Monday, July 18, 2011

Here it is ...

... a few things off the top of my head, because I don't want to hear any crap about not having stated what I think should be done.

Here’s what I am for, in terms of federal government action:

I am FOR getting out of Afghanistan. We’ve killed most of the people we need to kill, and we’re not likely to kill the rest given the stated goals of our current foreign policy establishment. Also, cut all aid to Pakistan. Thanks to the aftermath of Obama killing bin Laden (good job, BTW), we have probably “lost” Pakistan anyway. Not that they were doing anything than playing a double game with us anyway, and if we need an ally in South Asia we should pursue better relations with India. That will save us a good chunk of money every year.

Get out of Iraq in particular, and the Persian Gulf region. Fuck ‘em. The Iraqis will either hold onto a democracy, or they won’t. They only way we could have any hope of insuring that outcome would be to plant the flag there permanently, and they just aren’t worth it at this point. Our foreign policy goals should be to promote OUR interests, and wasting more and more time, money and blood on Arab Democracy is stupid. The only nation that ever seemed to have it was Lebanon. How’d that work out? If Arabs want democracy (and I doubt they do) let ‘em get it the old fashioned way.

End our foreign commitments in Europe. End our foreign commitments in the Far East. Let the Chinese deal with the fucking idiots in Pyongyang – it’s rightfully their problem anyway. The Japanese and the South Koreans need to fend for themselves, and largely are anyway. (One exception to that, and I’m getting there.)

Largely, get the Hell out of most of the rest of the world’s affairs. We did our cop duty, now let them fend for themselves.

Concomitant to that, reduce the size of the Army. Maybe the Navy and Marines and Air Force need to be kept as strong as they are, but not the Army. Reduce it drastically. Cut current and future development programs. Maybe finish the carrier we’re currently building, maybe not. Cancel the next generation of fighter craft that we’re developing. Maybe even cut back the orders for F-22. We can’t afford everything anymore, and that means pain, even in terms of reducing our leading edge advantage militarily, at least for the moment.

There may be reason to keep the Navy/Marine Corps as strong as they are – we may still want to project power here and there. But maybe we don’t. The real assistance we provide to Japan comes from having the world’s last great blue water navy – maybe we want to keep that, as we have large sunk costs there. But other than strictly projecting power for our own interests, forget it. All this crap like what’s going on in Yemen and Libya is just that – crap.

Maybe we keep up arms sales to other nations, maybe not. Cost/benefit analysis should be done to determine whether or not it is worth it TO THE NATION AS A WHOLE, not how it benefits the defence contractors.

All of this comes with downside risks. The world will likely get a lot more violent in our absence. Tough titty, sailor, not out fight. We should limit our foreign adventurism to our natural sphere of influence, and limit ourselves to invading the odd Latin American country now and then. The other downside is that we will end up with more unemployed people – from the downsizing itself, from reduced employment in the defense sector, and from those towns and businesses that benefit from a large military. Hell, we’ve been trying to close useless bases for as long as I remember, now it can finally happen.

Part of this would also be eliminating most foreign aid. I would end our commitment to the UN’s main body (only after paying any back dues), but keeping up with UNICEF, the WHO and some of the other bodies makes since. But the political arm of the UN is useless.

End most foreign aid. Not huge stuff in the scope of things, but it would be an important part of reducing our commitments. Perhaps we cut Israel loose, perhaps not. Again, we should look at the situation with jaundiced eyes, and decide what is in OUR best interests. We can’t afford to keep looking out for the other guy anymore.

That cuts a decent sized chunk out of the deficit, but leaves much else.

Next up, financial reform. First off, I would repeal Sarbanes-Oxley and Dodd-Frank, and reinstitute Glass-Steagal as it was when it was repealed in 1998. Not that this is optimal, but it is a start. The big bank should be broken up, not just as Glass-Steagal would require, but even more than that. Pass the legislation to make it happen. Pass the legislation to remove the guys that have run our financial system into the ground from their jobs. Criminal prosecution is probably out of the question now, but we can at least put people like Dimon and Pandit (to name my two least favorite) out of work. Make whatever changes are necessary so that entities like GMAC (and whatever the hell GE did) do NOT get to be considered straight-up commercial banks. Being a bank should mean what people think of when they think of banks. Raising capital requirements for commercial banks may or may not make sense, but should be revisited.

