It's All About Choices

If you are anything like me you are a little sick of people trying to describe how we got into this current mess. It seems that everyone has their own way of explaining things and most of those explanations leave one or two of the causes out (mostly because the author is in one way or another associated with a cause of the problems). That being said, I think that the following article written by John Mauldin does a fantastic job of summing it all up. He doesn't stop with a great summary of what happened though. He goes on to explain what choices we have to make now and how we will have to go through the full consequence at some point and the longer we avoid it the worse it will get. He is a little more bearish than I am, and you should also note that he is usually more bearish than most. However, he is not an extreme bear and he tries to push and look for the possible good more than others in his camp do. Some might also take offense to his stabs at the Republican spenders who were in office, but I think he is equally critical of the current administration.

Without any more explanation, I highly recommend you take the time to read through this article. It is very long, I understand, but it is important that we all understand the options we face so that in the coming elections, and on a day to day basis, we make the right choices.

An Uncomfortable Choice
As our family grew, we limited the choices our seven kids could make; but as they grew into teenagers, they were given more leeway. Not all of their choices were good. How many times did Dad say, "What were you thinking?" and get a mute reply or a mumbled "I don't know."

Yet how else do you teach them that bad choices have bad consequences? You can lecture, you can be a role model; but in the end you have to let them make their own choices. And a lot of them make a lot of bad choices. After having raised six, with one more teenage son at home, I have come to the conclusion that you just breathe a sigh of relief if they grow up and have avoided fatal, life-altering choices. I am lucky. So far. Knock on a lot of wood.

I have watched good kids from good families make bad choices, and kids with no seeming chance make good choices. But one thing I have observed. Very few teenagers make the hard choice without some outside encouragement or help in understanding the known consequences, from some source. They nearly always opt for the choice that involves the most fun and/or the least immediate pain, and then learn later that they now have to make yet another choice as a consequence of the original one. And thus they grow up. So quickly.

But it's not just teenagers. I am completely capable of making very bad choices as I approach the end of my sixth decade of human experiences and observations. In fact, I have made some rather distressing choices over time. Even in areas where I think I have some expertise I can make appallingly bad choices. Or maybe particularly in those areas, because I have delusions of actually knowing something. In my experience, it takes an expert with a powerful computer to truly foul things up.

Of course, sometimes I get it right. Even I learn, with enough pain. And sometimes I just get lucky. (Although, as my less-than-sainted Dad repeatedly intoned, "The harder I work the luckier I get.")

Each morning is a new day, but it is a new day impacted by all the choices of the previous days and years. Tiffani and I have literally interviewed in depth well over a hundred millionaires, and talked anecdotally with hundreds over the years. I am struck by how their lives, and those of their families, come down to a few choices. Sometimes good choices and sometimes lucky choices. Often, difficult ones. But very few were the easy choice.

What Were We Thinking?
As a culture, the current mix of generations, especially in the US, has made some choices. Choices which, in hindsight, leave the adult in us asking, "What were we thinking?"

In a way, we were like teenagers. We made the easy choice, not thinking of the consequences. We never absorbed the lessons of the Depression from our grandparents. We quickly forgot the sobering malaise of the '70s as the bull market of the '80s and '90s gave us the illusion of wealth and an easy future. Even the crash of Black Friday seemed a mere bump on the path to success, passing so quickly. And as interest rates came down and money became easier, our propensity to acquire things took over.

And then something really bad happened. Our homes started to rise in value and we learned through new methods of financial engineering that we could borrow against what seemed like their ever-rising value, to finance consumption today.

We became Blimpie from the Popeye cartoons of our youth: "I will gladly repay you Tuesday for a hamburger today."

Not for us the lay-away programs of our parents, patiently paying something each week or month until the desired object could be taken home. Come to think of it, I am not sure if my kids (15 through 32) have ever even heard of a lay-away program, not with credit cards so easy to obtain. Next family brunch, I will explain this quaint concept. (Interestingly, I heard about a revival of the concept on CNBC radio, coming back from dropping Trey off at school this morning. Everything old is new again.)

