Return of the Fabians

"[They wanted] a business-like understanding of national needs which would take hold of the future like a governess, slap it into clean clothes, wash its face, blow its nose, make it sit up at the table and eat a proper meal.”

Does that sound vaguely familiar?

Does that begin to describe the sense you get when you hear some of the descriptions coming out of this or that figure in Washington as they talk about the need for more government involvement in healthcare, banking, energy, education, etc?

Does this sound similar to the meaning of some of the adds paid for by this or that group of actors or perhaps a political action committee, that ‘we can’t wait anymore, we need to fix ‘it’ now?’

Those words were used by the historian Barbara Tuchman to explain the Fabians, a society founded in 1884 in England. They were an interesting bunch. Tuchman described them as ‘essentially authoritarians, impatient with democratic process,’ they were ‘coldly bent on improving society’ (from their own perspective.) They wanted ‘Socialism without Marx or revolution, something like Macbeth with the murder.’ They favored ‘anything which strengthened the State and brought in revenue for more sewers, soup kitchens and unemployment insurance.’

And right now we have Senators and senior bureaucrats in Washington making statements to the effect that the House of Representatives should just accept the Senate’s healthcare bill, not debate it or change it or contest it. “Impatient with democratic process.”

Just to remind the folks in Washington who sometimes forget what’s what. The Constitution, the document you have sworn to protect, was designed to stimulate debate, to establish a slow and deliberative process in regards to the creation or changing of laws. This systems, what we learned as ‘checks and balances’ in our social studies courses when we were in school, is fully intended to make passing a law a slow process, one that is easily stopped.

Why is that? Because the Founding Fathers, having studied history a good deal more thoroughly than many – most – in Washington today, were aware that laws, once passed, are VERY difficult to ‘undo.’ And laws passed quickly are usually poorly thought out. Having not been thoroughly debated, they normally lack clarity and intellectual integrity.

The best example of this is in the length of a bill – any bill. Long bills (proposed laws) usually become that way because different offices construct different elements of the bill. The bill is then simply stacked together. Mark Twain famously observed that ‘I have to send you a long letter as I don’t have the time to write a short one.’ The same is true of bills.

Long bills create great complexity because as the length increases in any document it becomes more difficult to ensure consistency and integrity and the result is contradictions (apparent and real), mistakes, omissions and loopholes. This is only exacerbated by the process we see in Congress in which multiple offices draft different sections of the bill, often with only a cursory review of each other’s work. Further complicating the issue, amendments are then added to the bill, often without the drafter having actually read the whole bill. The result is the plethora of long, tortuously complicated laws that we have on the books, laws that need constant amendment to cover the various mistakes that are discovered every year.

But none of that matters to those in power in Washington today. Rather, as their ads insist, the need is to act ‘now.’ Let’s not think this through, let’s not debate it – as the Founding Fathers intended and as the Constitution insists, let’s not have a rational discussion on the pro’s and con’s of each issue. Instead, sane discussion is replaced with invective, finger pointing, and demagoguery. Those who call for debate have been accused of being no better then the slave traders of 200 years ago, and anyone who opposes this or that bill is clearly a tyrant in disguise.

The fact is that the procedures called for by the Founding Fathers, and resident in the Constitution, were designed to prevent tyranny, by insisting on a slow and deliberative process, so that the truth might be revealed by informed debate.

But that is not what the Fabians wanted and that is not what the politicians in Washington want now. Rather, like the Fabians, they want “progress” as they have defined it, and are impatient with the democratic process – the one identified in the Constitution - the same one they swore to protect. They have decided they have found ‘the truth’ and anyone and anything that stands in their way – to include the Constitutional process – must be pushed aside.

The Fabians have returned, and the Constitution be damned.

Bring Me a Rock: How Not to Fix HealthCare

The healthcare issue seems to have settled into a dance between sophistry and fear mongering. On the one hand are vague comments about healthcare being ‘broken’ and that ‘we have to act because …’ followed by loosely knit opinion; on the other hand is a constant screed that ‘if we don’t do something now…’ followed by predictions that start to sound like some Hollywood end of the world thriller.

Meanwhile, no one answers any hard questions with anything approaching real data. It would be comic if it weren’t so important. We have actors, posing as hyper-concerned citizens, telling us that we need to ‘fix it now,’ though precisely what they mean by ‘it’ is never made clear (Do they really mean they want every single piece of the healthcare industry addressed in one truly enormous piece of legislation? Teeth cleaning to brain surgery, all in one?) Nor does anyone care to define what is actually broken (if you are going to fix something, ostensibly it is broken).

But what is broken? A recent article in ‘Investor’s Business Daily’ provided the following statistics:

Percentage of men and women who survived a cancer five years after diagnosis:

U.S.              65%

England        46%

Canada         42%

Percentage of patients diagnosed with diabetes who received treatment within six months:

U.S.              93%

England        15%

Canada         43%

Percentage of seniors needing hip replacement who received it within six months:

U.S.             90%

England       15%

Canada        43%

Percentage referred to a medical specialist who saw them within one month:

U.S.             77%

England       40%

Canada        43%

Number of MRI scanners (a prime diagnostic tool) per million people:

U.S.             71

England       14

Canada        18

Percentage of seniors (65+), with low income, who say they are in "excellent health":

U.S.             12%

England         2%

Canada          6%

Was there some careful selection of the data shown? I suppose, though that last set of data are telling. Nevertheless, it speaks to facts, not hand-ringing.

One of the worst things leader or manager can do is provide guidance which is so vague or obscure as to actually make the situation worse. We have all known or worked for someone who only tells us something is wrong, but never really tells us what he is thinking or how to address the problem. We are told to ‘bring me a rock,’ and then told ‘no, not that rock. Bring me another.’ The ‘managers’ and ‘leaders’ who behave in this manner are poor managers and leaders. And usually, we find they had little knowledge of what they were trying to manage.

Congress, and a whole slew of special interest groups, are determined to ‘fix’ healthcare, though they can’t really be precise about what is broken except to say that 15% of Americans don’t have health insurance, and to constantly bang the drum that healthcare is expensive. Yet nothing in any of these proposed bills will actually reduce the amount of money we as a nation spend on healthcare, nor will it create more healthcare, nor has anyone in any of the harangues (I have seen no real debates) shown any element that will actually improve the quality of specific types of care. Is that because they can’t find something that is broken or they simply don’t know how to fix it? Or is it simply irrelevant?

Consider this: in the 1940s, 1950s, 1960s and 1970s in the US military every soldier, sailor, airmen and Marine received a yearly physical. But, as the services shrank in size in the 1970s and the number of dependents increased, there were fewer uniformed doctors and nurses to provide healthcare. The answer was that the military went to physicals every three years for everyone not on special status (such as pilots). This was done for one reason: the Department of Defense could not afford to hire more doctors and nurses. So they rationed healthcare.

Yet there isn’t a doctor or nurse in this country who will tell you that you should not have a physical every year.

Recently, the US Preventive Services Task Force, a panel whose members are appointed by the Department of Health and Human Services (those who would control our healthcare) recommended that women start regular breast cancer screening at age 50 vice 40. It is worth noting that this was based on new analysis of existing data, not any new discovery, and the final decision, according to the vice chair of the panel, was ‘qualitative’ ‘and not based on some magic number.’ Why let facts interfere? (The link to an article in the Wall Street Journal is provided below.)

The American Cancer Society disagrees. But, they are dealing with patients, not money. So, ask yourself this one question: How will government oversight increase cancer survival rates?  See if anyone has any facts.

http://online.wsj.com/article/SB126031689043682715.html?mod=googlenews_wsj

Let's Create Jobs........

Sounds like a good idea: create jobs.