All Fed governors should be fired, including The Bernanke. They have largely failed in their mandates, so fuck ‘em. Pass legislation if necessary. Abolishing the Fed may or may not be a good idea – it can be considered later. But the Fed should have a SINGLE MANDATE – stable currency. All else creates one conflict after another and is counter-productive.

(Incidentally, if these ideas sound familiar, they should. Schuler has promoted some of these ideas, as have many others. It is amazing that there is a consensus building out there, amongst certain people, and that it has no chance in Hell of being enacted. The people building the consensus just don’t matter.)

Some of the actions above will remove some systemic risk. However, systemic risk can arise not just from a few institutions being too big (none of this should ignore insurance companies, for example – consider the cluster-fuck at AIG), but also if everyone does the same thing. Breaking up the banks in 2005 might not have accomplished anything at all if everyone was doing the same thing. (MBSs, CDOs, CDSs in general, et cetera.) Regulators need to consider whether various kinds of financial practices are actually good for the business environment. Despite the claims from derivatives guy about CDSs and the like “spreading risk”, what we really got was everybody getting involved in everything. That didn’t work out so well. Regulators need to consider new products and new practices and decide if they will actually serve a purpose for the underlying economy, as opposed to the financial houses. I have no idea how they would do that in practice. Some of it seems obvious to me – despite the (very) high level math that went into pricing derivatives, they ultimately got it wrong. I don’t see where derivatives really give any benefit to the underlying economy – in practice they simply allowed people to make bad decisions believing that they were covered if anything went wrong. I say, let ‘em decide up front if those decisions are good or bad, and bear the risk themselves.

Another example – high frequency trading. I don’t see how that can POSSIBLY be anything other than a zero-sum game of finance – those with the best algorithms and fastest connections win, by extracting value from everyone else. Ban it.

The question should ALWAYS be, when considering any financial instrument/practice, “Can it, DOES IT, actually help the underlying economy?” Now, every financial system will be subject to gaming. But that doesn’t mean we have to encourage it.

Now here I differ to Dave Schuler, who has thought about and dealt with regulators far more than I have. I would differ to others as well, as to how to implement the above. But I know what I want, which is a financial system that can benefit the rest of the economy. We don’t have that now, thanks to government being in bed with the financial institutions completely. (You can call it regulatory capture if you want, I will call it simple sleaze.)

I could go on and on for this particular topic. I have many crazier ideas, ones that would make for interesting discussions, but not ones that will actually have any chance of being implemented. But the stuff above can work, and something very like it ought to be done. We should NEVER be in a situation in which any organization can claim it is TOO BIG TO FAIL. Forget being anti-capitalist (a bad term anyway, IMO), that is anti-freedom – it puts the entire body politic at the mercy of some small segment. Fuck that noise.

Eliminate GSEs. They’re a bad concept every which way.

RE: Social Security – I have stated before, and believe still, that despite the basic Ponzi scheme nature of the beast it actually can be saved. Or at least, it could be saved if it were the only problem. We’ve done it before, and we can do it again. Means testing, raising benefit ages, raising the limits on what can be taxed, etc. The problem has always been demographic in nature, and we seem to be reaching an end-point on that. That means a more or less stable solution can be reached. Again, this is in absence of other problems, which I am getting to.

Let me stop a moment to say what I am looking for in the nation, what I think the biggest immediate problems are, and how I think they should be solved.

What I am looking for is a nation where I can be reasonably free in my person. What I care about is in maximizing the freedom of myself and my fellow citizens. What I do NOT care about is in being Number One in everything. I don’t care if we have the biggest military. I care that our military be sufficient to defend ourselves. (Thus I see an opportunity for savings w/o sacrificing anything too significant.) I don’t care if we have the best this, or the best that, or the best whatever. I don’t even care if we have the biggest economy, although that would seem to be helpful in any concern. I only care that the nation be secure, that the citizens be free, and that we have the wherewithal to insure that state of affairs.