As a banking system, we made choices. We created all sorts of readily available credit, and packaged it in convenient, irresistible AAA-rated securities and sold them to a gullible world. We created liar loans, no-money-down loans, and no-documentation loans and expected them to act the same way that mortgages had in the past. What were the rating agencies thinking? Where were the adults supervising the sand box?

(Oh, wait a minute. That's the same group of regulators who now want more power and money.)

It is not as if all this was done in some back alley by seedy-looking characters. This was done on TV and in books and advertisements. I remember the first time I saw an ad telling me to call this number to borrow up to 125% of the value of my home, and wondering how this could be a good idea.

Turns out it can be a great idea for the salesmen, if they can package those loans into securities and sell them to foreigners, with everyone making large commissions on the way. The choice was to make a lot of money with no downside consequences to yourself. What teenager could say no?

Greenspan keeping rates low aided and abetted that process. Starting two wars and pushing through a massive health-care package, along with no spending control from the Republican Party, ran up the fiscal deficits.

Allowing credit default swaps to trade without an exchange or regulations. A culture that viscerally believed that the McMansions they were buying were an investment and not really debt. Yes, we were adolescents at the party to end all parties.

Not to mention an investment industry that tells their clients that stocks earn 8% a year real returns (the report I mentioned at the beginning goes into detail about this). Even as stocks have gone nowhere for ten years, we largely believe (or at least hope) that the latest trend is just the beginning of the next bull market.

It was not that there were no warnings. There were many, including from your humble analyst, who wrote about the coming train wreck that we are now trying to clean up. But those warnings were ignored.

Actually, ignored is a nice way to put it. Derision. Scorn. Laughter. And worse, dismissal as a non-serious perpetual perma-bear. My corner of the investment-writing world takes a very thick skin.

The good times had lasted so long, how could the trend not be correct? It is human nature to believe the current trend, especially a favorable one that helps us, will continue forever.

And just like a teenager who doesn't think about the consequences of the current fun, we paid no attention. We hadn't experienced the hard lessons of our elders, who learned them in the depths of the Depression. This time it was different. We were smarter and wouldn't make those mistakes. Didn't we have the research of Bernanke and others, telling us what to avoid?

In millions of different ways, we all partied on. It wasn't exclusively a liberal or a conservative, a rich or apoor, a male or a female addiction. We all borrowed and spent. We did it as individuals, and we did it as cities and states and countries.

We ran up unfunded pension deficits at many local and state funds, to the tune of several trillion dollars and rising. We have a massive, tens of trillions of dollars, bill coming due for Social Security and Medicare, starting in the next 5-7 years, that makes the current crisis pale in comparison. We now seemingly want to add to this by passing even more spending programs that will only make the hole deeper.

Frugality is the New Normal
I could go on and on, but I think you get the point. The time for good choices was a decade ago. It would have been more difficult at the time, so that is not what we did. And now we wake up and are faced with a set of choices, none of them good.

Reality is staring back in the mirror at the American consumer, and especially the Boomer generation. The psyche of the American consumer has been permanently seared. We are watching savings beginning to rise and consumer spending patterns change for the first time in generations. Even as the authorities try to prod consumers back into old habits, they are not responding. Borrowing and credit are actually falling. Banks, for whatever reason, now want borrowers to actually be able to pay them back. Go figure.

Frugality is the new normal. We are resetting the underpinnings of a consumer-driven society to a new level. It will require a major overhaul of our economy. The normal drivers of growth - consumer spending, business investment, and exports - are all weak, and it is only because of massive government spending that the second quarter was not as bad as the two previous quarters and that the coming quarter will be positive.

But what then? How long can we continue with 10%-plus GDP deficits? We have an economy that is in a Statistical Recovery, fueled by government largesse. In the real world, we are watching unemployment rise, and it is likely to do so through the middle of next year. Deflation is in the air. Capacity utilization is near all-time lows. Housing numbers are only bouncing because of the government program of large tax credits for first-time home buyers and lower home prices. It will be years before construction is significant.

We will be faced with a choice this fall and early next year. If you take away the government spending, the potential for falling back into a recession is quite high, given the underlying weakness in the economy. A few hundred billion for increased and extended unemployment benefits will not be enough to stem the tide. There will be a groundswell for yet another stimulus package. Another 10% of GDP deficit is quite likely for next year.