Like most things, though, there is a catch. Let’s say you have a Billion dollars in your pocket – every year. And, being a kind and generous sort, you decide to create some jobs. How many jobs can you create? Well, let’s assume that you start a company and you are going to pay everyone a $50,000 salary. So, you could employ 20,000. Well, actually, no. Because you need to pay Social Security and Medicare, every $50,000 salary will actually mean about $57,000 per person. Plus state taxes of perhaps 1 or 2%. So, let’s call it $58,000 per $57,000 job (though the employee only sees $50,000). So, you can create 17450 jobs.

So, why can’t the government create some jobs with all that tax money they collect and solve the unemployment problem?

The Federal government collects almost $3 trillion in taxes and such every year. That translates into 51 million ‘$50,000’ per year jobs. Problem solved, right? Well, not exactly. Because it seems that the numbers don’t quite work that way.

First, the government (any government) isn’t quite this efficient. Because of systemic inefficiencies, as well as the obvious cost of the bureaucracy that is handling the money, the ‘rule of thumb’ figure for the cost of a basic job in the federal government (that is, if you say this will require 100 people, the number you multiply 100 by to reach the annual labor cost) is $65,000 (or more, depends on which department).

So, the translation is simple: every time the government collects $58,000 in taxes, it deprives the free market economy of the money needed to fund a real job. To create a job, the government then needs to spend a bit more than $65,000. $3,000,000,000,000 in tax revenue translates into the equivalent of 51 million jobs. But $3,000,000,000,000 in government spending translates into 46 million jobs. Net loss is 5 million jobs.

Now, it isn’t quite this simple or clean, as the relation between the taxing and the spending is delayed and tortuous. But the general relationship is this: government spends more money creating a job then does the private sector and government spending. Once government moves past a certain point in providing security, infrastructure and governance – which occurs consumes less then 10% of the entire Gross Domestic Product - it stops adding to the solution, and starts adding to the problem.

Moreover, when government creates a job, there is no reason to believe they got it right; government often overpays, and the job may be of no value. It is no coincidence that real estate costs in the Washington DC area are some of the highest in the country. While the federal government does not pay very well at the very top end (that comes after folks leave government), it pays ‘middle management’ very well, as witnessed by the number of SES and GS-15s in the Washington area.

The Under-Funded War

There are some real myths surrounding the wars the US is now fighting.

First: Cost

Washington and the media insist that the war, that is the wars in Afghanistan, the Republic of the Philippines, Iraq, and the Horn of Africa, cost too much. So, some simple numbers: Since 2001 the United States has spent a bit more than one trillion dollars on the war. During the same period the total US Gross National Product is in excess of 100 trillion dollars. In short, we are spending less than 1% of our national wealth per year for something that both President Bush and President Obama state is vital to our national security.

If it is so vital, and I think it is, why is spending less than 1% of our wealth so extreme? A few nights ago the President suggested that the cost in Afghanistan could reach 300 billion dollars per year. Such a number still represents a tiny sum if it is indeed vital to our national security.

This is not too say that there hasn’t been a real cost in people, 5000 dead and 30000 wounded. which is a horrible price.  But, here too the numbers are illuminating. I recently saw a figure that estimated that roughly one million US citizens have participated in this war over the last 8 years. That is compared to a national population of 303 million. To put that in perspective, the US population in 1970 was 203 million, and the number of US citizens who took part in Viet Nam was a bit less than 7 million; 1/3 of a percent versus 3.5 percent.  Almost twelve times the level of involvement.

Second: Duration

We are told that we cannot have open-ended commitments (even though it is vital to our national security). Why not? In fact, if something is vital to our national security doesn’t that demand an open commitment? The logic of this argument escapes me.

The fact is that anything that is vital to our security requires commitment for however long it takes. Presidents in the past have made this case and the American people, who routinely have more sense then their elected servants in Washington or the “experts” in the media, have agreed. That is why there are still US forces in Korea (59 years), Japan (65 years), Germany (65 years), Italy (65 years), the Sinai (30 years). We kept forces in the Philippines from 1944 to 1993 (49 years). The American citizenry understands security and sustained commitment. It’s why we have kept a fleet of ships forward deployed to the western Pacific for more than 100 years (yes, 100 years).

The only people who don’t “get this” live within 30 or 40 miles of Washington DC and in a few select ivory towers around the country. The idea that we will commit to something that is stated to be vital to our national security - but only for 18 months - is lunacy.

Third: Nation Building

We are told nation building is impossible. Well, anyone who says that has never been to Seoul, Korea. We helped the Koreans rebuild their nation, the Germans, the French, the Italians and the Greeks, the Philippines, Japan, etc. Nation building is hard because it DOES require commitment. There are a host of “experts” (in more ivory towers) who will tell you that the cases cited above were ‘different’ and that the current candidates for nation building lack this or that trait and therefore can’t be successful candidates for nation-building.

I would suggest that the nations listed above are about as diverse a group of cultures as you would want. Yet we – they and the US working together – did engage in nation building. The only difference was the leadership in the 1940s and 1950s didn’t listen to any “experts” who insisted, because of their own lack of intellect and imagination and spine, that it couldn’t be done.

Nothing important is achieved quickly or at low cost in real sweat. The American people get that. It is fairly clear that the experts in Washington and the ivory towers don’t.

Whither Iran?

Much like Captain Renault, the Prefect of Police in ‘CASABLANCA,’ I am shocked! that Iran has more nuclear facilities then it admitted, that is it quibbling with the international community over what it is really doing, and it is apparently pursuing the refinement of highly enriched Uranium en route to assembling a nuclear bomb.* I would hope that my ‘shock’ is shared by people around the globe, particularly the vast majority of the leaders of the nations of the world.**

The question now is what does the world do about it? As it turns out, there are only a few paths we can pursue.

1) We can hope the problem simply goes away; the Iranians will wake up and realize that they really shouldn’t pursue nuclear weapons and will stop their program. This is truly naïve. And for the leadership of the nations of the world, hope is not a plan. As private citizens you and I can hope; as leaders, they are responsible for acting, and acting intelligently; and should be held accountable when they don’t.

2) We can apply pressure, through political and economic means. But, making someone change their goals, regardless of the amount and type of pressure that is applied, whether carrots or sticks (or both), requires that the pressure applied results in a change in their mental calculus. Everyone makes decisions based on their own perceptions of the value of each option. Those values may be easily defined: money, for example; or more difficult to define, perceptions of self worth, morals, religious values, etc. In some cases it may even be, for all practical purposes, impossible to change someone’s perceptions. Such is the case of a suicide bomber who is convinced that blowing himself up will result in an instant trip to heaven and eternal paradise.

In Iran, there are several major groups to whom pressure may be applied; each has their own motivations. President Ahmadinejad clearly believes that having a nuclear weapon provides several positive values to Iran, with, I assume, no real negatives. (Remember, we are talking about his perceptions.) A nuclear weapons arsenal, even a small one, will in his estimate provide Iran with a deterrent capability that guarantees a much higher level of security from attack. Further, he would point out that the countries that have nuclear arsenals have not been ostracized by the rest of the world. He is correct on that point, though all the countries with nuclear arsenals, except North Korea, developed their weapons in the shadow of the polarized world of the Cold War and that fact is central to how those countries were accepted into the community of nations after their arsenals were made public.

It would seem that Ahmadinejad believes that a force of nuclear weapons would give Iran, and by extension the Mid East, credibility on the world stage that it lacks and sorely needs, in opposition to Israel, which has a nuclear weapons force.

