Improving US Healthcare, Lower Costs & Better Outcomes

Improving US Healthcare

Lower Costs & Better Outcomes

Among industrialized nations, the United States ranks first in the cost of healthcare per capita and 30^th in life expectancy. In this column, we will explore ways to improve the U.S. healthcare system, while lowering healthcare costs and improving the outcomes.

The analysis here utilizes information from the Organization for Economic Co-operation & Development (OECD), an organization of 39 industrialized countries, including the U.S., Canada, Chili, Mexico, Israel, Japan, South Korea, Australia, New Zealand, and 30 European countries. Most of these countries have found ways to lower healthcare costs and increase life expectancy. Here is a sample of information from the OECD Health Statistics 2016:

Cost per Life

Capita Expectancy

Italy 3,207 82.2

United Kingdom 3,971 81.4

Japan 4,152 83.7

Australia 4,177 82.4

France 4,367 82.8

Canada 4,506 82.1

Sweden 5,003 82.3

Germany 5,119 81.2

Netherlands 5,131 81.8

Switzerland 6,787 82.3

United States 9,024 78.1

OECD Average 3,620 80.5

Note that the United States spends 2½ times per capita as much on healthcare as the average OECD and the lifespan of Americans is more than two years shorter than the OECD average.

Additional evidence supports these statistics. A 2012 Novartis/McKinsey study revealed that the French population has a higher rate of lung disease than Americans due to higher smoking rates. Yet the French spend one-eighth as much on treating lung disease and have fatality rates one-third of the U.S. fatality rates. Broader coverage and early detection contribute to better outcomes.

In their 2017 study of 11 leading nations, the Commonwealth Fund stated, “Overall, the United States ranks last on access. The U.S. has the poorest performance of all countries on the affordability subdomain and ranks next to last in Administrative Efficiency”.

In many OECD countries, the private sector delivers the healthcare services and the government pays for the healthcare through taxes. All citizens are covered and governments administer the programs for far less cost than the private sector insurance in the U.S.

Studies have shown that, on a per claim basis, Medicare’s administrative costs are about one-fourth the cost of private insurance. The insurance industry argues that on a “per enrollee basis” (not per claim), their administrative costs are less, but this is because they insure a younger group and many enrollees have few or no claims. As Disraeli said, “Figures don’t lie, but liars figure.”

In an apples-to-apples comparison, the Congressional Budget Office (CBO) compared the administrative costs of regular Medicare to the privately-run Medicare Advantage. Medicare’s administrative costs are one-fifth the cost of Medicare Advantage. The higher cost of private insurance is due to expenses for sales, advertising, other marketing costs and higher salaries and bonuses for executives.

Adding more citizens to Medicare would require an increase in taxes, but this increase would more than offset what employers and individuals are paying for healthcare insurance. According the Council on Foreign Relations, healthcare costs add $1,500 to $2,000 to the cost of every car made in America. Reducing healthcare costs for employers would enable American companies to be more competitive in global markets.

In addition, various polls and studies (including Gallop Poll and Princeton) have shown that people on Medicare are more satisfied with their health plan that people with private insurance and they have less negative experiences.

Based on this information, adding more Americans to Medicare would:

Lower overall healthcare costs
Increased life expectancy
Cover more Americans
Make American companies more cost competitive.

This could be accomplished in a phased-in approach, by adding citizens 60-65 the first year, then adding those over 55 in two years, continuing until all Americans are covered with Medicare.

The biggest challenge to single-payer system may be the lobbying against it. Healthcare lobbyists represent their employers, including health insurance companies. In 2016, the healthcare industry spent $511 million on lobbying, according to the Senate Office of Public Records. Healthcare ranks #1 in lobbying expenditures. Spending on healthcare lobbying in 2016 amounted to $955,000 per member of Congress. In Washington, DC, there are 2,759 registered healthcare lobbyists, more than five lobbyists for each of the 535 Members of Congress.

Some countries, like France and Japan, have systems that blend single payer with insurance. Germany has non-profit insurance companies. The Dutch have a system similar to the U.S. in that they utilize private health insurance, yet their healthcare costs per capita are 45% less than the U.S. In the Netherlands, all residents, excluding the military, are mandated to purchase health insurance and have the right to change insurers every year. Insurers are required to accept all applicants. The Government subsidizes those who are high-risk or low-income. Long-term care insurance is also mandatory and subsidized. More information on the Dutch healthcare system is available on the Commonwealth Fund web site.

