Discretionary Budget Options” including Defense cuts, reductions for entitlement programs through “Mandatory Budget Options” for healthcare and “Reforming Social Security”. All of these reforms: taxation, government spending, entitlements for healthcare and social security, are essential to a comprehensive solution for our country’s problems and all must be addressed if we are to succeed.

The Co-Chair’s Proposal is controversial but responsible, realistic, and deserves the serious consideration of the President and Congress, who are currently engaged in irrelevant political bickering over trivial spending cuts instead of the substantive fiscal and debt problems we face. Congress and the President should get together, agree on or revise as appropriate the “Guiding Principles and Values” above, and start to work for the American people and our country. Political posturing for re-election is NOT a valid course of action.

Currently, neither the Congress nor the President is addressing our fiscal and debt crises with any sense of urgency. The President and the Democrats are not only totally ignoring the problem but are fighting to avoid even minimal reductions from the inflated budget spending of the last 2-3 years. Federal Budget inflation nearly tripled our federal deficit from $0.459 trillion in 2008 to $1.3 trillion in 2010 and is expected to increase again to $1.7 trillion this fiscal year. Obama’s recent budget proposal for 2012 continues spending at $3.7 trillion and the deficit at $1.6 trillion. Additionally, Obama’s new budget projects a further cumulative deficit of $7.2 trillion for the next ten years – bringing our debt to approximately $22 trillion! This is not leadership; it is madness! Only the Republicans are even attempting to address the issue and, to date, their proposals are woefully inadequate. To be fair, the House Republicans through Representative Paul Ryan are promising to present a comprehensive budget in April that does address the looming long-term catastrophe we face. I hope they deliver.

Given the magnitude of our fiscal and debt problems, the current congressional squabbling is an inappropriate distraction from solving the overall crises facing our nation! Without an agreement on debt limits and/or spending cuts by April 8, our government may shut down. As noted in “Is Our Government Broken”, except for national security and some essential services, shutting down might actually be a good thing. Our government is too big, too irresponsible, and too self-centered. Can’t our Congress or Administration do math?

Where is President Obama’s leadership in all of this? Actually, at the time of this writing he’s currently travelling again and making speeches at a Democratic Party Fundraiser – big surprise. As usual, when leadership and responsibility for our country are required, Obama is absent. Last week with a national debt deadline imminent, Congress took a week off rather than stay in session to attempt to resolve the current national debt limit issue. Brilliant! Our elected representatives need to make financial solvency and economic growth a priority and get to work NOW!

We are on unsustainable fiscal and debt crises that, if not corrected quickly, will lead to potential financial and economic disaster for our country. Our government is oppressive and out of control, its growth must be stopped, and its intrusion in our lives and businesses reversed. We MUST maintain the entrepreneurial spirit necessary for economic growth and global competitiveness. We need to bring back the constitutional freedoms and personal liberties that led us to become the greatest nation on earth. Our government should immediately take up the Bowles-Simpson Co-Chairs’ Proposal.

The Old Guy PhD

Is Obama Our Worst President or Just the Weakest?

G’Day!

While I did not vote for Obama, I did have great hope for his presidency. Even though I believed him to be too inexperienced and unqualified to be President, his slogan, “Yes we can!” combined with his soaring rhetoric was inspiring and motivating. Unfortunately, my initial fears have been realized. Perhaps Anna Pukas said it best in her recent article, “Barack Obama: The Weakest President in History?” when she described him as “INEFFECTUAL, invisible, unable to honour pledges and now blamed for letting Gaddafi off the hook. Why Obama’s gone from ‘Yes we can’ to ‘Er, maybe we shouldn’t…” To Anna Pukas’ observations, I would add aloof, elitist, and indecisive.