It needs to be added that Ahmadinejad is by all reports a devout ‘Twelver,’ someone who believes that when the 12th Imam appears, much like the Second Coming in the Christian world, their will be a final great struggle and the world will be set right. For such an individual, the idea of Iran’s pursuit of a nuclear weapon force and the possibility of a cataclysmic war is not necessarily something to be avoided. If that is the case (a big IF), then applying pressure to Ahmadinejad is going to be difficult, as there appears to be little that the US or the West or the UN Security Council has to offer him – whether carrot or stick – that would move him away from a desire to build a nuclear arsenal.

The second major player in Iran, and, in fact the more important player, is the Ayatollah Khameini. The Ayatollah is both the religious leader of Iran as well as the real political power in the country. Little of note takes place without his approval. It is certain that the Ayatollah desires a nuclear capability. It is almost certain that he has let Ahmadinejad act like a braying donkey because it deflects attention from the Ayatollah and allows him to work both local politics and international diplomacy from several angles simultaneously. No position that Ahmadinejad has taken has not been approved – explicitly or implicitly – by the Ayatollah. What that means is that finding some way to ‘work around’ Ahmadinejad would not materially change anything.

In effect, the only reasonable conclusion to the intellectual conflict the West (in particular the US) has with the Iranian government is that the conflict will remain until either the West gives up or the Ayatollah (and any possible successors) is displaced from governing.

There is often talk about making contacts with member of the military, and by appealing to their patriotism and love of country, convincing them to overthrow the current regime and set the stage for democratic reform. While the army remains a major segment of the government, the real power in the army is held by figures who have been appointed to those positions because the Ayatollah and his deputies determined that these men could be trusted.

Furthermore, Iran has two separate militaries (a tactic common to a number of countries). In addition to the regular armed forces, there is the Islamic Revolutionary Guards Corps (IRGC), a group that reports through a separate chain of command that leads directly to the religious leaders of the country. Any possible coup by the regular military would face a very real counter-coup effort from the IRGC.

The final major player in Iran is that block of the population that believes it is time for a change. Does this group constitute a majority? The last elections seemed to suggest as much. However, when the results of the elections were changed by the government and the West failed to at least provide moral support to the demonstrators, the West lost any opportunity for change in the near-term. The overwhelming majority of the Iranian population is below the age of 30, did not live under the Shah, hardly remembers the Iran – Iraq war, and wishes for more open relations with the US and the West. Nevertheless, the West has failed to make support for their effort an element of any meaningful foreign policy effort and there is little likelihood that this avenue of approach is of any value in the near term.

So, if we were to apply political pressure, the only meaningful target at this point would be the Ayatollah, and there seems to be little of note that we could offer him, positive or negative, that would be of interest.

This leaves the use of economic pressure. Alone, the US has little direct economic play with Iran. Any further unilateral tightening of economic restrictions by the US is likely to have no meaningful impact. Any effort to simply get the members of the UN Security Council to pass a Resolution barring most trade with Iran will fail, as Russia and China have both said (and made it clear in deed) they will not approve further sanctions.

The leaves the US with only a few tools; the US could, for example, declare the Iranian government as supporters of terrorists and then, using existing legal powers, seize any funds that we can in the international marketplace. This would have some impact, but, given that the Iranians have already spent years working around US sanctions, it is likely that they would survive this kind of effort without a great deal additional hardship.

One possible option is a ‘third-party embargo,’ in which the US states that it will not trade with anyone who trades with Iran. Third party embargoes are rare, because they are so extreme. But they offer some hope of success, at least when the US is involved, simply because we are the largest economy in the world and the largest importer and exporter in the world. If the US were truly serious about the embargo, Iran could be economically squeezed very quickly.

The objection, of course, is that Iran exports several million barrels of oil per day and any such embargo would cause a dramatic spike in oil prices. Accordingly, no one wants to use this tool.

More limited embargoes however, have proven to be ineffective, which leaves the US little room to effectively maneuver. (Embargoes are difficult even under extreme –wartime – conditions. During World War II Nazi Germany tried and failed to blockade the United Kingdom, a country of 95,000 square miles, using unlimited submarine warfare. Iran, a country of 650,000 square miles (hence substantially more natural resources), and not an island nation, would be substantially more difficult to embargo, even if we were to consider unlimited submarine warfare, which we, of course, are not going to consider.)

3) We can accept Iran possessing a nuclear arsenal and develop a new world view that accepts that new reality.

This seems to be where the West is headed. We know they have the technology (atomic bombs have been around for more than 60 years, the technology isn’t the issue, the highly enriched uranium is the issue), and now we appear to be nearing acceptance that they can’t be stopped. This will involve some necessary political theater or posturing: ‘if the West were going to stop this it would have had to have acted earlier’ (blaming previous world leaders); ‘We have talked to the Iranian leadership and we believe they understand the gravity of the situation and we have made it clear that we will not tolerate any irresponsible behavior’ (hoping that the Iranian leadership won’t do anything during the next 5 to 10 years until the current world leadership is retired); and pursuing ‘confidence building measures’ (policy experts engage in prolonged discussions, and some agreements are signed in which everyone promises to be more ‘open’ to each other in the future).

There might also be multiple rounds of negotiations and even some very specific and public trade restrictions (ones that would look good but have no real impact). But, the fact is that we – the international community – have already showed our hand and there is little reason for Iran to believe that we are suddenly going to develop spines.

Further, none of this changes the fact that they will have nuclear weapons. It will just make us feel better over cocktails.

Which leaves us with one final option:

4) We can attack them.

This isn’t as easy as it seems – if it seems easy at all. Simply put, are you sure you know where all the facilities are? Or how many weapons they have? And where are those weapons? What is the plan if you miss? These are some basic questions you always ask whenever you are conducting a strike on an important target, and I have absolutely no idea what intelligence is available to the decision-makers in Washington or other capital cities. The difference is that we are talking about nuclear weapons. The margin of error is much lower. Given the track-record of intelligence over the past 5, 10 or 20 years, prudence would dictate a higher degree of certainty in regards to any intelligence if we are going to pursue surgical strikes.

The unintended consequences would also be substantial: the impact on US/European – Mid-East relations, the long term political and economic impact on Iran, US bilateral relations with a wide range of partners in the Mid-East and elsewhere, the impact on Israel, the impact on the oil markets and the world economy, etc.

And then there is the political fallout: Is the leadership in Washington (or London and Paris) prepared for the political firestorm that will follow an attack on Iran? Will they be able to offer proof that the Iranians had nuclear weapons? Will they be able to deal with the response from the far-left and the West haters that the West retains nuclear weapons while ‘denying them’ to the Muslim world? Will they be able to struggle through their own moral ambiguity to arrive at a defense for the Western world acting despite the ensuing cries of outrage from a host of duplicitous world leaders?

Which leads to the final thought: will the West wait and delay long enough that Israel, knowing full-well that they are high on the likely target list for any Iranian nuclear weapon, will act on its own to destroy the Iranian nuclear weapon program, giving the Western leaders both the solution that they want and a convenient ‘whipping boy’ on whom to vent their spleen?

A Solution

In the end, this is an issue about the leaders of the Western world recognizing that they are different and that they need to act accordingly. For the last three generations the Western world, led by the US, has acted as has no other civilization in history, not as conquerors but as liberators. There have been mistakes, to be sure, but the motives and intentions have been to better and free mankind. Despite huge advantages over much of the world, we have not exploited those advantages. Despite a huge military disparity, we have used our capabilities to seek to improve the lot of nearly everyone on this planet. We need to recognize that there is a difference between us and others, and that while we have been conscientious guardians of dangerous technology, many others would not be, except for the fact that we retain a technological advantage. The leaders of the West need to recognize that we are different, accept that difference, and accept the responsibility that comes with that difference.

Allowing Iran, and the current Iranian regime, to build nuclear weapons is not an acceptable answer. The fact is that while policy wonks talk of risk, the real issue is the consequences. What are the consequences of failing to stop Iran? Certainly it means there will be more war in the war in the Mid East. Almost as certain is that it will involve nuclear weapons.

