Standing on the Precipice

The election is over.  Now it's time to get to work to do the people's business.  First and foremost there is the fiscal cliff.  For those who have forgotten, let me describe briefly how we got to this point.  The fiscal cliff is a result of Congressional wrangling.  Back in 2011, the House Republican majority held the nation's credit rating hostage by refusing to raise the debt ceiling without major cuts in certain Federal programs.  The immediate crisis was averted by an agreement to set up a "super committee" that would be charged with reaching a settlement on issues of debt, taxes and deficits by the end of the year.  To the surprise of exactly no one, the committee was a dismal failure.  Because of the 2012 election, Congress and the President decided to kick the can down the road creating the fiscal cliff we face now.  The idea was that with the election over, the legislative and executive branches could tone down the rhetoric and actually accomplish something.  How that will work out remains to be seen.  In the mean time, I have the answers to the problems.  It's not necessary to thank me, I do it for love of country.

The Revenue Side

The Republicans will not tolerate increases in tax rates.  The President and the Democrats demand that the top income earners pay more.  If that doesn't sound like a recipe for success, it's because it isn't.  Yet with all the seeming rock and a hard place posturing, there have been some little cracks of light.  Boehner says he might accept revenue enhancers as long as the rates don't change and the President says he's not wedded to every step of his plan.  It's not much, but it is something.

At the end of the day, if all deductions for all tax payers are eliminated, there will not be enough money saved to make a significant dent in the debt.  Only an actual tax increase will do that.  I've been surprised at how many people don't grip the concept of "marginal rate."  What the President is proposing is an increase in the marginal rate.  So if you are making up to $250,000 in W-2 earnings, you will not pay more.  If you make more than $250,000 in W-2 earnings, the amount above $250,000 will be taxed at 39.6%, the same as during the Clinton years, only no oral sex.  That means that 98% of taxpayers will see no increase in their rates.  As for the claim that small businesses will be hamstrung, 97% of all small businesses don't pass the $250,000 mark either.  That remaining 3% includes hedge funds and financial firms that employ less than 50 people, not really small businesses.   During the Reagan Administration, the top marginal rate was 50%.  During the Eisenhower and Kennedy Administrations, the top marginal rate went from 91% to 70%.  So stop weeping for the top 2%, they've gotten richer and richer and everyone else has gotten poorer and poorer.

During the campaign, Romney and Ryan said they would close loop holes to raise revenue, but refused to disclose which loop holes they intended to close.  Here are my top picks.  Oil companies receive huge tax breaks through the tax code.  Enough already.  They don't need the help.  We have subsidized the production of ethanol, a fuel that uses more energy to be produced than it creates.  The double whammy is that the tax subsidy rewards agribusiness for diverting its corn crops from food to bad fuel.  This is not only expensive, it's counter productive.  The United States should pocket most of the saving and divert the rest to basic research into the development of alternative fuels.  

All tax breaks for corporate investment off-shore should be terminated.  Let the government keep 50% and spend the other 50% to help finance domestic manufacturing investment.  Other countries have a Value Added Tax (VAT) instead of a corporate income tax.  When their companies export, they are reimbursed for the VAT making their products cheaper when they enter other nations, like, for example, the U.S.  The VAT is a regressive tax, and I don't recommend it for us, but we have to do something to compensate for the unfair advantage granted to vendors from VAT countries.  Congressman Bill Pascrell (D-NJ) and Chuck Schumer (D-NY) have been working on what they call a border equity tax that adds back the VAT from other markets when their products land here, and grants tax relief equal to the VAT charged in receiving countries when our companies ship there.  This sounds like a solution, but it violates the rules of  the WTO and could spark tariff/trade wars with some trading "partners" like, say, China.  So the concept needs some more work.

Mitt Romney's late introduction of an amount of deductions allowed, first he said $15K, then $17K and then $25K, has some merit.  I think it works well for home mortgage interest deductions, but not so well for charitable giving.  I think the lower rate for capital gains should be graduated, so up to the first "x" amount of capital gains would be taxed at 15%, anything over that would be taxed as regular income.  Republicans, hey, there may be one who reads this, before you get your panties in a knot, Ronald Reagan's 1986 bipartisan tax reform plan eliminated the lower rate for capital gains altogether, so you're allowed to support the idea.  By allowing some level of capital gains, we would protect the earnings of those middle income Americans whose retirement consists of some capital gains.

The Spending Side

I'm not even going to dignify discussion of cuts to the social safety net programs such as food stamps, unemployment benefits etc.  These make up about 10% of the Federal budget and, thus, should be left alone.  Let's talk about the big three.