It is actually too early to tell if the outcomes from the legislation of the Obama government will make him our worst President but current and future implications for the massive increase in big government socialism, continuing fiscal catastrophe, unsustainable levels of debt, and diminished international respect for the United States around the world, clearly make him a contender. More worrying is the apparent weakness and inability of President Obama to accept leadership and responsibility for the direction of our country. His ambivalence as a leader and his priority with the “perks” instead of the responsibilities of his office are unprecedented in our current time of crisis. In issue after issue he has withdrawn from the actual decision-making process and, during his first two years in office, deferred to Congress or leaders in other countries to set our government’s goals and priorities. Besides golf (60+ times since taking office, I’m retired and haven’t been able to play that much), political speeches, extensive travel, and a totally unearned Nobel Peace Prize, he has largely been an observer on domestic and international issues. Professor Peter Morici recently indicated on national television, Obama appears to be more interested in “Presidential Tourism” than in dealing with the critical issues facing our nation. Virtually all Presidents in at least the last century have been strong leaders. Some of their actions have been right and some have been wrong but they were willing to take responsibility and actually lead our country. Perhaps Harry Truman expressed it best when he said, “The Buck Stops Here!” With Obama, “The Buck Starts Here!”

We were warned by Hillary Clinton during the Democratic Primary Campaign that Obama, while in the Illinois legislature, declined to take a position on issues by voting “Present” (neither yes nor no) 129 times. While in his partial term in the US Senate, he missed roll call 314 times (24%). These should have been indications of his personal lack of commitment and inability to take a position on legislation. Since becoming President, Obama has essentially been a pitchman for the Democrats, notably the unions, and has punted important domestic decisions (Stimulus, Healthcare, Financial Reform, Federal Budgets, and National Debt) to the Democratically-controlled House and Senate and international decisions to the State Department and foreign leaders. With foreign leaders he has been persistently weak and apologetic concerning America’s historical role in fighting for and defending freedom, democracy and US international interests. He has consistently been indecisive and ambivalent in dealing with China, Russia, Iran, the Middle East, and now Libya.

In responding to the current Libyan crisis, he has dithered and deferred to the leadership of Britain, France, and the Arab League and has now bypassed Congress (perhaps illegally) and subordinated US national interests to the UN Security Council for the current military actions. All this while he and his entire family engaged in “Presidential Tourism” to South and Central America. At the time of this writing, our US policy on Libya is a confused mess. Obama has no clear long-term objectives and he has still not addressed the nation or properly communicated to Congress a coherent government plan. Astonishingly, Obama’s currently stated goal for Libya is to WITHDRAW US military authority over the actions in Libya, pass command to “somebody else”, and voluntarily abandon American leadership in a time of international crisis. He appears to be willing to give command and control over our military to unknown foreign powers “to be determined”! This is another example of Obama’s avoidance of responsibility and lack of strength. Unfortunately, his weakness as a leader and lack of belief in the greatness, strength, and historical contribution of America in the world, has undermined our international stature in the world and created a power vacuum that other nations are trying to fill. Even our long-time allies have been embarrassed by his deference and obeisance to the leaders of problem nations. Remember Obama “bowing” to the King of Saudi Arabia and cancelling President Bush’s Anti-ballistic-missile Defense Shield for Central Europe when challenged by Russia. These are not the actions of the President of the World’s greatest nation.

I don’t know if Obama will turn out to be our worst President but he doesn’t look good and the future of our country is in peril on many fronts, especially our fiscal and debt crises and our foreign policy. I do believe that what little political conviction he has is directed toward expanding socialist government, reducing personal freedoms, and exercising more control over our lives (see “Big Government IS Our Problem!”). This is not good! I am also very sorry to say that I believe that Obama IS our weakest President in at least the last century and has not demonstrated the personal strength to handle the conflicts and confrontations that are a necessary consequence of the domestic and international issues confronting America. This is very unfortunate given the variety of crises we face. Fortunately, the November elections gave control of the House of Representatives to the Republicans. This, at minimum, will halt the growth of collectivist government for the next two years.

Our nation was founded on constitutionally protected principles of individual freedoms, free markets, and limited government. Let’s stop the rot, get back to our roots, and reverse the trend as soon as possible.

The Old Guy PhD

Is Our Government Broken?

G’Day!

Yes, our government is currently broken and it needs to GET TO WORK! The events taking place in our national government and some states do not represent the principles of elected representative government upon which America was founded. We elected our officials to serve the needs of the people, not the desires of their political party, big business, or unions.

