The Regal Child

Not every post here is all about fiscal reform.  When possible I will share things that significantly impact me as they will hopefully impact you... 

Have you ever seen anything as remarkable as this photograph?  If only we could avoid war and the pain caused children such as this...Can you imagine if we could all face our trials and adversity with the same raw courage? 

That's not a child...He's a man, a mighty one and a National Hero!

FACINATING!!! CLARIFY HUMAN MOTIVATION

I can't tell you how this clip clarified my understanding of my own motivations and those around me in the work place...What an astounding clip!!!

It may challenge all you think you know about the old "stick and carrot" approach!!!

WHAT MOTIVATES US

TAX REFORM AS PART OF FISCAL REFORM

Are there elements of discretionary spending that need to be capped and cut?  Definitely, but there is an equal if not greater need to reform the tax system in the U.S.

Without taking issue or making argument concerning the various alternatives that may exist regarding reform of the system, it is abundantly clear that in order to correct deficits, to balance the budget and to put this country back on the right track to sound fiscal footing and prosperity TAXES WILL HAVE TO INCREASE as SPENDING IS DRASTICALLY DECREASED!!!

Now let's be clear.  They should not increase so much that a disincentive is created that stifles productivity but taxes are artificially low today and the country would benefit immensely from a sound, less volatile long-term tax policy that keep taxes equivalent with those imposed during the Clinton Administration with similar tough budget controls as were also imposed then.  Perhaps even a BALANCED BUDGET AMENDMENT would be timely and of great benefit to unborn generations.

If "UNCERTAINTY" alone was removed from the system at very least, businesses would know precisely what they were up against from a tax perspective and they could then make their longer-term plans on that basis.  The uncertainty extended for another two years by the recent extension of Bush Era Tax-Cuts is a very real disgrace and was a mistake that should never be repeated again!!!!

USE TAX, FAIR TAX, FLAT TAX, CONSUMPTION TAX, PROGRESSIVE TAX STRUCTURE???...Those are all important but are purely tactical questions.  Let us first get the great strategic questions right...We can debate tactics once the overarching strategy is sound!!!

A NOVEL LITTLE COST REDUCTION IDEA

Health care reform may benefit longer-term from greater incentives provided to physicians to enter the lower-paying realm of "primary care" vs. the current trend to "specialize"...It has long been recognized that the greater compensation is found by specializing and that few can afford to incur the debt required to make it through medical school and then choose the more modest income typically earned by the primary care physician.  Therefore, there is a chronic shortage of primary care physicians that may be leading us to provide less preventative care which in turn may be by neglect causing health care concerns to become exacerbated over time into acute or chronic conditions that require the much more extensive and expensive care associated with forced referrals to the "specialist".

Therefore, based upon the premise that preventative care is less expensive than intensive care at the hands of the specialist, perhaps the people of the U.S. might consider a subsidy supporting the payment of the cost for medical school for anyone willing to commit to at least 10-years in primary care with specialists left to incur the debt much more easily repaid as an eventual specialist.

A more modest compensation package to provide  cost-cutting preventative care without the weight of the student debt associated with the traditional entrance to the profession might just appeal to a great enough extent to remove a great deal of the cost from the system in the name of preventative medicine.

Viable?  "Stomachable" by the voter?  What do you think?

ACTUAL MEDICARE REFORMS

It is absolutely essential to reform Medicare.  Reforms should not seek to "ration" care but should "intelligently redesign" the system with at least the following fundamental reforms.

01.  Place "STATUTORY CAPS" on federal health care spending.  Currently the system is "open-ended" and spending is not capped.  Therefore, there is no sensitivity to the issue of "price."  Introduction of consciousness of price in the system is imperative if we are going to stem the rampant inflation.  There must be incentives to control costs which incentives are conspicuously lacking today.

02.  Raise Part B and Part D premiums cutting substantially the projected funding shortages by gathering more funding upfront which will putting more of citizen's skin in the game.  This act alone will get the attention of the citizens who will predictably take steps to further develop health conscious lifestyles to help prevent both chronic health conditions and to prevent further reductions in their discretionary income.  Increased premium in these areas will further encourage judicious use of their access to the health care system.

03.  Raise the eligibility ages for coverage in installments over 10-20 years.  This will require coordination of coverage with the private sector which may need to extend beyond age 65.

04.  Improve coordination of care among providers with a new electronic data base allowing all physicians, pharmacies and other related parties to access the same system with the object of not just coordination of care but a transparency that does not exist now with special emphasis on preservation of privacy and protection of identity etc. etc.