This gets us to the current state of affairs. The nation is not secure – while no enemy can attack us (and expect success, at any rate) we have built a shameful state of affairs with our finances. Federal debt levels alone have topped 90% of GDP, and absent large federal government expenditures I imagine we’re a helluva lot closer to 100% than 90%. That does not include unfunded liabilities, stuff we’ve said we would pay in the future.

A nation cannot long withstand this level of indebtedness. We’ve been here before, but usually (I believe always, but I’ll just say usually for the moment) after times of great national crises. While the last few years have certainly been a large crisis, we were already well down this path BEFORE that crisis, especially considering the unfunded liabilities.

Our finances must be repaired. Corporations have been working on their balance sheets. Individuals have tried, and I doubt much headway is being made there. None can really be made until incomes start increasing. And the government has been terrible. We must start there. Thus the stuff I am outlining. Some of it may seem unrelated (the financial stuff above) but it really isn’t. Our government is failing, and so is our financial system, despite all the money thrown at it. About 1,000 banks are on he unofficial problem bank list published over at Calculated Risk. That list is compiled using government notices, and is pretty damned accurate. I would imagine that some of the banks NOT on that list should be, but I quite looking at the damned thing over a year ago – it is too depressing.

So I am looking to repair the nation’s balance sheet, basically. When you are flush you can do more stuff. So get flush, man. In order to get flush, we must get the budget more in balance, and repair the nation’s business environment.

Now for the big one, especially going forward: Medicare. Medicare has completely fucked the nation’s finances, and it hasn’t done all that great a job (from my limited perspective) in advancing the nation’s health care system. (Admittedly my perspective is colored by my mother getting fucked over by the system repeatedly in the last few years. And also by my father-in-law getting fucked over by the medical system, although that was the VA instead of Medicare. Or my father and brother getting fucked over by the system. Although that was private insurance instead of the VA or Medicare. Mostly, doctors suck, and their system accentuates that suckitude nicely.)

In my last job I worked on the financial side of the medical system for a large privately insured company. We were EXTREMELY interested in how “the system” should be reformed. What I learned was that there are no systems that will “work” well.

Let’s define work well: How’s about providing all the needed healthcare to everyone that needs it? Well, that’s stupid on the face of it: everyone can’t have everything. So how’s about proving a decent standard of care for everyone at a reasonable price? That’s better, but everyone is going to argue about what a decent standard of care is about. (Death panels, anyone?) Actually, we could do this all night and all day tomorrow. We always come back to the same problem: Everyone wants everything for their loved ones. How to handle that financially?

I’ve come to the conclusion that only two types of system have any chance of working: Some form of single payer system (or nationalized healthcare, or whatever you want to call it), or a completely (which is to say, TRUE) private enterprise system.

The problem with the first is that at some point it will come down to someone/something deciding who gets what kind of care. Death panel is as good a name as any. The problem with the second is that the market will decide who can get what form of treatment. The Golden Rule will apply again.

Unfortunately, I think the second option is best. The true problem with the first system is that the voters will ultimately start voting themselves more benefits again, and that gets us back to where we are. The second option avoids that.

The second option would also seem some market rigor start to take hold. I’ve been dealing with doctors a lot the last four years, because of my mother’s, brother’s and wife’s health problems, and I see a monumental amount of BS that serves no purpose except to drive up costs, usually while decreasing care. In order to get a colon problem taken care of, my mother got shuffled off to THREE different proctologists: one to “manage the situation”, another to actually do the colonoscopy, and another to do needed surgery via a colonoscopy. Why one goddamned proctologist couldn’t have, shouldn’t have, handled all three functions escapes me. We’re seeing the same thing now with her thymic carcinoma (alleged), except it is even worse. Last year during a hospital stay my wife ended up seeing a minimum of 18 doctors over 14 days in the hospital. That only counts the ones that were the lead doctor in the room at the time, not any students of other docs hanging around. And THAT only counts the ones I saw. (for other reasons I could not be there all the time for the whole 14 days.) Most of those doctors served no fucking purpose, except that it was another billing opportunity.