President Obama, both Democrat and Republican Congressional Representatives and Senators (with minor exceptions) are not currently working for the long-term benefit of America. Nearly all are posturing and working for what they perceive as the good of their political party and personal reelection. Citizens have common sense and know that we have fiscal and debt crises that are too large and unsustainable. We must get our State and Federal Governments in order.

Our overall national debt is currently $14.2 trillion and growing. It is nearly the size of our annual GDP. Disturbingly, over $1 trillion of this debt is held by China, not our most reliable or friendly partner. Our fiscal deficit in 2008 was $0.459 trillion, by 2010 it nearly tripled to $1.3 trillion, and the expected deficit in 2011 is $1.7 trillion. Additionally, we currently have unfunded “entitlement” liabilities for Social Security of $14.8 trillion, Prescription Drugs of $19.6 trillion, & Medicare of $78.1 trillion. This is a total current obligation for future generations of $112.5 trillion, nearly 8 times our total annual output and just over $1.0 MILLION per current taxpayer. This is madness and is crippling our economy and economic growth.

We actually have NO FEDERAL BUDGET for 2011! Obama’s unapproved 2011 “budget” is expected to reach $3.7 trillion this year. This amounts to $10.1 BILLION PER DAY. In the current congressional debate concerning raising the debt ceiling, Democrats have offered “real” cuts for the remainder of the fiscal year of $10 billion (1 day’s spending) and the Republicans are offering approximately $60 billion (only 6 day’s spending). Neither proposal even remotely addresses the magnitude of our problem. If agreement can’t be reached in Congress, the Federal Government may be forced to shut down. Frankly, except for national security and some essential services, this might actually be a good thing. Our government is too big, too irresponsible, and too self-oriented. Can you imagine what the Founding Fathers would think of what is happening in our government today? A temporary shut down might force us to be more responsible and self-reliant, as the founders of our nation and our Constitution intended.

As noted, the magnitude of our nation’s financial problem is enormous, increasing, and untenable! So what is our government doing to correct the crisis? Last year, the Democrats, who controlled the Administration, the Senate, and the House of Representatives, failed to even pass a Federal Budget for fiscal 2011. They were, however, able to compound our future fiscal and debt problems by passing a massive and unpopular healthcare bill and a financial reform bill, both of which further increase the size of government, with more regulations and control over important sectors of our lives. This legislation further erodes our liberties and free-market economy. Do we really want to become a collectivist country with the government dictating our lives?

For his part, President Obama has virtually abdicated all leadership in this crisis by proposing a new budget for next year projecting spending of another $3.7 trillion and an addition to the deficit of $1.6 trillion. Over the next 10 years the new Obama budget proposal is expected to produce a further cumulative deficit of $7.2 trillion, bringing our overall national debt to approximately $22 trillion. President Obama is spending (pun intended) his time travelling, golfing, and giving political speeches; and his proposed budget is an embarrassment given the magnitude of our country’s ongoing financial problems.

In Congress only the Republicans are even attempting to deal with the fiscal and debt problem and so far they are dealing with trivial, not real spending or fiscal reform (although it is promised). The Democrats are essentially ignoring the problem and blocking even the inconsequential cuts proposed by Republicans for the remainder of this year (see above). When real leadership is essential, Obama and Congress have abdicated their responsibility to the nation and chosen posturing and rhetoric over work and accomplishment for the American people.

At the State level a few Governors are trying to deal with similar budget issues, but some Democrats have deserted their State Houses and fled their elected responsibilities (see “State Democrats Shun Democratic Process!”). Unions are sponsoring demonstrations in several states, which are disrupting our democratic processes and interfering with the ability of our democratically elected representatives (when present) to perform their legislative duties. This is a travesty and is not the way our democracy is intended to work.

Yes, our government is currently broken and it’s time to get to work. What should they be doing? First, after quickly resolving the ridiculous political stalemate over the debt limit and budget for the rest of this year, they should NOT make the fiscal situation worse and the government’s out-of-control spending and inefficiencies should be eliminated as soon as possible. The GAO report “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue” has already identified unnecessary duplication, overlap, or fragmentation existing across our Federal Government totaling BILLIONS of dollars in ANNUAL SAVINGS. This is a good place to start.