05.  Encourage education, prevention and wellness.  Treat the wound before amputation is necessary and cost will reduce by definition.

06.  Develop Accountability Based on Outcomes by moving away from "Fee for Service" compensation models and encourage reward for the more intelligent practice of medicine by paying doctors as measured against their peers for the aggregated results of their patient bases.  Those who move a greater percentage towards more positive outcomes are compensated more richly for their superior performance than those that do not move their patients as meaningfully forward against the same metrics.

CONSIDERING FISCAL REFORM (OR ANYTHING ELSE)

When we consider fiscal reforms now both urgent and imperative we must recognize a fundamental truth that seems beyond dispute.

Any stance taken that represents only one extreme of the ideological spectrum must be deemed impractical.  The is so because like it or not, one of the central and fundamental features of our democracy is COMPROMISE...Therefore, the most relevant question we can ask is not "What do we agree with?" but rather "What can practically be passed by two houses of the legislature and what actually gets executed by Presidential signature?"

One of the great amenities in Congress has always been the "centrist-Statesman" that has the ability to conduct business from the Center by building both consensus and compromise.

Granted, in the current system in Utah consensus builders in the center can't get through the primary process because they are not card carrying members of the militia but the "center-right-moderate majority" is exactly where the best business gets done in this Country.  It's the sweet spot!!!  Always has been...

Therefore all the "loons on the left" and the "zealots of the far right" can all use at least equal doses of psychiatric assistance to rehabilitate "a sensible center" that can conduct quality business through consensus and compromise...This is not a relinquishment of values or principles but an added layer of wisdom that knows which battles are worth fighting and which should be abandoned so that other essential we can fight and win another day.

In addition, every battle worth fighting cannot always be won!!!  Wisdom is knowing when to fight even when victory is not had and when to fold in preservation of the strategic objectives dictated by sensible, common sense...Where did "common sense" go in the system? 

Try it...you really can do it...If you don't everyone loses anyway because nothing will get done and that is surely not acceptable to any of us, right?  Look around...the ship is sinking, folks!!!

NATIONAL HEALTH CARE COST CRISIS

Yes, I know you have heard...The 8000 lb. gorilla in the room concerning our fiscal woes over the long-term is the ever increasing cost of health care.  This is not credibly disputed by anyone...no one!!!

Medicare is underfunded by approximately $38 Trillion over the next 75 years.  The reality is that we are not necessarily deriving value as we spend ever more to obtain care.  The strategic objective is to IMPROVE QUALITY, VALUE & RESULTS while simultaneously SLOWING THE INCREASE IN COST to provide the care.  This is anything but easy to accomplish.  Accomplishing this strategic objective will certainly require a complete and fundamental shift of the incentives within the system.  If we "move the cheese" the results we desire ("the mouse") will follow!!!  Try these possible solutions on for size.

01.  Move away from the "Fee for Service" model we currently operate under.  Rather than paying the physician "per procedure" we should pay the physician for actual results achieved in relationship to other like practitioners but aggregating their patients and creating metrics that reward results, relative to the results of other peer practitioners rewards the outcome, not the series of tests or procedures engaged with little emphasis on their actual outcome.  Measuring aggregate metrics against other aggregate metrics (peer-to-peer) will ultimately weed-out (or seriously under compensate) the under-performing physicians and will increase the compensation by more effectively compensating physicians that can deliver results through the practice of intelligent medicine.  Aligning compensation with actual outcomes and value provided per dollar will increase exponentially.  That's good for each of us!!!
02.  Medical Malpractice Reform:  Get Rid of the Frivolous Law Suits in the System...Need I say more???  This has got to be almost painfully self-explanatory as a cost reduction technique!!!

03.  End of Life Care:  Let's agree from the get-go to quit the demagoguery..No one anywhere on the planet advocates "DEATH PANELS"...The reality is that a vast majority of the cost in the system surrounds "end of life" care.  Everyone is literally "endowed by their Creator with certain unalienable rights" and one of those might be to have access to appropriate end of life care as determined by you- the patient, your doctor and your other advisers such as your attorney and your ecclesiastical leader- not to mention spouse or family. 

Care should not be "rationed" but sensible, humane steps should be taken to encourage planning that includes care deemed appropriate to preserve and maintain life during these sensitive scenes of decline leading to the finality of the eventual demise.  Notwithstanding the sensitivity of the issue, we can do a better job coordinating and defining what is really reasonable and necessary by again separating real "need" from the avid "want"...The key is to leave the decision making to the patient and the doctor, not in the hands of a bureaucrat. 