As I (and Woody Brock) have made very clear in these e-letters, deficits that are higher than nominal GDP cannot continue without dire consequences. Good friend Richard Russell writes today:

"The US national debt is now over $11 trillion dollars. The interest on our national debt is now $340 billion. This is about at 3.04% rate of interest. In ten years the Obama administration admits that they will add $9 trillion to the national debt. That would take it to $20 trillion. Let's say that by some miracle the interest on the national debt in 10 years will still be 3.09%. That would mean that the interest on the national debt would be $618 billion a year or over one billion a day. No nation can hold up in the face of those kinds of expenses. Either the dollar would collapse or interest rates would go through the roof."

That would be at least 30% of the national budget. How would your household do, paying that much as interest? How can you operate when interest payments are 30% or more of the budget? Do you borrow to pay the interest? And the Obama administration openly admits to deficits of over a trillion a year for the next ten years, under very rosy growth assumptions. Anyone outside of Washington and rosy-eyed economists think we will grow 4% next year? I am not seeing many hands go up.

And Then We Face the Real Problem
If we do not maintain high deficits, it is likely we fall back into recession. Yet if we do not control spending, we risk running up a debt that becomes very difficult to finance by conventional means. Monetizing the debt can only work for a few trillion here or there. At some point, the bond market will simply fall apart. And it could happen quickly. Think back to how fast things fell apart in the summer of 2007. When perception of the potential for inflation changes, it changes things fast.

The problem is that we are now in a very deflationary world. Deleveraging, too much capacity, high and rising unemployment, falling real incomes, and more are all the classic pieces of the formula for deflation.

Let's look at what my friend Nouriel Roubini recently wrote. I think he hit the nail on the head:

"A combination of higher official indebtedness and monetization has the potential to yield the worst of all worlds, pushing up long-term rates and generating increased inflation expectations before a convincing return to growth takes hold. An early return to higher long-term rates will crowd out private demand, as lending rates on mortgages and personal and corporate loans rise too. It is unlikely that actual inflation will emerge this year or even next, but inflation expectations as reflected in long-term interest rates could well be rising later in 2010. This would represent a serious threat to economic recovery, which is predicated on the idea that the actual borrowing rates that individuals and businesses pay will remain low for an extended period.

"Yet the alternative - the early withdrawal of the stimulus drug that governments have been dispensing so freely - is even more serious. The present administration believes that deflation is a worse threat than inflation. They are right to think that. Trying to rebuild public finances at a deflationary moment - a time when unemployment is rising, and private demand is still contracting - could be catastrophic, turning recovery into renewed recession."

There are no good choices. Nouriel, optimist that he is (note sarcasm), suggests that there is a possibility that the government can manage expectations by showing a clear path to fiscal responsibility that can be believed. And thus the bond markets do not force rates higher, thereby thwarting recovery.

And technically he is right. If there were adults supervising the party, it might be possible. But there are not. The teenagers are in control. Instead of fiscal discipline, we are hearing increased demands for more spending. Please note that the very rosy future-deficit assumptions assume the end of the Bush tax cuts at the close of 2010. But raising taxes back to the level of 2000 does not make the projected future budget deficits go away.

I mean, seriously, does anyone think Pelosi or Reid are going to lead us to fiscal constraint? Obama talks a good game, but he has not offered a serious deficit-reduction proposal, other than further tax increases. And by serious, I mean we need cuts on the order of several hundred billion dollars. The Republicans lost their way and their power (deservedly, in my opinion). Just as at the high school prom, the very few adults are being ignored.

It is the proverbial rock and the hard place. Cut the stimulus too soon and we slide back into a deeper recession. Let the budget spin out of control for a few years and we will see inflation return, with higher rates and a recession. Raise taxes by 1.5-2% of GDP in 2010 and we are shoved back into recession.

There are no good choices. If we do the right thing and cut the deficit, it means very hard choices. Can we keep our commitments to two wars and our massive defense budget? Medicare and Social Security reform are not painless. Education? Research? The "stimulus"? But cutting the deficit by hundreds of billions while raising taxes by even more than is already in the works, is not the formula for sustainable recovery.