Second, they should employ proven strategic management techniques. Any basic management course indicates that solving problems and capturing opportunities requires: setting long-term goals, reviewing historical performance to identify strengths and weaknesses, identifying and prioritizing alternative “comprehensive” solutions, acting on the best “comprehensive” solutions, and measuring and correcting course to improve performance. Our government needs to follow this agenda. The Bowles-Simpson, Co-Chairs Draft Report, “National Commission on Fiscal Responsibility”, is a reasonable draft proposal for identifying and establishing these goals and actions (some painful) to resolve the long-term financial crisis we face as a nation. It addresses all areas of government including its size, spending, and revenues and suggests major reform in income taxation and entitlement programs. This is also a good place to start. To date, neither President Obama nor Congress appears to be seriously considering the information and recommendations in either report.

“Big Government is Our Problem”! Let’s fix it and put our country back on a solid foundation with individual freedom, free markets, sound fiscal and monetary policy, economic growth, and limited government!

The Old Guy PhD

Are Public-Sector Unions Destroying Democratic Government?

G’Day!

The fiscal and debt crisis facing many of the 50 states and the bankruptcy of General Motors have highlighted the critical role public and private-sector unions have in our ability to compete globally and in the functioning and long term solvency of our state and federal governments. The demonstrations in Wisconsin and similar events in Indiana, Rhode Island, New Jersey, and Ohio, not to mention the budget crisis in New York and California, are emphasizing the magnitude of the controversy and crisis facing our governments over well-intended but overly generous and unsupportable public-sector union benefit packages. Unlike the private sector, public-sector workers are paid by taxpayers, currently receive benefits and wages that are above the average paid for similar work in the private sector, and have greater job security. Without significant change and fiscal sanity restored, many states will ultimately face one or a combination of undesirable choices: raising taxes on business and/or the general population, cutting services, reducing salaries and benefits of public-sector workers, or declaring bankruptcy and starting over.

Originating in Europe, unions transferred to the USA in the 19^th and especially the 20^th century. They began in the private sector with legitimate goals of fair pay, better & safer working conditions, and fair bargaining for labor contracts. In the private sector unions work because in a competitive free-market there is an objective economic outcome, which, when successful, maintains profit for the owners and appropriate wages and working conditions for the employees. If owners are too greedy, good employees will leave and the firm will fail. If employees are too greedy, costs will be uncompetitive and the firm will fail. Under either situation both owners and employees will lose, so both parties have incentive to balance their demands so that the firm succeeds. It was the excessive bargaining power of the unions combined with increasing competition that led to many private U.S. firms’ bankruptcies (think General Motors and the Airlines) and that ultimately led to a decline in private-sector unions. Private-sector union membership peaked in 1953 at 25.5% of the labor force and has declined steadily afterwards. I support private-sector unions in a competitive, free-market economy as long as they are “open shop”, represent “right to work” conditions, have “secret balloting” for elections, and are not biased by legislation.

Public-sector unions did not exist until the late 1950s, when, Robert Wagner, Mayor of New York City, in an appeal for votes (an omen of things to come), signed an executive order authorizing the city workers to unionize. Other Democrat-led local and state governments followed his lead and President Kennedy, also by executive order, authorized federal workers to form unions in 1962. Prior to this, public-sector workers were expected to earn less than private-sector workers in return for job security and service to the public. Even union leaders recognized at that time that collective bargaining by government workers was biased in favor of workers, unfair, and inappropriate.

Public-sector unions do not represent the conditions necessary for fair and balanced negotiations with elected government representatives. Government jobs do not have a competitive market (governments and essential services don’t compete), don’t have an objective economic outcome that forces compromise (governments don’t go bankrupt, yet), and the taxpayer owners are represented by temporary agents who negotiate for wages and benefits with workers who vote them into office. The contracts from these negotiations endure permanently into the future long after the elected politicians negotiating for the taxpayers have departed. There is clear bias when short-term reelection partially depends on the votes of these employees. This process is further biased where public-sector unions are large and have full “Collective Bargaining” rights, as is currently the case in 26 states.