Medicare

Fixing Medicare isn't that hard.  It does require political courage.  I'll wait while you laugh about the slim chance that we'd ever see any of that from Congress.  Are you done?  OK, let's move on.  As the private insurance market and simple common sense demonstrate, the costs of medical care are highest for the oldest, sickest people.  This is why insurance companies eliminate prior existing conditions whenever they can, of course with Obamacare they can't do that anymore, and why there are lifetime caps on benefits, oh, and of course with Obamacare they can't do that anymore either.  Medicare covers only the most costly population, old farts like me.  If Medicare could tap into a healthy cohort to share the costs, its income would go up and its costs would decline.  For the last few years we have heard the Republicans and the Tea Party types who have gained control of the Republican Party whine about the evils of government sponsored healthcare.  We all remember the sign above.  If you were to ask most Medicare beneficiaries if they are satisfied with their coverage, they'd say that they are.  Even the Tea Party types like it, as shown in the numerous signs and "intellectual pygmy on the street" interview comments at Tea Party rallies.  Medicare isn't perfect and people have problems with it.  But they never have the problem of their insurer trying to throw them off the plan because Medicare is not for profit.  Personally, I love my Medicare and thanks to Obmacare routine screenings like mammograms, prostate exams, annual physicals, PAP smears and the like are now covered, and the Part D Drug Plan donut hole has been reduced by 25% this year, and will be reduced for each of the next three years until it is eliminated.  

Remember the $716 billion that Romney and Ryan said that President Obama had taken from Medicare?  Well they took the money from private insurance companies who were getting subsidies to offset the costs of Medicare Advantage plans and from hospitals that were overcharging Medicare.  Advantage plans were part of the Republican program passed in the Bush Administration in an attempt to a) inject private market competition into the senior health coverage business and b) lure as many seniors as possible away from traditional Medicare in an attempt to drive it out of business.  I'll bet you can guess how that worked out.  Even with the subsidies, the private market couldn't keep costs in check so now the President has decided that these plans will have to sink or swim without government help.  Part D drug coverage was another genius move by the GOP and Bush.  The program was instituted but not paid for from the budget.  Rather, it was financed by borrowing more money.  And I thought Republicans were against increasing the debt.  It was a huge giveaway to the big drug companies.  Just to make their profits higher, Medicare was prevented from negotiating for better prices.  So some of that $716 billion will close the donut hole that increases the costs of drugs for many Medicare beneficiaries, and not even the sickest ones.  I'm currently in the donut hole and I don't use a lot of prescriptions.  Virtually all of those I do use are generics.

Back to the topic at hand.  If Medicare were opened to everyone at any age, the demographics of the beneficiaries would become much more advantageous and the plan would be financed forever.  Another advantage would be that employers would no longer be in the healthcare business.  I have spoken to numerous small and mid-sized business owners and the one thing upon which they all agree is that they don't want to be in the healthcare business.  Medicare for everyone would accomplish that goal and lower their costs of doing business, making them more competitive in the international market place.

Defense Spending

President Eisenhower

Our defense department is still designed to fight the Cold War.  We have bases all over the world, whether we need them or not.  For example, why do we still have huge bases in Europe?  Germany, France, Italy, the UK etc. have their own sophisticated military establishments.  Let's pack up all the stuff in Europe and come home.  We could save billions of dollars just by doing that alone.  Why do we have a military presence in Japan?  End the World War II prohibition on Japan developing a full military presence, and let them handle it themselves.  More billions would be saved.  Because of North Korea, we still need a presence in South Korea, but that presence should be reduced and South Korea should assume additional responsibility for its own military needs.  That's more billions.

We need to stop building weapons systems that the military doesn't want or need.  Technology has proven to be very effective.  Things like drones and cyber weapons have proven to be very effective  and they risk fewer American lives and cost a lot less.  We should always remember the warning of President Dwight Eisenhower, "In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex."

Social Security

Who pays more for Social Security, someone who earns $106K per year or someone who earns $200K per year?  The answer is that they pay the same amount.  Social Security taxes are taken out  of W-2 earnings up to a maximum of $106K.  Someone making $35K per year pays a higher percentage of his/her income for Social Security than someone earning $200K.  Does that seem fair to you?  It doesn't seem so fair to me.  To save Social Security, which, by the way, is in no danger until 2035, we need to increase its income.  The way to do that is to lift the cap.  The current system burdens lower income earners more than higher income earners.  Very simple don't you agree?  There are a couple of myths being batted around about Social Security's "problem."  One of the most  widely espoused is that when Social Security was instituted, the average life expectancy was 63 years old, while today it's something like 70  That is true as far as it goes, but it doesn't go far enough.  Back in the day, the average life expectancy may have been 63, but once you made it past 63, your life expectancy was about what it is now.  Remember that infant mortality was quite high back then, so the average includes children who died from things that are now very preventable and now don't really cause death anymore.  Of course Christian Scientists and the whacko followers of Michelle Bachman, who think vaccines cause disease and death keep that average lower than it need be.