Have we grown up? Are there adults in the room? Sadly, I don't think there are enough. We are still a nation of teenagers. We will do whatever we can to avoid the pain today. We will kick the can down the road, hoping for a miracle. Will we grow up? Yes, but the lessons learned will be hard.

There are no statistical signs of an impending recession. We are not going to get an inverted yield curve this time, which made it relatively easy for me to predict recessions in 2000 and 2006. We are in a deflationary, deleveraging world. A far different world than in the past.

I see little room for us to avoid a double-dip recession. It would take the skill and speed of former Cowboys running back Tony Dorsett hitting a very small hole in the line to break us into the open. I see no running back in our national leadership with such ability. As I have outlined above, recession could be triggered again in any number of very different economic environments. It all depends on the choices we make. But the choices lead to the same consequences, at least in my opinion.

As I wrote in August 2000 and August 2006, I write again in August 2009: there is a recession in our future. I was early both of those times and I am early now, maybe two years early, though I doubt it. And as I pointed out both of those last times, the stock market drops an average of over 40% during a recession. When I was on Kudlow in October of 2006, I was given a hard time about my recession call and prediction of a bear market. I think it was John Rutherford who dismissed my bearish vision. And he was right for the next three quarters, as the market proceeded to rise another 20%. I looked foolish to many, but I maintained my views.

You have choices. You can buy and hold (buy and hope?) or you can develop a strategic alternative. The next bear market, as I wrote in 2003 and in Bull's Eye Investing, will likely be the bottom. (It takes at least three of them to really take us to the bottom.) But the next one will change perceptions for a long time. Valuations will drop. Savings will rise even more. And a generation will grow up. The adults will return. Chastened. Scarred. Shaken. But we will Muddle Through. That is what we do. Even my teenagers.

Choose wisely.

One Aggravated Rant to Another

I was glacing through the headlines on CNBC today and I saw this headline: "Selective Amnesia on Deficit Spending." I have enjoyed a couple of the articles written by the author, Julie Roginsky, in the past and so I decided to read it. Unlike her other articles, which always have a little bit of an attack on Republicans in office, I found this article to just be one big rant against...well, I am not even sure. She does target Republicans, Bush, anti-healthcare reformers, and I think anyone who is against what the President is doing. I usually enjoy reading articles from those with opposing opinions, but only if they hold logical arguments.

So, here are some of the points of the article and my comments regarding those points.

"The reasons for the current shortfall are relatively straightforward. Over the eight year prior to Obama's inauguration, the United States amassed the largest budget deficits in modern history. Two wars, tax cuts which were never paid for and the largest economic crisis in almost a century all contributed to a $1.3 trillion deficit by the end of 2008. The deep recession, plunging tax receipts and measures undertaken to spur the recovery have led to even greater deficit projections since the Obama inauguration. Many of the same people decrying the current budget deficit are the same people who not only cheerled the annihilation of the Clinton budget surplus but also cared not at all about how to pay for two wars while providing budget busting tax cuts. House GOP Leader John boehner, who has apparently come down with a severe case of amnesia when it comes to fiscal responsibility, criticized the majority for spending money with 'reckless abandon', despite being one of the largest enablers of deficit spending during the Bush years."

Talk about selective amnesia. It's fantastic how easy it is to condone all of the spending and deficit growth for this current recession and condemn the efforts by the previous administration to get us out of the previous recession. Yes, there was a recession back in 2001 for those that forgot. As far as those tax cuts are concerned, how many of those opposed to all things Bush enjoyed those savings? Well if you didn't like that tax savings, guess what, you got the change you were looking for. In order to pay for the current recession (which if we are going to place blame then let's do it fairly and blame it on pretty much everyone who was overleveraged and in debt, not forgetting all those on both sides of the aisle who encouraged and allowed it, they couldn't afford: States, Companies, Individuals and those that packaged that debt and sold it), and get the deficit down to "acceptable" levels tax hikes are going to happen, which Roginsky does mention a bit later. Those tax hikes, by the way, are not just going to happen to the uber wealthy. They will be passed on to pretty much everyone. I am not saying that the spending that was inacted under the guise of getting us out of this recession is all bad, and I am not saying that the spending to get out of the previously forgotten recession was all good. I am just saying let's remember all the facts and take into account how everyone has benefited or not benefited.