The West needs to act, and accept that there will be huge costs no matter what course we take, which is what happens when you wait too long to act. Iran must be forced to give up its nuclear weapon program. A definitive date must be given, the nearer the better. A third party embargo should be initiated by the US immediately to underline our determination. The international community must be told that there is going to be a definitive solution and that they must be prepared for it. After that date, the weapon program would be dismantled, either by the Iranians under close international scrutiny and supervision, or by the West, militarily, and irrespective of concerns about collateral damage. There should be no compromise.

Is this likely? It would seem at this point that it is not. But, the alternative is to stand and watch as first the Iranians, and later others, develop nuclear weapons and build nuclear arsenals. Eventually, perhaps in five years, certainly within 25 years, those weapons will be used, either by the regimes that built them or by others who have acquired the weapons. Hundreds of thousands, perhaps millions, will die. The consequences of failing to stop this program – now - will be greater than the consequences of striking and destroying the program, no matter how great those are. And if the US and the West fail to act, within a generation there will be a nuclear detonation and the world will ‘wonder’ what might have been done to prevent the catastrophe.

* For those who have never watched Casablanca, Inspector Renault (played to perfection by Claude Raines) is a completely amoral policeman who, to please his NAZI minders who want Rick’s Café closed, announces that he is ‘shocked’ to find out that there is gambling going on in the back room. As he announces this, the croupier shows up and hands the Inspector some money with the quiet comment ‘Sir, your winnings.’

** There are only a couple of options: either the leaders of the world are truly shocked and surprised that the Iranians were not fully disclosing their nuclear program, in which case they – the leaders - are incompetent boobs; or they suspected that there were additional secret facilities (and more will be revealed in the future) and they chose to ignore that fact in the expectation that either someone else will address it (hope as a plan) or it will simply not matter to their country (whether that makes them naïve or appeasers is the subject of another discussion.)

Raising Taxes or Raising Revenue?

Ask yourself a simple question: when the price of something – anything – goes up, do you buy more? Or do you buy less? If the filets at the grocery store – the ones you buy once a month for that great Sunday dinner – go from 10.99 per pound to 12.99 per pound, are you going to buy more of those steaks? Or is it possible that you will either ask the butcher for smaller steaks, or switch to rib-eyes, at only 9.99 per pound?

This sort of fundamental concept is necessary to understand why things rarely work the way Congress wants. If a grocery store raises prices of their prime cuts of beef, as a general rule they will sell fewer of those steaks. And when government raises taxes, in the end they will get less revenue.

Now, this isn’t absolutely true, that is, true in all cases. Take the case of a new society, formed out of the wilderness. Every family is responsible for its own security, and people live on a barter system. Then, a society is formed. Some sort of money is created and a small tax is levied to pay for certain services – basic security being the fundamental collective service of all societies, followed by other, basic services (security, governance (setting and maintaining standards for trade and ownership), money supplies and support to trade, infrastructure). The result is that the basic step from living as isolated families to living in a society and paying even a modest tax results in a very short time in a huge increase in economic activity as individuals are free to concentrate their efforts on their particular trade and not have to protect themselves and do all the other things that are provided by even the most basic of societies.

So, the difference between zero tax, with the government having no assets to provide for a basic society, and a society taxed at just a few percent, is massive. The few percent tax will provide enough assets to allow for a range of basic services and overall productivity soars. Now, here’s the important point: as productivity soars, the amount of revenue from taxes also continues to grow.

Simple numbers will suffice: during the first year of taxation there will essentially be no revenue. Money is just starting to circulate, there is no banking system, hence the money supply will actually under-represent the amount of economic activity.

After a couple of years the money is now widely circulated, banks have been established and people are now using money instead of a barter system and the money begins to multiply (I deposit money, the bank loans it out, others spend that money on capital investments, etc.) And so, a 5% tax in year 2 or 3 yields substantially less then a 5% tax or even a 3% tax in year 6 or 7. The economy grows so revenue increases despite tax rates remaining flat or even declining.

Now, let’s jump ahead and imagine a situation in which the rich society, with a tax of let us say 5%, is suddenly seized by a mad king, who inherits the kingdom after his father dies suddenly. The mad king wants more money to build more castles and so he raises the tax rate to 100%. What will happen? The answer is simple: everyone would stop working. What happens if the tax rate is 95%? A few people would work; many - most - would not. And total government revenue would be well below what it was when the tax rate was at 5%.

Now, it is apparent to event the most casual observer that there is a ‘boiling frog’ solution to part of this problem; that is, like boiling the frog, don’t throw the taxpayer in boiling water (high taxes), rather put him into nice, comfortable situation (warm water – low taxes) and slowly turn up the tax rate (heat up the water). Eventually, the government gets what it wants: very high tax rates. Unfortunately, it will also, eventually kill the taxpayer, just as surely it will kill the frog. The only difference is that the death is very gradual, rather than sudden.

It is also apparent that, if the government wanted to maximize revenue, it would play at reducing taxes until it found the ‘sweet spot’ where economic activity and hence total tax revenue is maximized. Estimates from a wide range of economists – led by Milton Friedman – have estimated that the ‘magic number’ is somewhere in the range of 15 percent total taxes for the society. Let me repeat that, the federal government would maximize its total tax revenue if the total tax rate on the country were approximately 15%.

Friedman argued, as have many others, that by reducing the tax rate the overall real economic activity in the nation would increase – the economy would grow – faster than the tax rate was shrinking. In short, lowering the tax rate would result in an increase in total tax revenue. (Think of WalMart: they lower the prices on everything and they have huge amounts of revenue AND profits).

Has this been tried? Yes. President Kennedy tried it, President Reagan tried it, and President Bush tried it. In all three cases the economy grew and government tax revenues increased, even as tax rates decreased. It has also been tried with equal success in other countries, Chile for example.

There are those who will respond that this didn’t happen under Reagan or Bush, but the numbers tell a different story. In fact, the deficits grew during the Reagan and Bush years because government spending actually grew faster than the economy, and the economy was growing very fast indeed. (Only during the period of 1994 to 1999 when the then Speaker of the House insisted on fiscal discipline did federal government spending, though it continued to increase very year, slow below the rate of growth of the economy.)

What does this mean? It means that if the federal government were interested in increasing tax revenue as its primary goal, it would further cut taxes. If it has other interests, such as gaining greater control over the economy (and increasing the number of people who are on the public dole and hence can be manipulated), irrespective of the total revenue, it will continue to raise taxes.

Medicare Funding: A Cautionary Tale (or: Trust Me, I’m From the Government)

At the heart of all of the discussions about the healthcare plan is the Congress and the President promising to do something that will result in healthcare costing less. Setting aside all the arguments and numbers produced by each side in the screaming match (it isn’t a debate and I won’t dignify it by calling it so), let’s look at the other large healthcare program the Federal government ‘manages:’ Medicare.

Medicare was started in 1966, and actually started disbursing significant payments in 1967. So that we get the numbers right here, let’s look at the pertinent numbers for that year:

1967

Population of the US: 198 million

US Gross Domestic Product: $833 Billion

Per Capita GDP: $4207

Medicare Coverage: 19 million citizens

Total Distributed: $3.4 Billion (.4% of GDP)

Receipts: $1.1 Billion

Net Cost: $2.3 Billion

Cost per Capita: $11.62

(This cost represents the total amount per person taken from the general tax revenue to pay for the difference in Medicare outlays)

Per Capita Expense (percent of per capita income) .28%

Over the course of the next three decades Congress changed things and the costs increased a bit. Here are the similar numbers from 2003:

2003

Population of the US: 290 million

US Gross Domestic Product: $10,886 Billion

Per Capita GDP: $37,538

Medicare Coverage: 77 million citizens

Total Distributed: $278 Billion (2.5% of GDP)

Receipts: $28.4 Billion

Net Cost: $249.6 Billion

Cost per Capita: $860.69

Per Capita Expense (percent) 2.3%

So, over the course of nearly 4 decades this program grew from less than ½ of 1 percent of GDP to 2.5% of GDP. So what about the government today convinces us that this time they will bring down the cost or control the spending?

