WHAT ROMNEY SHOULD HAVE SAID II-- SOME SOLUTIONS

by Tom Brown

We must start the discussion by saying what we cannot do; namely rely on new programs, financed by tax increases on high income people, to spend our way out of our problems.  There are not enough high income people, and even if there were for this year’s issues, this wouldn’t work on a continuing basis as costs continued to grow.

It is clear from the new demographics that there are not enough people that would vote for a purely conservative approach, even if it would work.

Presumably all of us would vote for a more efficient caring government responsive to a broad range of issues deemed important to most demographic groups.  Here would be my priorities.

Regarding employment:

1.      Make retraining a requirement to receive extended unemployment benefits.

2.      Try to minimize what an employer must pay above and beyond a basic wage or salary, such as unemployment insurance, social security or health insurance so it is easy and cheap to hire people.  Taxes and benefits should be the responsibility of the individual but forgiven (in the case of taxes) or accrued (in the case of insurance or retirement) when the individual is unemployed.

3.      Make vocational training available at the secondary school level, as an alternative to college preparation.

4.      Make any federal school aid dependent on test scores and improvements realized so that we are promoting and graduating many more students that meet standards for their grade level

Regarding immigration:

1.      There must be a path to a work visa and later to citizenship that exacts a one time penalty for being here illegally that is high enough discourage future illegals, but reduces the number of undocumented illegal immigrants.

2.      There must be sufficient temporary and seasonal  work visas for needed unskilled and semiskilled workers.

3.      There must be better policing of professional work visas to prevent abuse and allowing foreigners to take jobs that young people should be training for and getting.

4.      We must take politics out of immigration and work visa quotas, by having congress write the principles and the INS to do the numbers.

Regarding government’s contribution to the cost of living:

1.      Justify all government services on a cost versus benefits basis.

2.      Privatize services where appropriate in a way that access is not impeded and fraud on the part of the public and providers can be kept low.  Health insurance and road plowing are examples.

3.      Minimum wage must follow inflation, at least on a lagging basis, so as to be understood by the public as contributing to being able to earn a living wage.  We must understand and accept that there will be some impact on low level jobs.

4.      Any regulation, existing or proposed, must be justified on the basis that the harm it would avoid is significantly greater (say 100x) than the effect on the cost of living plus the cost of establishing  the regulation plus the ongoing cost of enforcing the regulation

Regarding health care:

1.      Go to two levels of care for all.  Basic which uses proven cost effective practices and efficient delivery systems, available to all on a subsidized basis with the subsidy depending on income. Advanced which is private where the delivery system and practices followed are as agreed between the policyholder and the insurance provider and not subsidized by the government. A board of experts is to determine on an ongoing basis what constitutes basic care.

2.      More effort to identify what works, especially with analysis of electronic medical records on an anonymous basis.

3.      It should be noted that some of the Obama care program is valid certainly including the requirement that all people should have insurance.  This concept would accomplish this in another way.

4.      It is also important to note that a health savings account and catastrophic insurance, with a deductible equal to the health savings account balance at the policy anniversary should be an acceptable way of meeting the requirement of being insured.

Regarding the tax code:

1.      We should move to a highly simplified tax code with one or two progressive rates and few if any tax deferrals, exemptions and deductions.

2.      We should strive for very low corporate taxes.

3.      A minimum tax might be considered but might not be necessary with low rates and almost no deductions and exemptions.

4.      We could also use the alternate minimum tax concept to simplify taxes.  And in any case tax revenue analysis must take it into account.

Regarding retirement:

1.      All pension contributions from a company or government agency must be placed in a trust account in the year earned.

2.      Retirement age must be increased based on current life expectancy; savings must be increased by removing IRA contribution limits.

Regarding infrastructure:

We need to catalog and prioritize infrastructure that serves interstate commerce.  We should pay for it partially with an increased fuel tax and partially through eliminating ‘pork barrel’ projects.

Otherwise infrastructure must be a state and local issue.

Regarding the balanced budget:

We must remember that we are now inflicting a horrible financial burden on our children, grandchildren and beyond by having a budget deficit.

We need spending cuts to balance the budget within 5 to 10 years.  Maybe 8 years for political reasons.

We need a temporary revenue increase to reduce the deficit and finance the transition over a 5 to 10 year period.

The spending cuts need to be thought out and carefully studied to minimize the impact on citizens.

As an example, we cannot simply cut Medicare reimbursement rates.  We need to establish qualifying criteria for a given treatment and establish treatment protocols so that only the lowest cost effective treatment is allowed.  This must be coupled with changes in how the treatment is delivered to further lower costs.

We probably need to negotiate reimbursed drug costs; we have high costs on branded costs the in some cases subsidize the cost of drugs to other countries.  It would not necessarily hurt to have reduced drug research; we have a lot of “me too” drugs.

Regarding efficient government:

1.      We cannot pay people who are not working except for a relatively brief period.  Some of what is now extended unemployment could possibly be spent on retraining the unemployed for available jobs.