To protect the integrity of the system a "sliding scale" per procedure can be developed to place greater economic benefit on "joint replacement surgery" (for example) making it more tenable economically when done during at an age range that statistically suggests both value and a real life return on the investment based upon current life expectancy.  Those who wish to have the same surgery at ever advanced ages could be required to shoulder more cost as an incentive to encourage the tough conversation separating real "needs" from the avid "wants"...

The principle is to encourage reasonable care to be provided by using the economic realities of life and care to help motivate cost conscious decisions that are never prohibitive in relationship to getting care but that reward people for making decisions that are both in line with their best interest in terms of health but which minimize the expense of the care systematically when it is provided in less efficient and less viable circumstances.

Cause the recipient to shoulder more of the cost in acceptance of these economic and actuarial realities. 

Complex, yes...Doable, yes...Easy, no...Effective, yes...Humane, yes...Efficient, yes...

What are your thoughts?

THE DICOTOMY OF THE AMERICAN MENTALITY

It's amazing...In general, Americans are "socialists" with regard to their desire for government services and are remarkably "libertarian" when it comes to paying taxes to pay for such benefits.

How can the American psyche deal with such cognitive dissonance?  When will we finally accept the undisputed fact that government must and can only tax to provide for benefits and services provided.  How we can separate the two sides of the same coin from one another is beyond me...

I suppose we are going to have to get to the point where these two realities are reconciled or we are going to continue to feel as discombobulated as we currently feel.

Are the benefits valuable enough to finance through the payment of reasonable tax rates to maintain them?  You make the call!!!  Get involved, have a voice, register a vote and speak your mind!!! 

Long-term the people will get it right!!!

POSSIBLE SOLUTIONS: SOCIAL SECURITY REFORM

Fixing the Social Security System (OASDI) is relatively easy with relatively little discomfort caused anyone long-term.. Just a little political will and a few common sense adjustments and we'd be set.  Of course, these suggestions assume that we all agree that OASDI is a moral and compassionate system to have in place as a social safety-net of sorts for citizens of the U.S.  If it is determined that this one assumption is not correct then more fundamental reforms will be both contemplated and may ultimately prove necessary.

Common Sense Reforms that should go forward without delay or even much debate...

01.  Gradually increase the retirement age at which people qualify for benefits and index qualification for benefits with life expectancy to keep the program true to its founding in A.D. 1935.  Doing this over a decade and a half (in installments) until the eligibility age matches and then keeps pace with life expectancy is imperative.  The program was originally designed to pay an "old age" benefit to those who exceeded life expectancy which was age 62 back in 1935.  As the life expectancy of our citizens has increased over the years, the system has not kept pace.  This alone accounts for most of the shortfall of the current system.  Those nearest to retirement today need not be hurt or placed at a disadvantage.  Those of younger age have a longer horizon to prepare for the increased ages of eligibility.  This makes good, sound, reasonable sense, right?

02.  Raise the Social Security Wage Base or in other words, collect the social security tax on a greater percentage of income.  In 2010, the tax was collected on only the first $106,800 of a taxpayer's earnings.  This amount is affectionately called the Social Security Wage Base (SSWB).  With little pain the SSWB could be raised north of $180,000 which for relatively little more out of taxpayer pockets could bridge much of the projected shortfalls.

03.   Needs Test Benefits preserving COLA adjustments for those most in need while reducing the increase in benefits for the wealthy.  Though it may seem that this provides an artificial incentive for those who are not as successful or productive over a life-time I suppose I argue that if someone is going to purposely not succeed to preserve their COLA on their social security benefits, we are dealing with a "head job" that will cause many more problems for society than this somewhat inequitable incentive.  Keep this all in perspective.  The last thing the wealthy need is inflation protection on their paltry social safety-net benefit, right?

Why has delay been the "watch word" on these sort of common sense, relatively easy reforms that make all the sense in the world???  Good heavens, congress...ACT, LEAD, GOVERN!!!

DEFENSE SPENDING REFORMS

Defense spending must be reformed as well.  Categorically, defense spending is part of the "discretionary" portion of the budget.  In terms of "non-interest" spending, it accounts for 1 of every 5 dollars spent.  Since 2001 the U.S. has spent over $1 Trillion in defense spending.  Defense spending is projected to return to more sustainable levels when the current conflicts in Afghanistan and Iraq wind down.  Nevertheless, the

Defense budget must undergo thorough review where reasonable and judicious reform is implemented in at least three key areas with special emphasis on elimination of waste, fraud and other forms of fiscal mismanagement...