Because wages and benefits to public-sector workers come from taxpayers, ALL taxpayers in total are funding these contracts AND union dues. A portion of these union dues is recycled into the election and lobbying process as political support for union favored candidates and laws (like the current “Employee Free Choice Act”, which is union biased and should be killed). In 2007-08 unions spent $165 million on elections and proposed legislation. Andy Stern of the SEIU bragged that the union spent $60 million to get Obama elected. Not surprisingly, the majority of these recycled union funds go to support the Democratic Party and no wonder that Democratic Senators in Wisconsin and Indiana have fled their states and elected responsibilities in support of union protests against proposed limits on union power and benefits.

Do the public-sector unions really have a legitimate complaint? Are they underpaid? Are their benefits unfair? Is their job security worse than the private sector? The obvious answer to all these questions is, “Hell No!” The US Bureau of Labor Statistics for 2009 indicates that unionized public-sector workers have a 31% advantage in wages and a 68% advantage in benefits over nonunionized workers (with a much larger advantage in defined-benefit pensions and health insurance) and their job security is almost assured, especially in education. Public-sector union members generally contribute little or nothing for their healthcare and pensions and in many cases can retire at a significantly earlier age than private sector workers. And remember, taxpayers are the source of their wages and benefits. I ask the questions, “Does the service and value provided by public-sector workers justify their higher-level of pay and benefits over the private sector?” If not, why are we, the taxpayers, paying it?

The chart above represents the trend in public vs. private-sector union workers since 1973. It illustrates that union membership in the private sector has declined by over 50% from approximately 15 million to 7.1 million to approximately 8% of the workforce. During this period public-sector membership has increased by over 150% from approximately 3 million to 7.6 million and represents more union members than the competitive private sector for the first time in history. This growth in government workers and spending must stop and proper priorities set on what we can fiscally afford as a nation. Our government cannot do every “desirable” project. Endless growth in State and Federal Governments promoted by unions is increasing regulations, increasing the size and cost of government, stifling economic growth and innovation, and restricting private sector job expansion. We, the people not the government, must accept primary responsibility for our families, our neighborhoods, our country, and ourselves.

So what should we do? First and most important, where it still exists, collective bargaining for the public sector, which should have never been permitted, should be ended, the proper balance between taxpayers and government workers restored, and its undemocratic and prejudiced influence in the electoral and negotiating process halted. Second, effective immediately, all new hires into public-sector employment should have a new retirement age consistent with those in the private sector, revised pension and healthcare contracts in which they must contribute appropriately to their health and pension plans, pension plans that are based on defined-contribution not defined-benefit, wages based on performance not longevity, and where it exists, “tenure” should be abolished. Third, existing retirement contracts for long-term government employees approaching retirement age (to be determined but within approximately 10 years of retirement) should be honored, but they should be required to begin contributing to their healthcare and pension plans as above. Fourth, employees with longer than approximately 10 years to retirement age should also begin contributing and have their retirement phased-in as appropriate to match the new retirement age.

These major recommendations are admittedly oversimplified for brevity and will differ by State and between State and Federal workers depending on existing contracts. However, they will significantly reduce the current and long-term fiscal crises facing our state and federal governments. Other non-union related issues and recommendations will be the subjects of a future post.

The near-monopoly stranglehold public-sector unions have over large portions of our state and federal governments must be broken or the unsustainable budget and debt problems will continue to erode and potentially destroy our democratic institutions of government. Public-sector workers must be compensated like private sector workers based on value-added.

It’s time to curb public-sector unions, return power to the taxpayers, and restore fiscal sanity to our government.

The Old Guy PhD

How to Solve Healthcare Part II

G’Day!

In “How to Solve Healthcare Part I”, I addressed the simpler ways free-market alternatives to “Obamacare” could be used to solve some of the healthcare issues we face as a nation. These issues were identified as: 1) cost reduction, 2) coverage for “pre-existing conditions”, 3) patient choice in doctor selection & treatment, 4) portability of existing coverage in relocation, 5) coverage for catastrophic events, 6) tort reform, and 7) coverage for those involuntarily uninsured because of need. This post will address the more complicated issue of the separation of the patient from the payment and insurance coverage process through employer-based insurance programs. Coverage specifically for catastrophic events will be the subject of a future post.