Other industrialized nations have proved that they can provide high-quality healthcare at lower costs. The challenge for Americans is to replace false beliefs with evidence-based research and foster a healthcare system with lower costs, more inclusion and greater life expectancy.

Tax Reform: How to Cut Taxes & Pay for It

“Tax Expenditures” will cost the Treasury more than $1.5 trillion next year[1], which is more than Social Security and Medicare combined. Tax Expenditures include tax loopholes, deductions and preferential tax rates.[2]

Each Tax Expenditure has a lobby or interest group that supports it. Consequently, Tax Expenditures cannot be repealed or reduced one at a time. They must all be repealed at once, with provisions to reinstate the highest priority Tax Expenditures.

Congress should pass a bill that has two primary components:

Repeal all Tax Expenditures effective on January 1, 2018.
Establish a Tax Expenditure ceiling in dollars so that Congress can then restore the highest priority Tax Expenditures.

Note that a $500 billion ceiling on Tax Expenditures would free up $1 trillion to increase spending on military, healthcare, infrastructure, education and for reducing the deficit. Abolishing some Tax Expenditures has the additional benefit of eliminating government- induced distortions to free market economic behavior.

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[1] Forecast by Office of Management & Budget

[2] The Congressional Budget Act of 1974 defines tax expenditures as “revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.”

How Great is America

How Great is America?

The 2016 US Presidential race has raised questions about how great America is. One Presidential candidate has said, “This place is a hell hole and getting worse.” Polls show that 70% of Americans believe the US is on the wrong track. So, what do the numbers show?

Economy: The US has the largest economy in the world with $18 trillion in nominal Gross Domestic Product (GDP). The EU is second at $16 trillion. China is third at $11 trillion. Although economic growth has been slow, the US has the fastest growth rate among the developed countries. (See the CIA’s list of 34 developed countries in a note at end.)

National Wealth: The US is the largest country in national wealth at $86 trillion. China is second at $23 trillion. Japan is third at $20 trillion.

Per Capita Income: Per capita income in the US was $56,516 in 2015, the highest of any large country and eight times that of China. Income growth exceeded 5%, the largest gain since records began in 1967. Income and job growth have risen every year since 2009. Job growth is the longest streak on record.

Income Inequality: Pew Research ranks the US 21^st in income equality among 31 developed economies. Switzerland and the Scandinavian countries are among the best in income equality. Those countries also ranked the highest in happiness, according to US News & World Report. The US ranked 15^th in happiness. The countries with the best income equality and happiness rankings pay higher taxes and have more government involvement in their economies. American income inequality likely contributes to the high wrong-track numbers.

Defense: David Petraeus said, in Foreign Affairs September/October 2016 issue, “The United States has the best military in the world today. US forces have few, if any, weaknesses – from naval warfare to precision-strike capabilities, to airpower, to intelligence and reconnaissance, to special operations – they play in a totally different league from the militaries of other countries.” The US also has the best technology, weapons and military personnel. And, the US spends three times as much as China on defense and more than the next eight nations combined. The US spends a larger % of GDP on defense than any developed country, except for Israel.

Immigration System: Illegal immigration peaked in 2006 and has been declining since. Net immigration from Mexica (legal & illegal) has been running at a negative 21,000 per year during the last five years, according to Pew Research. For the last two years, the two countries that have provided the most immigrants to the US have been China and India. The crime rate among immigrants is one-third the crime rate among the general American population, according to the Wall Street Journal. Drugs are increasing entering the country via drones. . . The US immigration system is more restrictive for skilled workers than most developed countries, which has caused companies to locate research facilities outside the US.

Unemployment rate: US unemployment rate peaked in 2010 at 10% and has dropped in half to 4.9%. However, the percent of adults participating in the labor force has declined. The two major causes of this are demographics (baby boomers retiring) and increasing college attendance. The US is among nations with lowest unemployment rate in the developed world.

Globalization, Technology & Unemployment: Some industries, including textiles and furniture manufacturing, have been severely hurt by outsourcing production to countries with lower labor costs. Advancements in technology have also contributed to the decline in manufacturing employment. As an example, employment at General Motors’ worldwide has gone from 877, 000 thirty years ago to 215,000 at the end of 2015. Manufacturing employment in the United States has gone from a peak of nearly 20 million in 1979 to about 12 million today. Since 1979, industrial production in the US has doubled, peaking in 2015, but 37% fewer people are employed in manufacturing. Unfortunately, the US is among the worst nations in retraining the unemployed or under employed. Germany is among the best.