Now any reasonable system would have stopped that from happening. A true market system would have stopped that from happening. Hellfire and perdition, I TRIED to stop it from happening, as at least half the doctors were undoing the work others were doing. It was a goddamned nightmare. But I had no power, and my wife was delirious so she had no power, and the whole time the doctors were working at cross-purposes. Such is modern healthcare. The point is, we were stuck in a system in which ultimately no one had any power, and no one had any accountability. I’ve seen this over and over again in recent years, and I’m tired of it.

Now if I were paying the bills, I could at least threaten the bastards with a “if you don’t listen to me and explain what you are doing, I won’t pay you” I might at least get someone to tell me what the fuck was going on. And I might get a chance to explain to them what someone else had already done. Better still, maybe I don’t get passed from doctor to doctor, and one guy actually knows what is going on.

Sorry, it’s getting late, I’m getting angry thinking about all this crap again, and it is getting incoherent. Let me recapture the thread.

The point is this: Re-instilling some market discipline might help clear up some of the inordinate amount of crap the system has generated. There are problems with this approach, though.

First, people have PLANNED on having Medicare, and we can’t just end the program even if we wanted to – it would be unjust. We would need to wind the program down over several decades. Increase age limits over time until the program won’t have any new people in it, but keep the taxes in place to support it. That will take care of the unfunded liabilities, and in the starkest manner. That doesn’t solve the clusterfuck of a problem we have NOW, though, and I confess I have no good ideas on that front. Neither does anyone else, from what I have seen.

There is another problem with the private enterprise approach, though, and it is obvious – people will get the level of care they can afford. Insurance can help with some of this, but anyone dealing with insurance companies knows there are limits to the help they provide. Frankly, I have no idea how to resolve this. Any attempt to correct the problem inevitably gets us back on the road to government intervention. I am not convinced that charities and reduced costs alone will be able to pick up the slack.

That gets back to some kind of single payer – but again, I don’t see how (a) I can expect this system to get any better than what it is now, and (b) I see no way to prevent the voters and their representatives from doing what got us to this point.

I confess, I am at a loss on this point. But I know that what is happening is leading to catastrophe – what can’t be done ultimately won’t be done. And you can’t pay for everybody to get everything forever. So I admit to failing on this point. The problem I have is I don’t see anyone with a real solution anywhere, not one that holds up to scrutiny. I will plug away at the rest of it, such as it is.

I would end as much of the manned space program as we can while still meeting our commitment to the international space station. I would prefer to end that as well, but having already withdrawn the US military’s blanket of protection from most of the civilized world I might need to throw them a bone.

This kills me. I grew up watching the Apollo launches, and I’m not even sure how many shuttle launches I have seen up close and person – at least ten, maybe as many as 15. And I’ve seen a lot more than that from my home in Orlando. I mean step out to the front driveway and SEE.

But the truth is this: The manned space program has really lacked direction since Armstrong stepped foot on the Moon. Everything since then has been a mishmash. There have clearly been successes – the Hubble repair and servicing missions show the utility of men in space. But overall tere has been no real purpose. We’ve flown 135 or so missions to LEO for what, exactly? It is expensive, and directionless, and we can’t afford it. Cut it, which means ending the funding for the next set of launch vehicles.

Now I would keep NASA’s robotic and other science missions. The knowledge seems abstract, but we are learning a great deal about a lot of different topics. And it is a relatively cheap way to keep pushing certain technologies forward.

Reform the country’s drug laws with an eye towards reducing the number of people we put in prison. I do NOT mean legalize everything, or necessarily anything. But goddamn, putting people in jails and prisons for smoking doobies and selling some stuff to friends is a massive misallocation of resources.