"Boehner's party, which tried to privatize Social Security as recently as four years ago, has also become staunchly defensive of the status quo when it cmes to what it claims is protection of senior entitlements. But as any honest analysis of the long-term federal budget will show, the growth in health care entitlement spending - and Medicare specifically - is the largest budget buster there is. The same deficit hawks who oppose serious health care reform are simply just contributing to the deficits they claim are such a huge problem."

Wow, I am not even sure where to begin this thing is so full of odd statements and outright avoidance of the real issue. I guess we can take it one sentence at a time. First, privatizing Social Security was one option to help keep some form of income going to seniors. Just like there is a problem with Medicare now, Social Security can't last in its current form. It is another entitlement program that will have to eventually be reformed. Privatising it was an option being discussed which has support from people on both sides though was primarily a Republican proposal. Similar to how a public health care option is being discussed now. It is one option being discussed. Fortunately many economists have come out denouncing the idea as one that will not solve the real problem. What's this whole bit about honest analysis? Who is saying that health care costs are not the largest part of the budget deficit? I thought the whole argument form "Boehner's party" was that any reform should not increase the budget. Wasn't that also the President's request? Didn't he say on a few occasions that he would not sign a Bill that was shown to increase the deficit? What on earth is even the point of this sentence? In the final sentence is Roginsky saying that the current proposals are the only serious ones? And if so, isn't this sentence...well...I am not even sure what it is. She is accusing the "Boehner party" of opposing the "serious reform" (which has been shown to increase the deficit) because they didn't want the deficit to increase. Well, ok. I can't speak for others who are registered Republicans, but I am personally for reform. I want there to be change, not more of the same ideas and I really take issue with the media portraying every Republican as ignorantly opposed to reform.

I am now going to skip her next three paragraphs, not because it think they are well written or don't have plenty of comments, but because I really don't want this to be such a long post. I recommend you read her article if you are dying to see what she says in those sentences. So, on to her concluding paragraph.

"At some point in the not too distant future, some president will have to look Americans in the eye and tell them that massive tax increases are needed and benefits must be drastically cut or eradicated because politicians in 2009 failed to enact reform that would have gotten our fiscal house in order. At that point, the naysayers of today, if they are ideologically consistent, with be forced to vote for politically suicidal policies in order to get our deficit under control. More likely, most of them will continue playing politics, embrace the selective amnesia that Leader Boehner and his cohorts have come to exemplify so well, and cliam that unsustainable budget deficits are really not so unsusstainable after all."

Well ok, we'll break this one down one sentence at a time too. Couldn't agree more with the first sentence, but not solely for the reason stated at the end of the sentence. Eventually reform will have to be enacted. Honestly I can't stand the politicking that has gone on from both sides on this issue. Instead of having a debate regarding all possible solutions (There are so many ideas out there on how to fix this problem that come from people who represent all backgrounds), we are spending time accusing each other of hating our kids and old people. Roginsky epitomizes those on the left who say that if Republicans would just offer a solution too then they would debate it and then when they are given suggestions they reject every last one of them because they don't stick to what they want. Some of those on the Right are striclty sticking to opposing all things on the Left or Obama. I 100% agree that we need to quite the politicking. As for that last sentence, I totally don't understand the anger in this last sentence. We've already talked about the "selective amnesia" that seems to be going around amongst everyone in the media and politics. And again, who is saying that the current deficit is sustainable? Who is saying that no reform is necessary?

I really dislike these kinds of articles. It is exactly what a majority of the arguments on the White House's website under the reality check section do. They avoid the real issue by strictly attacking those that outright oppose all reform, then they conveniently avoid talking about the significant differences between what the President requested reform do and what the legislature has proposed. They insenuate that all reform ideas are good ones and anyone opposed to any of those ideas is opposed to all reform. That couldn't be further from the truth and it annoys me that accusations are flying about who is just playing politics when those very accusations are the lowest form of politicking in my mind.

And Another One

I know there have been a lot of posts lately about health care, but this topic in particular really impacts all of us, and whatever is put into place by our current legislature will be very difficult (read politically impossible) to rectify if it is messed up.

I think that way too few out there are able to clearly state the problems as I see them with Health Care. That is why when I read this great article (though perhaps a bit too long) I thought: "This guy has said it better than I have or could have."