Since WW II, the healthcare industry has become “layered” with various institutions, which have resulted in financial and personal separation of the patient from his or her doctor, treatment, and payments. Between the doctor and patient payment system, we now have insurance companies, health maintenance organizations, accounting firms, and employers. Some of these institutions are justified specializations that reduce cost or help manage risks. The inclusion of employers in the system is not one of them, is unnecessary, and has created its own set of issues. If fully implemented, “Obamacare” will add a new layer of government to this already complex process. As indicated in Part I, more government control over healthcare products and pricing will ultimately lead to higher not lower costs, fewer choices, higher taxes, more debt, and less competition. Perhaps the best indication of forthcoming problems with “Obamacare” is that the Obama administration has already granted delayed implementation “waivers”, because of higher cost and reduced-benefit concerns, to nearly 1,000 unions and major companies.

Employer-based healthcare plans and other “fringe-benefit” programs expanded significantly during WW II as a reaction to government “Wage Controls” and currently comprise nearly 60% of health insurance coverage in America. Because of government-controlled wages, employer-sponsored healthcare was created to provide valuable services to employees without violating arbitrary wage limits. These employer-based plans have persisted long after wage controls were removed. Since 1954 these employer-paid insurance benefits were no longer considered taxable income to the employee but are a deductible business expense for the firm, which further complicates the issue. The practical effects of this approach have been to insulate the individual patient from the financial implications of doctor choice, medical fees, tests, consultation, and treatment. In addition, individual freedom of choice has been replaced by limited “standard packages” or “one-size-fits-all” from which employees must choose. The alleged benefit for employees is cheaper cost, supposedly resulting from a larger company insurance pool and standardization. In this regard, it should be noted that the “packages” for unions (especially public-sector unions) and for management employees are frequently better than those offered to general employees.

If the employer “layer” was removed from healthcare and current business insurance costs paid directly to the employees as increased wages (with the same tax deductibility provision available to business), the healthcare insurance choices could be made by individuals based on their own cost/benefit analysis and financial choices for doctors and treatment would become more transparent. Coverage would be personalized to the needs of the actual consumer, not the desires of the employer. Because of the impersonal separation of the consumer from actual healthcare costs (other than a small “copay”) individuals generally consider these costs low or negligible and tend to overuse the system. Insurance coverage for separate and smaller employer pools should cost MORE NOT LESS than a larger nationwide competitive pool of all citizens, in which all individuals would have freedom of choice over the plans and costs that fit their personal needs. Why should personal choices for healthcare insurance be different from choices for auto, life, or other forms of insurance simply because of a 60-year old system designed to circumvent temporary government wage controls for WW II? Give back freedom of choice to the individual.

Removing the employer from the system, along with nationwide competition (see Part I) could also solve the “portability” issue of coverage during relocation or loss/change of job and retirement because the employee would own the insurance policy, not the company. Why shouldn’t healthcare insurance for the individual and his or her family be fully portable, like car insurance or life insurance?

Transition to personal-based vs. employer-based insurance could be accomplished by requiring employers to give employees the choice between continuing existing company-paid plans or receiving the company-paid contributions as tax-free employee compensation, as they are categorized under current tax law. This would allow freedom of choice to individuals and gradual adjustment to the new alternative. Besides freedom of choice, the “portability” advantage of personal-based insurance noted above would be another important consideration in the choosing between the two alternatives.

Employers have no reason to be another layer in the healthcare process, add no apparent value, and have created additional problems. If individuals are given the freedom to make their own cost/benefit choices in a free market with nationwide competition, individuals will have more alternatives and will be more aware of their actual healthcare costs. This should result in more responsible use of the system. Individual freedom to control their own healthcare insurance choices and the resulting additional financial transparency should result in more and better personal decisions and lower costs.

Individual freedom of choice, in a free and competitive market with temporary safety nets only for those truly in need, is a better healthcare solution.