So there you have it.  All we need now is for the members of Congress to do is develop a little intestinal fortitude and a spine and we can move ahead.  I suspect that what will come out of all this will be a piecemeal approach that will do little more than kick the can down the road.  Ah but we can dream!

Enough Already and Sandy Too

After 50,000 Republican Primary Debates, a whole bunch of GOP primaries, over a billion dollars of ads by both candidates, their parties, super-pacs, 501c4's (I think it's c4), 3 Presidential and 1 Vice Presidential debate, seemingly endless hours of pontificating by MSNBC, Fox News, network news Sunday shows, Daily Shows and Colbert Reports, I assume you've decided for whom you will be voting.  Most of the people who are reading this made that decision some time ago I suspect.  Some have already voted in states where that is allowed, including Ohio where the Secretary of State did everything he could to prevent it from happening.  I have held off commenting for two reasons. First, there has been enough to read and watch without my two cents in the mix, and, second, I've been busy doing stuff as well as reading and watching everything I could.  Of course if you're one of my Facebook friends, I have posted a plethora of links.  Now it's time to vote.  First, let's take a little detour.

Here in New Jersey, we have early in-person voting at every county clerk's office in the state this weekend and tomorrow for the first time.  This is one of the after-effects of Sandy.  Governor Chris Christie decided that in order to protect the Constitutionally mandated right to vote, the opportunity to vote had to be expanded.  Christie, of whom I am not a fan, has demonstrated character in the face of adversity.  He is paying for it, but more about that in a bit.

Before the storm, during the storm and every day since the storm, the Governor has been a whirlwind of activity and executive decision making.  He warned, cajoled, threatened and browbeat those who live on the barrier islands down the Jersey Shore to leave.  He did everything he could to warn the rest of us as well.  His performance was not unique in the region.  Governor Cuomo and Mayor Bloomberg in NewYork, and Governor Malloy of Connecticut were at their best too.  But none of them is my Governor, so I'll focus on Christie.  One of the realities he faced was that the State of New Jersey could not possibility mobilize enough resources to meet the oncoming need.  More had to happen.

Serendipitously, the one elected official who could mobilize the necessary resources saw the need early as well.  Before the Sandy hit, President Obama called the Governor and they talked about what was about to happen.  The President and the Governor spoke repeatedly about the need and about how the United States government could help.  The critical connection between the two governments was handed to Craig Fugate, FEMA administrator, who was given Presidential clearance to wipe away any red tape or other obstacle and make it happen.  FEMA was on the ground here when the storm hit.  

During the storm, Christie kept up his drumbeat of information and effective use of state government authority to try to help those of us out in the storm.  Of course the Governor was out in it too.  The President and the Governor were in frequent communication, with each of them working to provide the kind of coordinated response New Jersey needed and would need going forward.

After Sandy blew through, the President and the Governor visited major scenes of destruction around the state together.  This was no George W Bush thirty-thousand foot fly-by,  they actually worked.  They met with victims and continued to make sure our needs were being met.  It hasn't been perfect, but it was very good.  At each stop, the Governor praised the President for the skill and attentiveness he was showing and the President praised the Governor for his dedication and responsiveness.  It was what we needed to see and hear.

Twelve days before all this, Governor Christie, who has been a strong surrogate for Mitt Romney, was slashing the President verbally all over the country.  He has been relentless.  It's the same line of attack Romney has made but with Christie's unique New Jersey bluntness.  What happened?  The answer is very simple, Chris Christie is the Governor of New Jersey, and he understands that while politics, particularly at the Presidential level, is a vicious blood sport, an elected leader's prime priority is meeting the needs of the populace.  So the Republican Governor and the Democratic President, who understands what the Governor understands, worked together and stood together to provide the resources needed to help the people of New Jersey.  We have all benefitted from this increasingly rare display of grown-up behavior.  Christie still supports Romney and the President continues to run against what Christie is for.  Whether you support them politically or not, you have to be happy to see them working for us.

Not everybody was so happy.  As they were appearing together, Fox News and some of Romney's supporters were attacking Chris Christie as a turncoat.  Fox demanded that Christie re-pledge his fealty to Romney.  In most GOP circles, Christie is being vilified.  How did the Governor respond to all the noise?  When asked about the kerfuffle at a stop down the Jersey Shore, Christie's response said it all, "There are 2 million people in my state without electricity, do you really think I give a damn about Presidential politics?"  No, Governor, the people of New Jersey do not.

As you vote, think about the Governor and the President, and think about all you have seen and heard.  Are the candidates for whom you are about to vote seem to be more committed to us or to themselves?  Are they more interested in getting the job done or in screwing the other side for political points?  Vote carefully as if your life depends on it, because, one day, it may, literally.