Here is the article.

If you want the cliff notes version keep reading, but as with any cliff notes, you are missing the real story.

There are many problems with Health Care in America. Few if any of which are being addressed by the current "debate" on capital hill. In fact, the methods currently being discussed really perpetuate the problem. Health Care professionals are disconnected from their patients (they are forced to be in many respects). Health Care professionals in fact are more clients of the insurance companies than the patients are of the medical profession (Did you know that for every 2 doctors there is one insurance agent?). This lack of connection between doctors (again, despite the doctors and other professionals best efforts) and patients quality of care is way down. While I don't agree with him spouting this as if it were the norm and I especially don't think doctors concsiously think like Medicare is the client, I do know that plenty of people out there have similar experiences:

"What amazed me most during five weeks in the ICU with my dad was the survival of paper and pen for medical instructions and histories. In that time, Dad was twice taken for surgical procedures intended for other patients (fortunately interrupted both times by our intervention). My dry cleaner uses a more elaborate system to track shirts than this hospital used to track treatment.

Not every hospital relies on paper-based orders and charts, but most still do. Why has adoption of clinical information technology been so slow? Companies invest in IT to reduce their costs, reduce mistakes (itself a form of cost-saving), and improve customer service. Better information technology would have improved my father’s experience in the ICU—and possibly his chances of survival.

But my father was not the customer; Medicare was. And although Medicare has experimented with new reimbursement approaches to drive better results, no centralized reimbursement system can be supple enough to address the many variables affecting the patient experience. Certainly, Medicare wasn’t paying for the quality of service during my dad’s hospital stay. And it wasn’t really paying for the quality of his care, either; indeed, because my dad got sepsis in the hospital, and had to spend weeks there before his death, the hospital was able to charge a lot more for his care than if it had successfully treated his pneumonia and sent him home in days."

The way to get rid of this disconnect is bringing insurance back to what it should be; something to cover the costs of emergencies. He also points out something very interesting, the debate has changed the meaning of health care to be something synonymous with health insurance. Have you noticed how when individual members of the senate, etc. stand up to talk they talk about all those who don't have health care? What do you mean they don't have health care? The problem is they don't have insurance to cover the costs of their regular and emergency care. In what other area of our lives do we expect our insurance to cover the costs of routine things? Home insurance doesn't pay our electic bill and car insurance doesn't pay for gas.

The author also feels, and I personally just haven't done the research but find his arguments compelling, that hospitals are taking a huge chunk of the costs pie. This is part of his argument:

"Consider the oft-quoted “statistic” that emergency-room care is the most expensive form of treatment. Has anyone who believes this ever actually been to an emergency room? My sister is an emergency-medicine physician; unlike most other specialists, ER docs usually work on scheduled shifts and are paid fixed salaries that place them in the lower ranks of physician compensation. The doctors and other workers are hardly underemployed: typically, ERs are unbelievably crowded. They have access to the facilities and equipment of the entire hospital, but require very few dedicated resources of their own. They benefit from the group buying power of the entire institution. No expensive art decorates the walls, and the waiting rooms resemble train-station waiting areas. So what exactly makes an ER more expensive than other forms of treatment?

Perhaps it’s the accounting. Since charity care, which is often performed in the ER, is one justification for hospitals’ protected place in law and regulation, it’s in hospitals’ interest to shift costs from overhead and other parts of the hospital to the ER, so that the costs of charity care—the public service that hospitals are providing—will appear to be high. Hospitals certainly lose money on their ERs; after all, many of their customers pay nothing. But to argue that ERs are costly compared with other treatment options, hospitals need to claim expenses well beyond the marginal (or incremental) cost of serving ER patients.

In a recent IRS survey of almost 500 nonprofit hospitals, nearly 60 percent reported providing charity care equal to less than 5 percent of their total revenue, and about 20 percent reported providing less than 2 percent. Analyzing data from the American Hospital Directory, The Wall Street Journal found that the 50 largest nonprofit hospitals or hospital systems made a combined “net income” (that is, profit) of $4.27 billion in 2006, nearly eight times their profits five years earlier."