Cut other domestic programs. What the hell are the Departments of Education and Energy doing anyway? Start striping out government programs with an eye towards keeping what is necessary. Yes, public broadcasting doesn’t cost all that much, but we can’t afford it anyway, and unlike NASA’s science program doesn’t really seem to be adding all that much to the public good. Same with the NEA. The same with NY program that is not providing either immediate utility, or doesn’t promise to provide something concrete in the relatively near future. This area is tremendous, and has much area for argument, and that’s fine. Personally, I would want to keep the national parks functioning. Other might feel that they have little more utility than the NEA. Fine, let’s argue about it.

But the point is this: We HAVE to get our finances in order. Not ten years from now, and not at a discount (Four trillion? Are you kidding me? That’s perhaps only a third of what it should be.), but now, and as much as we can.

In order to achieve this, we should also look at how the government functions. Dave Shuler has gone into aspects of that here, on his blog. No point in going over this again. If corporations can make do with fewer heads, so can the goddamned government. For started, push all pay level back to where they were six years ago. Everyone else is taking a pay cut, so can they. Start eliminating positions, especially high-level sinecures and such. Every President has more Tsars than the last, it is time to reduce that trend.

Like cutting the military, these actions will also increase the number of unemployed. And that’s too bad, especially for me, as that it even that many more people I have to compete against.

But the point is this: the sooner we get things in order the sooner our economy can start allocating its resources in a better manner. Only in government do they think that the way it has always done is the best way it could ever be done. Except, of course, for adding more headcount and more budget. TO that end, end government unions. If you don’t understand why government unions are dangerous, then I can’t explain it to you. But they are bad because they increase the inflexibility of an already rigid system.

Government regulations need to be redone, yadda yadda yadda. It’s true, but it is boring. Again, the idea should be, Will this make the nation stronger. Sometimes that will mean ruling against business, too. Saying everything should be business friendly is at best a cop out, and at worst stupid. Some of the regulations serve good purposes – I don’t want acid in my rain, thank you very much. But many don’t. But this is boring stuff, and since NONE of this will be enacted anyway, I am going to get to stuff I find more interesting.

Namely, revenues. Should taxes be raised? Should they be lowered? Pointless debates, as usually stated. Our taxes aren’t a mess, they are a disaster heading towards catastrophe. He whole damned system needs to be ditched and redone. The purpose of a tax system should be to be fair, easily understood (because if it isn’t, you can almost be 100% certain someone is getting away with something – I’m looking at you, Immelt), and of course to raise sufficient revenues to fund the government. Personally, I favor as little complication as possible. Currently I probably like the so-called Fair Tax best. (That has problems – but so does every other system.) Or maybe we go with a flat tax with no deductions. Or just a flatter tax with no deductions. A big thing for me is “no deductions” – deductions are signs of favoritism and gamesmanship in the tax code. If you believe otherwise, you are entitled to your opinion. You’re wrong, but this is my wish list. There are many complex issues that can’t be avoided, but goddamnit, our current code is criminally complicated. We need a simpler system so people and businesses SPEND LESS TIME AND MONEY ON TAX ACCOUNTING. All of that is a big drag on the system.

Worse still, all those deductions come with political costs as well. What is it I’ve been hearing lately – GM had something like $5 BILLION dollars in profit last year and thanks to slick accounting and manipulation of the tax code they paid zero dollars in corporate income taxes. Meanwhile, Immelt is telling the leaders of other businesses, that actually DO have to pay taxes, to shut up and hire people. Fucking criminal. This demonstrates a fundamental corruption of our current business and political environments as well. And THIS is why I keep bitching about system being rigged for the big guys at the expense of the little guys – because it is.

Michael, you love to keep talking about being an entrepreneur, and that’s fine. But realize that if GM gets wind of you idea and decides to step in and cut you off at the pass, not only are they bringing tremendous resources from the company to the battle, they are bring tremendous clout in Washington to bear on the problem, clout you could not hope to match. If you both got up nd running and started making some profit, understand that they have you beat right from the get go because they can manipulate the tax code to their advantage. You haven’t got a prayer.

In fact, if I were put in charge of the whole damned thing, I would START with reforming the tax code. It is a source of manipulation and thus corruption in our body politic, and it has bad implications for our economy as well.