The Old Guy PhD

How to Solve Healthcare Part I

G’Day!

The 2,000+ page “Obamacare” legislation has good intentions but is potentially a government fiscal, debt, and administrative disaster. Like President Obama’s impressive rhetoric, it sounds good but will only increase costs, undermine individual freedom of choice, result in jobs lost in the private economy, reduce competition, increase government spending and regulations, and ultimately lead to government-only rationed health services & treatment.

Since “Obamacare” regulations are still being written and implemented, the ultimate consequences are unclear but they are certain to be, on balance, unfavorable and more costly for the majority of US citizens. More importantly, free-market improvements are available which would expand individual choices and minimize or prevent a government takeover of healthcare. The Republicans are right to oppose the bill, but the question of how we can fix it, reduce costs, and maintain our freedom of choice is still open. Perhaps the biggest question to be answered is, “Who should make healthcare decisions, the government or the patient in consultation with his or her doctor?” For me, given my belief in personal liberty and the effectiveness of free markets, individual freedom of choice is the answer.

The need for improvement in cost and coverage is obvious. In their most recent report, the UN World Health Organization ranked the USA #37 in overall world health results. The OECD 2008 report ranked the USA #1 (highest) in healthcare cost per capita. USA costs were $7,538/capita, more than twice the average for OECD countries and 50% higher than the #2 country, Norway, at $5,003/capita. Equally important is the September, 2010 report that 50.7 million of our citizens do not have healthcare insurance. While some legislation is necessary for those temporarily without healthcare insurance AND IN NEED, more government control over healthcare products and pricing will ultimately lead to higher not lower costs, fewer choices, higher taxes, more debt, and less competition.

Let’s start with the major issues upon which there is general agreement for improvement: 1) cost reduction, 2) coverage for “pre-existing conditions”, 3) patient choice in doctor selection & treatment, 4) portability of existing coverage in relocation, 5) coverage for catastrophic events, 6) tort reform, and 7) coverage for those involuntarily uninsured because of need.

Some potential solutions are relatively simple and should have immediate beneficial effects. First, allow insurance companies to compete across state lines (nationwide competition). The immediate effect would be to dramatically increase competition and put downward pressure on prices and costs. Second, remove the anti-trust exemption for insurance companies by amending/repealing the McCarren-Ferguson Act of 1945. The effect would be to reduce the potential for insurance companies to engage in unfair or collusive practices to the detriment of the consumer. When combined with nationwide competition, this should also put pressure on prices and increase transparency. Third, coverage of pre-existing conditions is in “Obamacare”, is important, and should be retained. Fourth, there is no reason for individuals to lose insurance when relocating and changing jobs. Insurance companies should be required to continue healthcare for individuals currently covered and moving under these conditions

Fifth, enact “tort reform” by capping “punitive damages” at a reasonable level and forcing the “loser” in a lawsuit to pay the legal costs of the “winner”. This should dramatically reduce the number of frivolous or speculative lawsuits by reducing the benefits for lawyers and increasing the costs of losing in a lawsuit. There can be little doubt that the high costs of defending medical malpractice lawsuits by insurance companies adds to medical expenses by increasing insurance premiums and stimulating “defensive” medical practices (unnecessary or marginal medical testing and consultations). There can also be no doubt that the victims of legitimate cases of medical malpractice deserve and should receive appropriate compensation for actual damages. What is at fault with the current system is that it is a patient cost-free, one-sided lottery, funded, not by legitimate actual damages, but by “punitive” damages. Anyone with common sense knows the magnitude of these “punitive” claims is ridiculously excessive and largely serve the lawyers, (just watch your TV to see how many ads there are claiming “you may be entitled to compensation”). Capping “punitive” damages at a reasonable level reduces the financial incentive for lawyers (and patients) to initiate unwarranted or marginal lawsuits. Combining this with “loser pays” the legal costs of the “winner” in a lawsuit creates a potential penalty, which further discourages initiating lawsuits with little or no merit in the hope getting a large settlement from the insurance company, a substantial portion of which goes to the lawyers. Without a “loser pays” penalty, the lawyer can rightly claim to any patient that there is no downside cost for the patient in filing a lawsuit. It is truly a one-sided, no-cost “lottery” for the patient and the maximum loss for the lawyer is only his or her time. This is absurd and without correction adds to medical costs by increasing insurance company costs and premiums and stimulating “defensive” medical practices by doctors.