01.  Defense Planning where NEEDS vs. WANTS per service with a greater focus on integration of overlapping elements of each service are clearly defined and delineated based upon a reasonable threat estimate in the short and long-term.

02.  Major reform in the areas of PROCUREMENT and CONTRACT MANAGEMENT are imperative.

03.  Examination of PERSONNEL COMPENSATION and BENEFITS must be conducted to improve long-term sustainability.

We clearly need to maintain a battle ready and vibrant national defense apparatus with the ability to triumph over all legitimate threats both foreign and domestic but we can do so more intelligently by review and reform concerning our resources and their deployment as we project peace backed by the credible threat of force around the world!!!

A FEW OTHER "MEDICARE PART D" THOUGHTS

When Medicare Part-D was debated in Congress, previous to its egregious passage, the legislators debated its cost over the first 10-years.  Originally projected cost of over $600 Billion the program has actually come in at just over $395 Billion (according to current estimates)...Some suggest (even argue) that this is a good thing and on the surface it appears so until one recognizes that any entity perpetually spending money it doesn't have  (even if the projected deficits are only half of what they were projected to be) eventually goes broke.  The U.S. is just that..."BROKE"!!!

Oh, and by the way, the cost beyond ten years which no one bothered to debate will be an estimated $8.1 Trillion over seventy-five years.  That is one-eighth (1/8) of the current amount that is needed at today's treasury rates to cover every unfunded liability the U.S. government is responsible for over the foreseeable future.  Yes, if we had +/- $64 Trillion on hand today we'd be just fine...Today we have ZERO on hand.  Thus, the definition of "unfunded liabilities" of the U.S. Government...

"Houston, we have a problem!!!"

Year 2019: "Hey Lady!!! THAT DOG WON'T HUNT!!!"

In just eight plus years it will be 2019. 

I know you wonder why you should care.  Let me get right to that point. 

2019 is the year, if nothing fiscal meaningfully changes, that the federal government will spend 92% of the entire budget to 1) service interest on the National Debt and 2) to make entitlement (social security and medicare) payments.  EVERY OTHER PROGRAM, including Defense, Education, National Parks (YOU NAME IT...) will have to fit into the little tiny 8% sliver of the pie.

I hope Nancy Pelosi, every big government liberal and every elected official regardless of label is both sober and listens intently to the next, all-important line...

"Hey Lady!!!  THAT DOG WON'T HUNT!!!"

"HOUSTON- WE DEFINATELY HAVE A PROBLEM"

For purposes of defining a few problems let's consider that in 2010 the federal government needed to have on hand, at current treasury rates, over $62 Trillion dollars to fund its future (currently unfunded) total liabilities.  Guess how much they have on hand?  You guessed it, by definition of the word "unfunded" the answer is $0...Yes, you read it right, ZERO!!!

In 2010 the public debt to GDP figure sat at approximately 62%.  If you throw in all the unfunded liabilities of the entitlement programs, the percentage swells to over 90%, currently.  Consider that the European Union requires its members to keep their public debt to GDP figures at 60% or below to avoid penalty and even a threat to their membership and standing.  Thus, at present, Lithuania could join the European Union but the United States could not.  How embarrassing!!!  I can't believe I am actually using the EU as a benchmark.  What is the world coming to???

At the current rate of U.S. fiscal deterioration it is projected that the public debt to GDP ratio in 2040 will be 303%.  Hmmm..."Houston, WE HAVE A PROBLEM!!!"

Perhaps setting a realistic target to keep our debt at or below 60% of GDP would be something to preliminarily shoot for!!!  (Do you think?)  Keeping our debt at or below this relative threshold would at least give us and the world some confidence that the U.S. was positioned to react to events of genuine crisis should they occur- and they will. 

They always do!!!

FIRST, STOP THE BLEEDING!!!

Additional budgetary mechanisms are critical in the context of a BALANCED BUDGET AMENDMENT which I wholeheartedly support (with the admission that some provision must exist to allow for deficit spending to respond for genuine short seasons of national crisis such as declared war and/or severe economic downturns etc.).

First, we must get serious about "PAY-GO" which policy forces any proposal to be "paid for" before it can be included in legislation.  This should include everything from tax-cuts to the latest, greatest social program.  If the legislature can't "pay as they go" then they can't propose the conservative or liberal item for consideration.  That forces tough decisions today and causes us to continually weigh our priorities in the context of a balanced budget.