He then goes on to debate the validity of how much of the costs of health care is made up from the new technology. This is another area where I would disagree with him to an extent. I don't think technology, as some suggest, makes up the majority of the rise in costs. He argues that he buys other innovative and new technologies all the time and they don't rise in costs, they lower costs. This argument doesn't take into account the scarcity of the technology available. It come to supply and demand and honestly the supply isn't great and demand has risen and will continue to.

His summary of the problems:

"A wasteful insurance system; distorted incentives; a bias toward treatment; moral hazard; hidden costs and a lack of transparency; curbed competition; service to the wrong customer. These are the problems at the foundation of our health-care system, resulting in a slow rot and requiring more and more money just to keep the system from collapsing.

How would the health-care reform that’s now taking shape solve these core problems? The Obama administration and Congress are still working out the details, but it looks like this generation of “comprehensive” reform will not address the underlying issues, any more than previous efforts did. Instead it will put yet more patches on the walls of an edifice that is fundamentally unsound—and then build that edifice higher."

Then his solution is a radical one. He suggests that we all contribute, paying a fixed premium rate dependent on age, to a catastrophic insurance program. By catastrophic he refers to it costing more than $50,000 (I would tend to think that too high and I also believe he sets it that high based on current costs). The rest of our care would be paid for out of income and savings. He suggests that everyone be forced to contribute to an HSA account (I am not a big fan of the forced part but I highly recommend that everyone get an HSA if you can). That HSA account would pay for the care that is more than mundane and less than catastrophic. The mundane care would be paid for by you out of pocket.

It is a radical solution and radical solutions tend to have bad up front results, but this kind of solution does actually address what the problems are.

Another Health Care Post

I know that most are probably rather sick of hearing the debates regarding health care, and maybe that "sickness" is hurting the debate.

It seems that lately all sides of the debate are spitting out all kinds of falsehoods. Some of those who oppose reform in general have gone as far as saying that the proposed plans will allow the government to get rid of old people (which obviously the government has been wanting to do for some time....?). Some who are for reform say that the opposition are just using scare tactics and lies and need to be reported (those stupid, gun totin', religion clinging, change hating fools), then they spout out statistics and numbers which are completely off the wall and false (I'm sure Surgeons would love to make $50,000 on a surgery as Obama indicated they do - too bad the medical board has come out and stated that the most a surgeon makes on a single surgery is well below that, in fact the citation from Obama is that they make up to $50,000 on an amputation when in fact the highest fee is less that $800). There are two things that really bother me about this extreme side of the debate. The first is, do they honestly believe in what they are saying? If so it scares me because that must mean they are extremely ignorant. If not, then what are their real intentions for spouting falsehoods? I know there are many answers to that question, but let's just leave it open.

Second, these extremes are distracting majorly from the real debate of health care. So much so that I recently read on Wikipedia the "definition" of health care reform and where it goes through the U.S. debates it states the extremes and divides those extremes strictly by party line. Meaning, it insenuates that all Republicans believe that reform is the beginning of the decline of our country into hellish communism. All Democrats believe the Republicans are liars and that the only way to "save" the country is to have a public health care insurance option.

I don't know about you but I don't fall into either of those categories and neither do friends of mine who fall on both sides of the aisle. I only hope that everyone researching into the debate will ignore those extremes and, when voicing their opinion to their representatives, will stick to the real facts up for debate.

I have seen some good articles that do just that (avoid ad hominem attacks and outrageous lies) and I wanted to pass them on to anyone reading the blog.

Distractions in the Debate

The Public Option Doesn't Work

Driving the Wedge

Cutting Medicare Costs (Why can't we focus on these ideas? I'm not saying whether this is a good or bad idea, I'm just saying, why not focus on this kind of reform?)

I've read other good articles that debate specifics, but if anyone would comment with something they have read I would appreciate it. You also probably noticed that I only posted articles that I agree with, so it is a biased list, but hey, it's my blog. I am open to opposing articles that stick to the real debate.

A Must Read!

So, it is a bit long, but there is a must read if you are at all interested in the current health care debate. This is something that was written by a couple of doctors in 1994 after the last attempt at social medicine was made, but I hadn't seen it until now. One of those Doctors is currently a Dean at Harvard.