Sixth, regarding healthcare for those not currently covered and temporarily in poverty, Medicaid already provides a means-tested method of coverage, including children. If Medicaid is not working properly, it should be changed. But, it should be a transitional bridge, not be a permanent provider, and should be modified to keep routine treatment out of Hospital Emergency Rooms. Improving Medicaid to better and more efficiently provide the intended services should not require a new bill with 2000+ pages of unclear legislation AND “Obamacare” seeks to expand Medicaid coverage (& CHIP for children) far beyond poverty levels.

These six items should be “doable” with some political will and a little common sense. Other potential solutions including better “catastrophic” coverage are more complicated and would require major structural change in the industry but potentially could have even larger positive effects on costs, individual doctor choices, and decisions on treatment in the long term. Perhaps the biggest of these is to remove the employer from the insurance business. This will be the subject of a future post on this site.

Healthcare should be a choice and responsibility of individual citizens in a nationwide free-market economy. Let’s keep our government’s role at the minimum necessary to provide a competitive level playing field and a safety net for only those in temporary need.

Individual choice in a free-market economy with competition is the best way forward.

The Old Guy PhD

Big Government IS Our Problem!

G’Day!

President Reagan was right! Big government IS our problem. Many of you are justified in your frustration with government for its increasing size, spending, regulation, and control over our lives. Left unchecked (pun intended), our individual freedoms, ability as a nation to innovate, and competitiveness in the global economy will continue to be eroded. If government would get out of the way, business would improve, jobs would be created, and the country would prosper. Reforming both personal and business income taxes is also required and would further stimulate growth and job creation. Taxes will be the subject of future posts on this site.

The magnitude of our nation’s financial problem is enormous and growing! We anticipate a fiscal deficit of $1.6 trillion in 2011 and President Obama’s budget proposal for 2012 projects a further deficit of $1.1 trillion. Over the next 10 years the new Obama budget proposal projects a cumulative deficit of $7.2 trillion. Additionally, we currently have an overall national debt in excess of $14 trillion, nearly the size of our annual GDP, and according to the National Debt Clock, have unfunded “entitlement” liabilities for Social Security of $14.8 trillion, Prescription Drugs of $19.6 trillion, & Medicare of $78.1 trillion. This is a current total obligation for future generations of $112.5 trillion, nearly 8 times our total annual output and just over $1.0 MILLION per current taxpayer. This is madness and is unsustainable for our economy.

President Obama has impressive rhetoric, but his new “centrist” oratory is unconvincing and inconsistent with the actions of his administration. He has a very different view for the future of our government than I. Obama’s actions indicate the socialist belief that BIG government is the answer to most, if not all, issues. He is converting our personal freedoms and free market economy into a European-style collectivist society with strong central governmental control over our lives and appears to believe that central government can make better decisions for individuals than individuals can make for themselves in a free society. This is a dangerous trend toward expanded central planning and is not the constitutional basis for liberty upon which the Founding Fathers established our great nation. Oddly enough, Obama’s action is taking place at a time when the major European nations are moving in the opposite direction toward American ideals. I believe it was Abraham Lincoln who said, “Government should only do for the people what the people cannot do for themselves.” I fully agree.

If the current administration is not stopped, America’s freedoms, spirit of entrepreneurship, & economic strength could be set back for years and probably permanently diminished. Much has already been initiated with the new legislation for healthcare and financial reform. Both of these new acts add too much central governmental control over crucial industries and need to be repealed or modified to conform to the principles of our free market economy. Future posts will also explore these two subjects in more detail.

America is on an unfavorable and unsustainable course, which must be changed or we face extremely serious consequences for our economy and our freedoms. Ronald Reagan was right (additional pun intended) when he said the 9 scariest words are, “I’m from the government and I’m here to help.” It is time for us to take back our country.

Big government IS the problem; freedom is the answer.

The Old Guy PhD