When was the last time the federal government managed to control spending? Even during the last 9 months this Congress and this Administration have lost sight of the money that flowed into the banking industry. If they can’t keep track of money over that short a period of time, what makes us think that they will keep track of this money, doled out over a years and years?

More to the point, what is it about government spending that keeps costs under control? The short answer is: nothing. As federal government involvement in healthcare has increased, so has the size of the healthcare industry. Not only has government involvement in healthcare not worked to control the increases in healthcare costs, government involvement has spurred the increased costs in healthcare. Now we are to believe that somehow, mysteriously, that government involvement will reduce costs and improve healthcare.

Let’s just repeat it one more time: healthcare costs will increase until there is an increase in the total quantity of healthcare. If the number of doctors, nurses, clinics, hospital beds, etc., begins to increase faster than the total population, the costs will eventually start to come down. Any plan that does not increase the supply will not, cannot decrease the costs. In fact, any plan that adds more people to the healthcare system without increasing the supply must increase the cost and reduce the availability of healthcare in order to make the ends meet. And all the promises of all the politicians won’t change that.

Why Can't Uncle Sam Get His Budget Right?

In case you missed it, the other day Congress passed a ‘Continuing Resolution.’ Not one of those things covered in our civics classes, a ‘Continuing Resolution’ is a means Congress has of keeping government moving when no budget has been passed for the new fiscal year.

A couple of comments are in order: what is a ‘Continuing Resolution?’ It is the term the Congress uses when they have failed to pass a budget for the fiscal year and so, in order to provide for funding to keep things operating, this ‘resolution’ (which means solution, which seems wrong) is passed that continues funding everything in the government at the same level as the previous year. In short, Congress passes a law that says ‘keep doing what you are doing, and money is authorized and appropriated until the date on the law, as the same rate as we were spending last year. There are other elements to it as well, certain items are funded at only a certain percentage of the previous year, no new programs can be started, etc. But, the long and short of it is that when Congress fails to pass a budget on time, they use this tool to buy some time until they do pass a budget.

So, how often has Congress used continuing resolutions? Well, since 1954 only 3 budgets did NOT require a continuing resolution: 1989, 1995, and 1997 (the last two courtesy of Newt Gingrich). The other 53 budgets (including this year) have each required at least one continuing resolution and many have required several.

Why?

Well, the answer isn’t terribly difficult to arrive at. In practical terms, Congress has one job, and one job only: draft a budget for the year and get it approved. Nearly everything that Congress does is, in the end, is contained in the stack of legislation that is produced each year to, in the language of Congress, authorize and appropriate money. And, every Congressman and Senator, and every staffer, and for that matter nearly everyone in Washington DC, knows that budgets, and control of spending authority, is the be all and end all of life in Washington.

Now, every time that someone bothers to raise a stink that the budgets aren’t being passed on time a large chorus of voices will rise that ‘you don’t understand,’ ‘this is very difficult,’ etc. Yet, every year they finally manage to push something through by December or January. And then it all begins all over again and the following autumn we are back once again to another continuing resolution.

Of course, further souring this whole process is the fact that some Congressmen and their staffers feel quite justified in defending poorly worded, overly complicated and obscure language in the bills that are passed because ‘they were rushed to get them passed before we had to pass another continuing resolution.’

This is sheer lunacy. Passing these bills is there job. So, why can’t they get it done on time, but they always get it done by December or January?

The answer is, unfortunately, all too simple. Congressmen (the term is used generically – Senators and Representatives) spend too much time doing other things and not enough time focused on the key issues. The waste of time that Congress engages in every time there is a hearing on some topic of the day is at the direct expense of their real role, the one we sent them to carry out. I love baseball, but what purpose did it solve to have hearings on steroid use in baseball, besides redirecting Congress’ attention from their central duties? It is important that Congress understand the situation in Iraq and Afghanistan. But how many Congressional junkets are needed to do so? And why must committees other than perhaps the Armed Services and Foreign Relations committees consume time and money on such trips?*

The fact is that the House and Senate lack leadership and they lack discipline. I suppose they could argue otherwise. But, if they are disciplined, why can’t they get their jobs done on time? I think we should all write our Senators and Congressmen and simply insist that either they pass all budgets on time, or they both grant us all a tax holiday – one-day holiday for every day of continuing resolution. And ad that no Congressmen or Senator or staffer gets paid under any more continuing resolutions. I suspect that would help to end the practice.

It is a curious fact that approximately 60% of the Senate (that is, 60 of 100 Senators) are lawyers, at least according to a Wall Street Journal blog of a couple of year ago. Wikianswers gives the number as ‘56 lawyers.’ The ABA claims that 36% of Congressmen are lawyers. What is disturbing about these numbers is that there are roughly 1,250,000 lawyers in the US, or .4% of the population. So, roughly 40% of Congress is lawyers. How representative is that?

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• While I agree with Judge Tucker’s warning that ‘no man’s liberties are safe while the legislature is in session,’ I simply want them to do their basic job.

Force Structure and the Need for a Strategy Debate

Several articles ago I talked about the chiefs of the US military services calling on their services to articulate new strategies. I suggested that there was a failure on their part that needs to be addressed. Before I proceed further, we need a very brief discussion on the mechanics of how the US actually builds and maintains is armed forces.

Force Structure is a term in the DOD lexicon that means the people (uniformed – active duty and reserve and national guard, as well as civilians, and contractors), gear (ships, aircraft, tanks, submarines, artillery all the way down to mess tents and latrines) and organizations (from huge ‘Combatant Commands’ responsible for all US military operations in the Pacific and East Asia for example, down to an infantry platoon of 40 soldiers) that make up the US military.

The question at hand is how do we, as a nation, arrive at a given force structure?

The simplest answer is that the force structure is what Congress says it is. That is, Congress funds the military (and the rest of the government, obviously) and also passes the laws that say how the money is to be spent. How does Congress arrive at a given force structure? Chiefly, but not completely, based on inputs from the Department of Defense. Congress is always free to adjust literally any facet of the DOD as it feels free. Does it? Not really. While much is often made about Congress meddling in the DOD, whether it be weapon procurement or manpower or organization or mission, the fact is that usually Congress listens to what the DOD and the President say and gives them the vast majority of their desires, usually with some guidance attached.

In the end, within the broad confines of the debate that takes place on Capitol Hill, force structure is determined based on a balance of several major – and usually interrelated - factors: the stated requirements of the combatant commanders to meet their missions as they understand them, the consolidated interpretations of those needs as produced by the Joint Staff and the various military services, and the overall strategic guidance from the President.

The important point is that the combatant commanders have assigned missions, those missions are assigned by the Secretary of Defense acting for the President, with the advice of the Joint Chiefs and the Service Staffs.

The force structure is, therefore, based on an interpretation – by the Combatant Commanders and by the Service Chiefs – of their assigned missions, missions assigned by the President. And, of course, the added filter of how Congress responds to the President’s strategic vision.