Second, the use of "discretionary spending caps" makes much sense.  These caps limit the amount (usually as a percentage of the last budget" that all discretionary spending measures can increase their budgets from year to year.  Admittedly, this and other suggested budgetary constraints are preventative and seem only to treat symptoms rather than the fiscal disease we suffer from but they do absolutely make it difficult for the situation to get much worse which is the first law of triage. 

Stop the bleeding and apply tourniquets, please!!!

Balanced Budget Amendment

Thoughtfully, it becomes necessary to suggest that we are in need, in the worst of ways, a Constitutional Amendment that requires Congress to both pass and balance an annual budget.  Federal lawmakers live in the maddening world of "continuing resolutions" and have parliamentary devices that allow them to shirk their duty as representatives of the people which have been duly elected to do the business of the people.  With perpetual lack of accountability we somehow have tolerated this behavior and many see little problem with the fact that Congress failed the American People in their duty to act according to their constitutionally mandated fiscal responsibilities.

Thus, a balanced budget amendment should be enacted as quickly as possible to force the hand of legislators to do the tough business of governing without respect to upcoming election cycles or other political motivations.  The requirement to pass a budget and to balance a budget annually would put an end to the "continuing resolution" non-sense that has for so long both "kicked the can down the road" and in addition, allows legislators to shirk their most critical responsibilities.  The idea that the people have allowed this atmosphere to exist for as long as they have is not a flattering commentary.  It is time to change the system fundamentally in this regard.

Now, having taken such a stance my only present worry concerning this suggestion is that there are times of real crisis comprising acts of war or perhaps severe economic downturns, to name a few, that constitute "short seasons" in which some deficit spending might (and I stress "MIGHT") be appropriate.  How one would reconcile a need for this flexibility with the constitutional requirement that the budget must be balanced with revenue available without the necessity of borrowing to live with a priority placed on reduction and possible eventual retirement of public debt is a complex and difficult question.  Some mechanism must make such reconciliation possible.  Brighter minds than mine will need to implement such a judicious fix.

In the meantime, a BALANCED BUDGET AMENDMENT requiring at least these items is imperative.

FISCAL REFORM: AN ATTITUDE OF COLLECTIVE SACRIFICE

With the necessity for fiscal reform never more urgent than today there are two concepts that stand paramount in the process.  Those who understand, accept and uphold them are those who will ultimately lead and support a more prosperous future for future generations.  Those who do not align ideologically and philosophically with them will at a minimum resist but worst case place the future of the Nation in jeopardy and in addition risk becoming completely irrelevant since fiscal reform is not only urgent but delay no longer a rational or sane alternative.

From a non-partisan point of view we must re-enthrone the following two ideals if fiscal reform is to happen in time to avert catastrophic fiscal disaster at the National- and therefore the personal level of each citizen.

01.  Citizens must cultivate a "World War II like" commitment to "collective self-sacrifice" with a willingness to ration personal lifestyle, personal security, personal ease and personal indulgence for the good of future generations.  Remember, we as a people have done hard things before and we need to rise to the challenge of overcoming these difficult challenges as an additional great generation.  While the current younger generation cannot take much of the credit for causing the problem we can take responsibility to own the had solutions and must do so if we value keeping this Nation both prosperous and great.  Recent generations since WWII have been far too overindulgent expressing their ultimate will through decades of legislation that have proven far too costly for than a temporary period of time.  Yes, I refer to entitlements that can neither be afforded in their current state nor perpetuated equitably to future generations.  I then am forced to ask, "Why would any American be willing to over-reach in a blatant effort to suck prosperity from future generations to gratify the here and the now?"  Fiscal reform (namely, ENTITLEMENT REFORM) is not just a practical necessity, it is clearly a moral imperative.

02.  Citizens must properly define the word "reform" in the context of fiscal reform.  The word reform means "taking greater personal responsibility" for both the problems and for the solutions.  We must own up to the fact that we can't depend upon government much but the most overarching protection of "life, liberty and the pursuit of happiness".  Greater personal responsibility means less dependence on government and more dependence upon our own thrift and effort.  We must provide, not the government.  Anytime we depend upon government for something we lessen our own independence and our own liberties in the process- by definition.

We can do this...Again, we've done very difficult but urgently necessary things in the past and we have it within us to correct in installments the massive fiscal challenges we face over the next ten or twenty years and beyond.  Are we up for the challenge...I know we are!  Who is in?

Austerity Measures in America...Pay Close Attention

AUSTERITY MEASURES IN AMERICA...???  Pay attention closely... David M. Walker and the David Brooks (NYT Op-Ed) have a few things to remind us about so that we are both guided by sound principles and not guilty of cutting our nose off to spite our faces!!!