I certainly hope that instead of trying to come up with ways to avoid the other side of the debate (I know its a bit biased due to source but see the article on Fox News about this) the senators who are coming back "home" will listen to their constituents and do their job - that is listen to their constituents and vote in the way that the majority of them want them to vote.

Here is the article. It loads slowly so be patient.

I also hope that the senators read the troubles that France is having with their social plan right now.

Gallup World Poll

A few years ago I read this article from Gallup Reserch which talked about a new world poll they planned on conducting every year from then on out. They first talk about how difficult it was to conduct a survey of everyone in the world and still get somewhat reliable results. If you think about all of the different variables like language and culture, you can see how hard it would be to ask a question of someone in California and then ask a question that had the same meaning both linguistically and culturally for someone in India. Apparently they did figure out how to do it and conducted their survey and had some interesting results.

I was re-reading the poll again the other day and had not remembered until then that, according to Gallup's research, the primary thing that everyone in the world wants is a good job. They want to be able to contribute to society and they want the benefits that come from having a job, like money, prestige, a sense of belonging, etc. Of course, if you stopped reading the research report there you might think that all Governments should do is focus on making sure everyone has a job and they would all be happy. Unfortunately it seems that our current leaders didn't even get that far in the report.

If you keep reading their report they talk about how, if countries, cities, and towns want to succeed they would create and encourage an environment that would entice those that the report calls Stars. These stars are the job creators. They are the idea people. They are the ones who have a vision and plans to change the world, and they will follow through on those plans. If it were not for these stars Gallup theorizes that the economists who predicted the decline of the U.S. in comparison with other countries would have been right. Those economists were off in their prediction of where our GDP would be at by trillions. How could they be so far off? Because they couldn't predict companies like Google, Walmart, etc. getting as big as they are. They discounted the possibility of Stars being created in the U.S. So what can governments and leaders do to attract and encourage stars (what Gallup refers to as Brain Gain) to to move to their countries/cities, etc.? Economists are now saying that the U.S. will fall second to China by 2040. What can we do in the U.S. to ensure that doesn't happen?

According to Gallup, and I would agree with most points, those who want brain gain need to have 7 things in place. I really agree with 6 of those items being something over which the government has or can have major influence. Those 6 things are:

Law and Order: Primarily they need to protect each individuals rights and provide safety.

Food and Shelter: Back in 2006 the U.S. had 17% of respondents say they didn't have adaquate food throughout the whole year.

Work: I love the way that Gallup writes this one - "While food and shelter and law and order are basic needs and are associated with self-preservation, work is where well-being turns the corner. This is where positive emotions that lead to creativity and openness are built. Good work facilitates a higher standard of living, higher potential for health, and higher well-being. Work is crucial to every adult human because work holds within it the soul of the relationship of one citizen to one government and one country."

Health: "Healthy people create more vibrant communities and more productive workplaces, which contribute to productivity, brain gain, and quality GDP growth." I would ask our currently leaders if what they are drafting currently would have a provable affect on the actual health of the people. If not then they need to go back to the drawing boards. I personally think that there is a need for health care reform, but I don't think the publicized government discussions are anything close to what will truly deliver a healthier population.

Well-Being: "While health domain reports perceived physical and mental helath, well-being reports the presence of suffering or thriving, misery or inspiration, feeling controlled or feeling independent. This 'soft' issue affects a populations ability to innovate, improve, and invent, because it reports the all-important presence of hope." It is probably my own opinion, but the current government programs have placed a cap on that hope. If you are too successful the government will put a stop to it.

Engaged Citizens: It starts with the leaders. It is a measurement of charity and the willingness to help those in need. From personal experience and in looking at the numbers our nation is doing a fantastic job in this area. We can always do better, but quite easily do worse. The government needs to encourage this and then stay out of the way.

A good leader will encourage and help push their citizens towards these areas. They will never try to fix the problem, according to Gallup. You can't fix the problem, as in make people have a sense of well-being or be engaged citizens. That is the area where I think our current leaders are going wrong. They are trying to Fix the problem rather than encourage people and businesses. As a people, apparently these are the things we want however and these are the things that will help our society grow and remain the top in the world.

Here is a link to where you can get the full report, which is an interesting read.