Crime Rate: The murder rate in the US peaked in 1990 to 1994, when murders averaged 24,108 per year. Murders have declined to an average rate of 14,577 per year since 2010. Nevertheless, the US has the highest death rate from guns among the developed countries.

Education: The US has the best universities of any country in the world. However, in secondary education, the US ranks 14^th. The top five nations in secondary education are South Korea, Japan, Singapore, Hong Kong and Finland.

Infrastructure: The US ranks 11^th in quality of infrastructure, which includes roads, bridges, water systems and power supply systems. The top two are Hong Kong and Singapore. Most Western European countries rank ahead of the US.

Corporate Tax Policy: The US has the highest corporate tax rate among developed nations before deductions, but the US is average after deductions. Tax loopholes and subsidies cost the Treasury more than $1 trillion per year, which is about the same as Social Security and Medicare combined.

Individual taxation: Of the 34 advanced countries, the US ranks 31^st in amount of taxes paid per capita by individuals and the percent of income paid in taxes.

Deficit: The US deficit as a percent of GDP has declined from 10% in 2009 to 2% today.

Government regulations: US Government regulations appear to be excessive, but they are less than other developed nations. The World Bank consistently ranks the United States as the easiest place to do business among large developed countries.

Campaign Finance: All other developed democracies spend less on elections than the US. Many provide public funding and limit the campaign period. Some forbid TV advertising. Only in the US can people and organizations buy favorable legislation through campaign contributions. As an example, managers of hedge funds and private equity funds saved $14 billion in taxes over ten years by contributing an estimated $60 million to congressional campaigns to promote “carried interest” legislation. Even though carried interest is considered the most egregious tax loophole, it passed. Tax loopholes and subsidies cost the Treasury over $1 trillion per year, about the same as Social Security and Medicare combined.

Technology: As the world evolves from the industrial revolution to the technology revolution, the US is home to all of the leading technology companies: Apple, Alphabet (Google), Microsoft, Facebook and Amazon. The US leads in mobile telephony, social networks, Nano technology, bio technology and most other fields of technology. No other country has duplicated Silicon Valley. While the US is the clear technology leader by most measures, the US Government has reduced its funding for basic scientific research.

Reserve Currency: The US dollar is the world’s reserve currency. It is the most trusted currency. Most international transactions are conducted in US dollars.

Stock Market: During the George W Bush administration, the Dow Jones Industrial Average declined 25%. During the Obama administration, it has increased 233%. Nevertheless, a recent poll showed that a majority of self-identified Republicans believe that stocks have gone down during the Obama administration. This may feed into the right-track wrong-track polls.

Right-track wrong-track polls: In the 44 years since right-track wrong-track polls began, these polls have rarely shown that the US is on the right track. Right track occurred during two of Regan’s eight years as President and three years during the Clinton and Bush Presidencies. The last time was at the beginning of 2004 when 55% of Americans thought the country was on the right track. What followed was the worst recession since the Great Depression. Consumer confidence, on the other hand, was in the 40s in 2008 and 2009 and has been over 90 for the past two years.

Global Image: Pew Research has polled more than 30 other countries on the favorability rating of the US. In 2015, American favorability ratings were higher than a decade ago in all countries with three exceptions: Russia, Jordan and Lebanon.

Olympics: Finally, in the Rio Olympics, the US won 121 medals, compared to 70 for China, 67 for Great Britain and 56 for Russia.

Although far from perfect, the statistical evidence clearly shows the United States is the greatest country on earth.

Note: The CIA lists 34 countries as “developed.” They include the US and Canada, Western European countries, Israel, Japan, Australia and New Zealand.

Immigration Figures & Facts

Immigration: By the Numbers

The flow of immigrants – legal and illegal – peaked eleven years ago in 2005 and has been declining ever since. For the last two years the country that provided the most immigrants to the United States is China. In second place is India. Mexico is third, but more Mexicans are leaving than entering. Net Mexican immigration has averaged a negative 28,000 per year for the last six years. Approximately 40% of illegal immigrants entered the country legally and then overstayed their visas.

Currently, in 2016, there are 82,243 employees who work in immigration, customs and border security, compared to 66,014 in 2008, the last year of the Bush Administration. The 2016 budget is 31% higher than the 2008 budget.