So, if there is a fairly well defined force structure, and a fairly well defined procurement and manning plan, there must be a well-defined strategy. A strategy is, after all, nothing more than a plan that bridges the intellectual space between your assets on one hand and your goals on the other. But several chiefs of services have maintained over the past decade or so that their services needed new strategies. Very simply, you cannot argue that we need to buy a new ship or aircraft unless you have a goal and a strategy to reach that goal that justifies that particular ship or aircraft. Since there was never a clear articulation by them as to what exactly were the new goals that they were trying to reach, the conclusion that I have reached is that either a) these men were being foolish and using important words and ideas very loosely, or b) they weren’t at all interested in issues of goals or strategy or the like, but had instead become creatures of programs, who spent all their time trying to justify a specific procurement program.

The problem with this, of course, is that the United States does not have an infinite amount of money. We cannot afford to by weapon systems because they have become the gleam in some admiral or general’s eye. We really do need to pay attention to what it is that we are trying to accomplish and not simply engage in budget battles in Washington to secure the legacy of this or that general or admiral who honchoed through some particular program.

What this nation needs is a vigorous debate on what it is that we – as a nation - are trying to do, and what it is that we are not interested in doing and then move from there to a discussion of how best to accomplish that. Despite what some might think, a great deal of this discussion can safely take place in the public. We can debate these issues without risking the lives of our soldiers and sailors and airmen and Marines. But, they must be debated as a whole, from the national perspective down, not from a service perspective up. Nor does this need to be a partisan debate. In fact, during the Cold War, when mistakes might have cost the world a great deal more, this nation had several vigorous debates about strategy and force structure, held them publicly, and key players in that debate sat on both sides of the aisle. It is worth remembering that Carl Vinson, John Stennis and Sam Nunn, all played key roles in the strategy debate, all played important roles in shaping and building the US military, and all were life-long Democrats.

We do not need to buy ships or aircraft because some admiral or general has spent most of the last ten years ‘stumping’ for that particular platform. But we do need a vigorous debate as to what are our major national goals, and what is the overarching strategy to achieve those goals. That debate will allow us to define our force structure and provide the soldiers, sailors, airmen and Marines with the tools they really need to carry out their missions.

Requiem for a Paper Mill

The Federal Government wants to spend our money. I am not generally in favor of government handouts or government efforts to keep particular businesses in operations for a number of reasons, not least of which is that they have been, since the dawn of recorded history, so terrible at it. Nevertheless, there are times when some good might come of such efforts.

On 22 October International Paper announced that it would close its mill outside Franklin VA in the spring of 2010. The reason is simply that the mill represents an overcapacity in light of the combination of the global recession and the decrease in demand of paper. So, the mill is closing.

In Franklin that means 1100 people will lose their jobs, some as early as November. The simple question is: what can be done about this? Obviously, economics works best when we let the ‘laws’ of economics play out as they are meant to. If demand is down, over-capacity needs to be trimmed. As such, International Paper should have closed the plant, assuming that that plant was the least profitable or had the poorest margins or some other such figure relative to their efforts to remain profitable.

Nevertheless, there is an opportunity here, one that certainly merits at least some consideration, particularly when compared to some of the other projects the US government has funded over the past 9 or 10 months with the hundreds of billions of dollars in stimulus money.

Consider a big ‘what if?’ (But certainly no bigger or more far-fetched than the idea that GM can be made profitable.) And actually, there are two ‘what ifs?’

What you have now is a paper mill and 1100 skilled workers. Instead of shutting it down and losing all that expertise, what if the workers, in concert with the state and federal governments providing certain key support, and using a government loan (the often mentioned stimulus money), were to buy the plant and convert it to a state-of-the-art paper mill, one demonstrating cutting edge paper production technology, as well as greater efficiency and low energy usage, use of recycled paper, and a zero waste foot-print, while increasing productivity per worker? Use this mill as a technology demonstrator to show what paper mills can become in the 21st century.

Nor would this necessarily be at the expense of International Paper: per the government backing, technologies and processes developed at the plant would be made available (at cost, or perhaps below cost, in as much as the advancements would have come from an investment of taxpayers’ dollars) to US paper firms. International Paper and other US paper companies would benefit from the new technology, Franklin would benefit from the new jobs and a plant that would be likely to operate well into and even through the 21st century, and the plant would presumably be then able to pay back the loan. The Federal Government would also – eventually – benefit from the creation of these new and, in the end productive jobs, ones that would return real tax revenues well into the future.

Secondly, as a state-of-the-art paper mill would certainly not require as many workers as the current mill, use the rest of this facility as a site for a technology training/retraining facility. Virginia could lead the way in establishing a job re-training program that anticipates changes in various industries and provides for retraining so that workers can retrain and move into newer but equally productive careers.

Would this be difficult? Yes, but not impossible. The limitation is that it would cost a good deal of money (though nothing like the amount spent on GM, Chrysler or any of the banks to which the government loaned money), and there are elements of the technology that would need to be further developed. But the technology could and would be sought by other paper mills as it became mature. And there is real value in such an endeavor. Let this mill become the leading technology demonstrator for an entire global industry, and let these workers become the lead technologists in the paper industry of the future.

And it would represent an opportunity by the people in Washington, who have literally hundreds of billions of dollars to spend, to spend the money on a project that would represent a real opportunity to establish meaningful capabilities well into the 21st century, ones that would provide real returns on investment to the American people and to the private sector.

Whither Afghanistan?

What is the US interest in Afghanistan? The answer to this question is essential if the President hopes to correctly respond to Gen. McChrystal’s request for more troops. It comes before questions of what will work and what won’t, before questions of whether the last election was fair or not, before questions of which faction or tribe should have what say, before questions as to the eradication of the opium crop.

First, to simplify matters, US presence in Afghanistan should depend on only one thing: is it in US national interest? IF it is, then the US needs to be there, irrespective of who is in power, how that government was formed, or even if there is a government in Kabul.

On the other hand, if the US has no national interest in Afghanistan, then it should leave, and leave immediately. For those who object, who respond that the US would be abandoning a ‘friend,’ or that it would send the wrong signal, as long as the signal is not too serious, it doesn’t matter. And, as for ‘friends,’ countries don’t have friends, they have interests.

What if any are the US interests in Afghanistan?

What is clear is that the US interest in Afghanistan is not part of the ‘Great Game’ as it was played by Great Britain and Russia for nearly 130 years, where geopolitics dictated that control of the center of Asia meant the ability to leverage control over all of Asia; nor is the current US interest the same as it was in the 1980s, when the US played a dangerous and difficult ‘hand’ to stop the Soviet Union, remembering that proxy campaigns were fought in order to avoid direct war between the world’s two largest nuclear powers.

While some have lamented that the US should not have fought that proxy war as it did, this ‘Monday morning quarterbacking’ loses sight of the fact that the Cold War was often quite warm, and the stakes were exceptionally high. Under such situations trade-offs often had to be made, and trading a then present heavily armed nuclear adversary – the Soviet Union – for the lesser potential future threat from an anarchic Afghanistan was deemed to be worth the risk.

But it is neither the consequences of that proxy war nor the threat of further anarchy in Afghanistan itself that warrants US combat presence. The issue at hand is the very nature of the region. Afghanistan cannot be considered in isolation. To do so is to forget that it sits beside, one might say ‘on top of’ Pakistan. And Pakistan represents the core of the real issue.

That Afghanistan was, and might revert to being, a safe-haven for terrorists is a concern. But the terrorists come and go via, and are supported by factions within, Pakistan. Pakistan is home to more than 150 million, possesses a small but capable nuclear arsenal with the necessary delivery systems, but has a fragile political and economic system. It is this reality that makes US presence in Afghanistan a vital interest to the US.