One final thing for this rant – I’ve mentioned cuts here there and everywhere above, with the exception of Medicare, where I admit I haven’t got a clue. I have also put a lot of people out of work. One other thing I would add is some form of welfare program to try and keep more of us united body and soul through a long period of trouble. Yes, that is another transfer program, and no, I don’t like it. But frankly things suck out here, and I didn’t outline a proposal to put everyone back to work. Mainly because I think such a program will ultimately fail. (See Japan.)

Instead I am advocating that the federal government (a) get its financial house in order before IT crashes the whole system, and (b) start to remove various distortions to our economy and body politic. Jobs will NOT magically appear if this is done, and short term more will be lost. But (a) has to happen sooner or later, and the sooner it happens the less long-term pain we will have. (Referencing a much earlier comment, it would be getting ahead of a problem for a change.) And (b) has as much hope as anything of getting the economy moving in a positive direction again. The drag that has built up is tremendous. But we have no hope of positive movement if we don’t repair damage already done.

This certainly isn’t everything, and as I will acknowledge for the third time (I tell you THREE TIMES) I have no fucking clue what to do about Medicare/Medicaid. Trade agreements and trade practices need to be examined, labor laws, industrial policy (should we have one, for example, would be a good place to start), immigration, and all sorts of other stuff need to be examined. But the above is at least a starting point, and it is more than you will get from Congress.

Not necessarily more than you will HEAR, but it is more than you will get. Because the elite running the country either don’t understand the problems, or don’t care about the problems of most of us. So things will continue along until everything REALLY crashes – not 2008 USA crashes, but more like Weimar Germany crashes, or even Europe 1914 crashes.


Dave Schuler said...

Since I've also proposed quite a number of the things you've suggested in this post over the years, obviously I'm largely in favor of 'em.

I'd add that in combination our policies tend to make things harder on people while they're climbing the income ladder and easier once they get to the top rungs. I think that's a good deal of the reason we're in the mess that we're in and none of the proposals currently on the table do much to address it.

Maxwell James said...

FWIW Icepick - I'm surprised by how much I agree with you. Not 100%, but at least 50%. And I'm pretty damn liberal, though perhaps more "liberaltarian" than some.

I'm a lot more optimistic about moving towards single-payer or something like it - in part because it's inevitable. A true market-based system would actually lead to it faster, imo, by fostering a voter revolt. You're right that voters will act to increase their own benefits, of course, but i think that's a pretty manageable problem in the long run.

The problem right now is that we have a few classes of voters who enjoy "universal" health care for themselves only, but who are not net taxpayers, so they in essence bleed the rest dry (or will, as soon as the bill comes due). And of course the health professions take advantage of that.

Single-payer wouldn't be a panacea (and would be much stronger, IMO, if paired with market-based reforms in other sectors, particularly health technology and pharmaceuticals), but it would significantly ameliorate this effect.

Regardless, I think we all have to be in one bucket. Either government-funded health care for all, or for none. As long as we continue to have categories for inclusion, it creates opportunities to game the system.

Icepick said...

Maxwell, I'm sorry I haven't addressed your comment yet - I'm just not online all that much anymore. (And when I am it tends to be late at night.) I hope to come back to it later, though it may take a few days.

Icepick said...

I'm surprised by how much I agree with you. Not 100%, but at least 50%. And I'm pretty damn liberal, though perhaps more "liberaltarian" than some.

I'm not sure why you are surprised - the problem is straightforward (we are spending much more than we bring in) and thus the basics of the soultion are self-evident. The fact that there is so much sturm und drang over this amongst our "leaders" show that the elites in this country have completely failed in their jobs. Leaders should LEAD.

I would add this - we have NOT actually had a crisis in this country due to federal debt levels. The crisis is coming soon, though, and on top of our other difficulties it will be crushing. The whole point here is to get in front of the problem (to use corporate jargon) so as to (a) be in some control of events and (b) to mitigate the damage done.

As for your comments on healthcare - I am just not sure that those who have been profiting from the current system will allow a single-payer option to pay them less. Absent that, I don't see how it will help much.