2.      We cannot guarantee home loans for people who cannot get them in normal private channels, as there are big risks of downstream defaults guaranteed by the taxpayers.

 

WHAT ROMNEY SHOULD HAVE SAID I -- THE PROBLEMS

by Tom Brown

We do not have enough people employed and will not unless we change course.  The present system of government investments, bailouts and unemployment insurance is not working.  It is especially disheartening that the massive alternative energy investments have not worked, yet have consumed precious taxpayer dollars.

We have a lot of unemployed and marginally employed people, often with skills that do not match the needs of the job market.

We have an education system that often does not train our children on the basics as measured by test scores.  Nor does the education system help the children sort out whether college is right for them or if they should pursue a job skill directly.  Needless to say college is very costly and, for most, unaffordable without financial assistance and loans.

We have a large number of illegal immigrants, some with citizen children, that cannot or will not go back to their home country for a variety of reasons.  We also have a dysfunctional immigration system for legal immigration.  Adding to this there have been some border protection and immigration scandals that the present administration has not been able to fix.

We have an extremely high cost of living with many people that cannot afford health care (or health insurance) because it is so expensive.  And we are spending perhaps 50 to 75% more than other developed countries without more results.

We have a retirement system that is underfunded for both social security and private pensions.

The public sector for now is the most generous, but is the most underfunded and may not be the most generous for long.

The private sector has some generous retirement programs, but most people in the private sector have little or no benefits beyond Social Security and Medicare both of which are going broke, Medicare being in the worst shape.  And if payroll taxes are not collected, Medicare and Social Security go broke faster. It should be understood that these programs rely on the general fund subsidizing them for the deficit in payroll tax collections.

Our infrastructure is crumbling and is not being generally repaired or replaced.

When you add federal, state and local taxes together, our taxes are as high for most as in other countries, but we are not getting the mix of services that we need most. Yet we are spending nearly 1/3 more than we are collecting on government services.

We have a tax code full of loopholes, preferential rates and exemptions that is making it difficult to raise sufficient revenues without hurting taxpayers who do not have access to these loopholes.

Besides, it is clear that we cannot simply add spending or tax our way out of this. We need to make government much more efficient and tuned more to our real needs and priorities, which would include some economically efficient stimulus in the short range.

Sorting through this requires hands on leadership and compromises between the political parties

 

THE REAL COST OF HEALTHCARE

By Tom Brown

 

In the United States we are approaching 20% of GDP spent on healthcare.  This is the greatest in the world; double what many developed countries are spending, with no worse life outcomes.

It is too much! And it is growing faster than the economy.

It is highly significant for people with middle class incomes or less, and not simply a chosen expenditure.

Employees only pay a portion of their insurance costs yet they often decline to take insurance for themselves or for their dependents.

Clearly health insurance adds to the cost per employee, more so than employment taxes, and it is reducing hiring.

It definitely adds to the cost of living even if the employee doesn’t buy the employer offered insurance, since the public sector pays for necessary health care for the uninsured, or it is somehow paid for as more costly deferred care.

And it definitely adds to the cost of products we make and services we offer, so we are less competitive on a global basis. And it adds to our public budget to support insurance for seniors, poor people and veterans.

We must reduce it

Obama care will not reduce health care costs sufficiently, or perhaps at all.

Offering health insurance to all will not reduce health care costs even considering reducing future health care costs of an individual because of preventive care according to reported Medicare studies on the effect of preventive care.

Reducing health care costs significantly means changing the system for:

--greater use of clinics where a cheaper person than the is the first contact of the patient

--greater use of generic drugs

--less defensive medicine including imaging and lab work

--pre-approval for non-emergency treatment and drugs, where the payer looks at the patient’s overall health, life prognosis and treatment history

--use of treatments and drugs with the lowest calculated cost benefit

--giving everybody a financial incentive to minimize their health care costs

--giving everybody an incentive to have a healthy lifestyle

--the end of group insurance, where some people pay too much and others too little, and the ones paying too much do not know

Obviously there will always be individuals who can afford to pay for costly treatments or what is called concierge care themselves or to pay extra for insurance to do so.

Ideally the individual will choose his insurance trading off copays and maximum out of pocket costs and HMO network coverage versus using any provider and even tax deductibilty.

In that sense, private insurance companies would seem to be a good way of creating a variety of offerings for this transition.

Also it would seem valid to allow an individual’s dedicated health savings to reduce that individual’s insurance cost by matching the deductible to the savings amount at the beginning of each year, and charging accordingly.

It is clear that this is not simply a discussion about Medicare. It is about health insurance for corporate employees, poor people, working families, self-employed people, veterans and retirees. Most, by the way get subsidized health insurance, including a tax subsidy.

All health care costs must come down.

Everybody should have some access to health care.  All tax subsidized health insurance including insurance offered employees and company retirees should operate with the same rules and principles.

No one should be advantaged or disadvantaged by the size of their employer, and whether they are full time, part time or self-employed.

Finally, no one should be able to game the system by not being insured. You need to have minimum insurance yourself or pay a tax to have access to a high risk uninsured individual insurance program to insure that need treatment will be paid for.