Simply put, to fail in Afghanistan is to set off a series of what ifs: if the US departs Afghanistan, do the Taliban return and reestablish control over the country? If the Taliban take control of Afghanistan, and invite al Qaeda and associated parties back into the country, will they be able to further destabilize Pakistan, as well as some of the other neighbors – Uzbekistan, Tajikistan, Kyrgyzstan, et al? If Pakistan begins to teeter, can we stop the collapse? And if Pakistan collapses, can we guarantee to our own satisfaction the security of that nation’s nuclear arsenal? Even if we can guarantee the security of the nuclear arsenal, what would be the impact on the region of anarchy in Pakistan, or the possible fractioning of that country, yielding several new states, one or more of which might be backers of extreme Islamic movements? What would be the necessary response from India – the world’s most populous democracy and one with whom the US needs closer relations? (And also a nuclear power.) How would US withdrawal from Afghanistan affect Iranian perceptions of US intent and would it embolden them further in their efforts to acquire nuclear weapons?

Admittedly, there are many ‘what ifs’ in the above. But while the risk is arguably small, perhaps not 1 in 1000, of all of the above taking place, the consequences of that happening are massive. That the loss of control of Pakistani nuclear weapons would lead to the detonation of one or more of those weapons is nearly a certainty. If we do not settle the question in our favor in Afghanistan (and hence in Pakistan) are we prepared to accept the associated risk? And if we do accept the risk, are we prepared to deal with the consequences? And what of the rest of the region, of Iran, of Uzbekistan, Tajikistan and the like?

As for anyone else in the world dealing with the consequences, the simple question is who? If a nuclear weapon is detonated anywhere, by anyone, the entire world will look to the US for the response. If Pakistan fractures, who will be called to provide both aid and security? If unrest spreads into other states, to whom would the world turn for leadership and action?

The Afghani-Pakistan region has always been a bit dangerous and unstable. Today, as a result of growing populations, weak economies, and weak political institutions, seasoned with nuclear weapons and radical Islamists, it is even more so.

Where does that leave the US?

Our choice is binary. We can either accept that we must remain actively engaged in the region, placing our people and assets in the region in an effort to bring greater stability, or we can decide that it is not in our national interest, and that whatever happens, happens - Que sera, sera.

If we decide that the region’s stability is in our national interest, then we need to commit the necessary assets to ensure: control of the Afghani country-side; ensure presence and stability – social and political – among and between the various tribes of Afghanistan, and establish control over the border region. We need enough forces working with the Pakistani Army to assist them in their efforts to establish control over their side of the border and the tribe dominated regions of both the border region and south-west Pakistan. And we need to do this whether the government in Kabul is deemed legitimate or not. If we believe Afghanistan is in our national interest we need to act now, not later, we need to move forces in before winter arrives (it will arrive soon in the high passes) and keep them in place where we can exploit our advantages – logistical, tactical and technical – throughout the winter and into the spring.

What we should not do is delay in our decision, which achieves little in our interest. Certainly, it is always good to work out one’s strategic direction. But that should have been worked out late last winter when the new administration came into Washington. That they did not do their jobs is now abundantly clear. But that is now water under the bridge.

We are now down to three questions: 1) Do we stay or go? 2) If we stay, what is the right approach - strategy – to achieve our goals in the region? 3) If we go, how fast can we get our forces out of there? The first question can be fully discussed in a matter of a weekend. Then the President needs to make a decision and run with it. Once that is done, the following two questions can be worked out. In the interim, if the answer is stay, send the troops in and give the operational commander what forces he wants while the long-term strategy is worked out. If the strategy then changes, adjust the force flow at that point. Such expenses in manpower, effort and material are minor in the long haul. If the decision is to leave, leave now, and begin to commit planning assets to develop a response for the consequence management following a break-up of Pakistan, chaos in central Asia, and the subsequent detonation of a nuclear weapon. And then pray that doesn’t happen.

Some Thoughts for the Next Governor of Virginia

To the next governor of the Commonwealth of Virginia:

While much has been written about spurring the economy, helping small business, growing jobs, repairing the roads, etc., little of substance has appeared in the news. Accordingly, the following is offered to the next governor in the hopes that whoever is in fact our next governor may adopt some of these ideas and thereby improve the economy and the overall wellbeing of our commonwealth in the long term. (And other governors can feel free to borrow these ideas as well.) All of these are possible and affordable, if there is the right level of will, effort, and leadership.

Show Real Fiscal Restraint – Spend down to revenue not up to your wish list. On day one pledge that you will spend no more than 95% of 2009 revenues, with 5% held over as a cushion for crises and disasters. Promise that spending will only grow as fast as the economy of Virginia grows. Strongly consider a balanced budget amendment to the constitution of the commonwealth – one that includes a maximum tax rate as well.

Grow Jobs – New jobs are predominantly created by small businesses. If anyone wants to create new jobs they must provide a real incentive to small business. The simplest means to do that is to eliminate corporate taxes. Tax revenue from corporations represents less than 2% of total revenue in Virginia. (That number is representative of most states.) Allowing businesses to keep that revenue would both create more than 20,000 jobs and provide an incentive for more corporations to move into Virginia. And the new jobs and new corporations would generate more revenue that would provide additional tax revenue.

Attract New Talent – New Patents and Copyrights are the foundations of many new businesses and jobs. Let’s attract that creative talent. Pass a law that permanently exempts all income from a patent or a copyright from income tax. This would draw those with new ideas to move to Virginia and would create additional jobs. The law would apply for any citizen, or anyone who has moved to Virginia and intends to make Virginia his or her home. (This would also be a great idea for the US as a whole, attracting the most creative minds in the world to become US citizen.)

Improve Transportation Infrastructure – On your first day in office call a meeting of all mayors, city councils, delegates, etc., and establish a bipartisan oversight committee with membership drawn from all those offices. Hire a small group of trained planners – my recommendation is some retired military folks who have engaged in planning before* - and have them draw up a series of options that address both current concerns and provide a plan that takes Virginia forward for the next 30 to 50 years. Then the plans would be submitted to the committee for simple up/down votes and then submitted to the House of Delegates for approval or not. But something has to be done to the road networks and the rail lines, etc., and the plan needs to look out into the future and have various options that flow logically. What we have now is a disaster that is only going to get worse.

Develop the Next Generation – Education. The most important step that you can take to set the stage for the next several generations is by improving education in Virginia. And the simplest means to do that is to ensure that Virginia has the highest standards in reading, writing, mathematics, science and history of any state in the nation. Set high standards and insist that they be met. The children can meet those standards, if we insist upon it.

Develop Clean Power – As with the road network, Virginia will need abundant energy if it is to continue to grow. We can sit and wait and hope for someone else to solve our problem for us (hope is not a plan) or we can take action, and provide leadership for all the states of the Atlantic Coast. We need abundant, cheap, clean power and the means to ensure that, well into the future, is nuclear generators. Other sources and methods must suffice for the moment, but cheap, abundant power requires more large power stations. Commit to starting three nuclear reactors in Virginia before your term is up, and set the groundwork for Virginia to lead the nation into the 21st century in clean, renewable power generation.

Plan ahead – Develop comprehensive crisis response plans that work (as demonstrated by recent events in Hampton Roads, whatever is on the books is nearly worthless) and practice with them.

The People of Virginia have nearly limitless potential. But it will require leadership in Richmond to get the impediments out of their way and allow them to convert that potential into something real. That requires leadership and planning from the governor.

* Whoever has been used before needs to be replaced: pick some people from outside the system who have real planning expertise; there are a lot of us around. But do it, and do it as soon as you are in office – these roads are AWFUL.

Healthcare isn't Broken

It has become a ‘truth:’ healthcare is broken.

But, what is broken about it? Today, in the US, 100% of the people in this country, whether here legally or not, whether they can afford to pay for it or not, are accounted all the emergency care they need. If you have an accident, you will get health care.

Today, 85% of the citizens of this country have health insurance.

Today, the poorest 20% of the citizens of this country have health insurance.

If you are truly sick there are clinics and facilities in this country that can match or better those anywhere in the world, in the treatment of any affliction.

So, what is broken? The answer, the pundits will tell us, is that we spend too much on healthcare AND there are too many people who can’t afford comprehensive care AND there is that nagging 15% who don’t have health insurance. That constitutes ‘broken.’

So, let’s ask a few questions. How much should we spend on healthcare? Right now we – all of us – spend an average of (roughly) $9000 per year on healthcare, including government subsidies. Is that too much? We spend more than that on our cars.

Ask the question another way: how much is your health worth? Ask it in pieces: how much is your hand worth? Would it be worth spending $100,000 to have your hand put back together if it were severely damaged? Or would that be ‘too much?’ How sick would you be willing to be if you could spend $1000 less per year on healthcare?

There is a bumper sticker that says ‘If you think education is expensive, try ignorance.’ The same can be said of healthcare; if you think healthcare is expensive, try sickness.

Yet we are on the verge of turning control of healthcare over to the government. Is there a guarantee involved? If this turns out to be more expensive then $100 BILLION per year, can we roll this back? If the government starts rationing healthcare, can we end this piece of legislation? If the research labs that made all of the ground-breaking pharmaceuticals close up and stop their (expensive) research, will we fund their resurrection, just as we funded GM?

We have a healthcare system right now that is expensive, but very successful. But not perfect. We are about to turn it over to the federal government and a bureaucracy that has been repeatedly shown to have a great deal of difficulty managing the funds we already give them. Now we want to give them more funds AND the responsibility of managing our health. Does that really sound like the best path?

We as a nation can always seek to improve. We all certainly want the best healthcare possible – though we don’t know how to define that. What is certain is that the government program is not directed at producing more healthcare: it won’t ‘grow’ more doctors, nurses and hospitals; nor is it directed at improving healthcare: there is no comprehensive plan to improve research into new technologies, new treatments or new drugs. Yet, somehow things will “get better” if we centralize control and drop a bunch of money into a government owned bucket.

Our healthcare isn’t perfect. But the question is this: do you believe that centralizing the control of healthcare into a single bureaucracy will lead to improved and (mysteriously) lower costs? Or, is it more likely that centralizing the control of 1/7th of the economy will lead to the growth of a large and complicated bureaucracy that is likely to stifle creativity? What is the track record of the federal government with large programs? It’s worth asking the question: we are talking about our own health.

The Cost of Healthcare

I read in the newspaper today that the people at the Treasury (that would be the U.S. Treasury – the folks responsible for tracking the coming and going of roughly$3,000,000,000,000.00 of our money each year, as well as a fair number of other tasks) were unable to understand the pay and bonus plan of AIG.

That the execs at AIG are receiving bonuses is absurd. But, frankly, it is such small potatoes when compared to the total amount of cash – our cash – that flows through the Treasury that I can’t worry about it too much. Indeed, what is a few billion dollars when we are watching the Treasury push trillions around? And now they admit that they really can’t figure out a pay and bonus plan? (As an aside, did anyone say” “I can’t make sense of this. Everything stops until you explain it?” My guess is ‘no.’)

What does this have to do with Healthcare? Simply this: the same people who can’t figure out the pay and bonus plan for AIG are now telling us that the Healthcare plan they are helping to push through the Senate and the House will cost ‘only’ $800 billion over 10 years and will actually reduce the deficit.

Believe it if you want.

But here is some simple math: the U.S. spends some $2,000,000,000,000 to $2,400,000,000,000 per year on healthcare (depends on which number you use, and how various folks compute the numbers). That works out to $8100 to $9800 per person for the 245,000,000 Americans who have healthcare. Obviously, there can be great differences between individuals. But, when working with numbers in the tens of millions, these averages will hold.

The new bill winding its way through the Congress promises to add 25,000,000 people to the list of those with healthcare. So far, so good. But, they insist that this will only cost some $80,000,000,000 per year, or just $3,200 person. Now, they will point out that this is the cost to the federal government. But that is smoke and mirrors.

First, the real cost – total cost to the U.S. Economy - will be on the order of $200,000,000,000 to $250,000,000,000 per year – at least (as per the numbers above). Second, they are creating another entitlement program, that is people are ‘entitled’ to it; they get it whether they pay for anything at all and funds are allocated without further action by Congress. So, whether the money is available in the private sector or not, it will be spent. Third, the bill does little to increase the real supply of healthcare in the country (more doctors, nurses, clinics and hospitals). Nor does it do anything to eliminate those items which have continued to push up the cost of healthcare: increasingly complex technology, more effective and precise pharmaceuticals, more sophisticated treatments, increased specialization among healthcare workers (and no growth in the number of healthcare workers), and the impact of law suits on both medical practices and insurance costs.

So, what does all this mean? Simple: the cost will go up: at least $200,000,000,000 per year, every year. Other costs will continue to rise because the bill does nothing to address the fundamentals that have caused healthcare costs to rise, and the government, the same folks who can’t figure out the pay system for an insurance company and lack the leadership to simply say ‘stop, explain this,’ will be responsible for it all.

Swell.

The Deliberative Process

There is a saying that goes ‘Want it bad, get it bad.’ An early version of the same sentiment is ‘Haste makes Waste.’

When the Founding Fathers drafted our Constitution they deliberately split the real powers of government (the legislature) into two separate houses: the Senate and the House of Representatives. Neither has the authority, except in a few narrow issues, to act alone. This was done so that laws could not be passed in haste. A law must first go through committees in each house, be debated on the floor in each, then passed, and then must be reconciled in joint committee between each house, and then once a law is passed, money must actually be set aside and the executive branch authorized to spend it on the issue at hand.

The idea was that every proposed law would be thoroughly debated before it became law.

Furthermore, the process for changing the Constitution, and the various state constitutions, was deliberately made slow and cumbersome so that no one would in haste change something that had been carefully thought out and debated many years earlier.

Now we see two examples of people trying to act quickly, when there is no demonstrable value to the citizenry for precipitous action. The issue is healthcare. We are told that our healthcare is in crisis, yet 85% of our population is insured, and 100% has access to emergency care. All our poor are covered by Medicaid, and there are scores of medical centers around the country that provide comprehensive care for free to those who cannot afford it. While note ideal, it works.

But Washington says something needs to be passed right now, we cannot debate it any longer, we need to act.

Why can’t we debate it any longer? Why can’t we expect our Senators and Congressmen to actually read the legislation before them and engage in a detailed debate that actually addresses all the major issues? That is what the Constitution directs. That is what they were elected to do? Why don’t they want to do that?

And meanwhile in Massachusetts, the Governor has apparently decided that, because of this legislative crisis in Washington, a purely partisan response since there are more than enough Senators to engage in and vote on any legislation, but not the 60 needed for one party to steamroll the other and end deliberation, he – the Governor – will act to circumvent the Massachusetts Constitution and appoint someone to fill the seat of the late Senator Kennedy.

Senator Kerry, the now senior Senator from Massachusetts said: “This is what Ted Kennedy wanted, what Governor Patrick and I wanted, and I firmly believe it’s what people in Massachusetts want, because big votes on everything from health care to climate change are being taken now, not in five months.’’

In other words, ‘we must make haste.’

I read yesterday that the Environmental Protection Agency’s new blueprint of industrial regulation is 18,000 pages long; 18,000 pages of regulation created by a bureaucracy without any Legislative oversight (that is, no elected officials had a hand in it) and this because we have – in haste – given the EPA authorities without adequate debate, without due deliberation.

Due deliberation, in-depth public debate, was placed in the Constitution to prevent tyranny, to prevent the Legislature from acting so fast that it made grave mistakes that deprived people of their liberties, either willfully or negligently. We should all be very concerned. We should all consider writing our Congressmen and Senators and insisting simply that they thoroughly debate each of these issues.