Of historical interest, the President who provided “amnesty” for the greatest number of illegal immigrants was Ronald Reagan. The Immigration Reform & Control Act (Simpson-Mazzoli Act) was signed into law by President Reagan 11/3/86. It provided a relatively easy path to citizenship for illegal immigrants who had been in the country for five years or more. Approximately 3.0 million of the 3.2 million immigrants in this category became citizens.

Islamic State: Solutions & Consequences

Islamic State: Solutions & Consequences Revised 2/12/16

Some relevant history in the Middle East is a worthwhile starting point in evaluating alternative strategies, tactics and solutions to the challenges of the Islamic State. For decades, Arab governments have engaged in harsh authoritarianism, substantial human rights violations and profound intolerance. The Arab governments provided conditions for Islamic terrorism and the American invasion of Iraq became a catalyst, leading to the significant growth of Islamic terrorism.

President Obama’s stated objective for the US led coalition is to “degrade and ultimately destroy ISIL.” Most strategies for defeating the Islamic State have significant negative consequents, which must be considered in evaluating strategies for solutions. In addition, there must be a plan for what happens after the Islamic State is defeated. Will the Sunni land that the Islamic State has conquered be given back to the non-Sunni governments in Syria and Iraq? Ryan Crocker, former US Ambassador to Iraq, stated, “There is no political architecture that will convince any Sunni over the age of three that he or she has a future with the Iraqi state.” None of the candidates for President from either party have articulated a plan for what happens after the Islamic State is defeated.

Just to keep perspective, it may be useful to remember that none of the five countries with the largest Muslim population are Arab countries and none are in the Middle East. The five are Indonesia, India, Pakistan, Bangladesh and Nigeria. It is also important to note that the Islamic State is a radical Islamic organization that does not represent the vast majority of Muslims around the world. In fact, the majority of the victims of the Islamic State are Muslims.

Afghanistan

Afghanistan is relevant to the discussion of the Middle East. Lawrence Wright, author of Looming Tower and leading expert on al Qaeda, said that in early 2003, al Qaeda had been reduced to 40 to 50 people, including women and children, living in Afghanistan. The United States knew where they were, and, with the necessary resources, could have killed or captured all remaining members. If the US had completed that task, Larry Wright said there would have been no “Global War on Terror.” Instead, the U.S. redeployed assets to Iraq and al Qaeda grew into a multi-national organization with operations in Europe, Asia and Africa in addition to the Middle East. This is an important lesson.

How has the US done in Afghanistan? Today, the Taliban control more of Afghanistan than they did in 2011 when the US invaded.

Iraq

Prior to the US invasion of Iraq, the number of Islamic terrorist attacks around the world was relatively small. The number of people killed remained under 1,000 per year until the attacks on 9/11/01. (Al Qaeda stated reason for the 9/11 attacks was (1) the US continued maintenance of “temporary” military bases near Mecca and Medina and (2) American support for Israel and corrupt authoritarian dictators in Muslim countries.) After 9/11, the numbers dropped back to under 1,000. Then the combined total surged to more than 23,000 per year by 2007.

In Iraq, Paul Bremer, head of the Coalition Provision Authority, “de-Baathified” the Iraqi civil and military services, leaving hundreds of thousands of Sunnis without jobs. Some of them formed al Qaeda in Iraq (AQI) and waged an insurgency against US troops. During the US “surge” in 2007, the Americans enlisted and paid 98,000 Sunnis in what was called the “Awakening.” The Sunnis on the American payroll successfully fought and virtually destroyed AQI.

The US defeat of Saddam Hussein converted Iraq from a Sunni state to a de facto Shiite state. The new Shiite government implemented strong sectarian policies and produced deep-seated Sunni opposition. This government discontinued payment to the Sunnis recruited by the US. This and other anti-Sunni actions fostered the birth of the Islamic State from the ashes of AQI. The conversion of the Iraqi government from Sunni to Shia also dramatically changed the balance of power in the Middle East

Some politicians have argued that results in the Middle East might have been better if President Obama had left some American troops in Iraq. This ignores relevant facts. Iraq’s prime minister, Nouri al Maliki wanted the US military out of Iraq so that he could purge the Sunnis from the government and discontinue paying the 98,000 Sunnis recruited for security and paid by the Americans during the “surge.” In addition, Iran, Iraq’s closest ally, threatened to reduce their support of Iraq if any American combat troops remained in the country.

Consequently, the Iraqi Government demanded that the “American invaders” withdraw all troops. The Bush administration negotiated and signed the Status of Forces Agreement on November 17, 2008, which required that all American combat forces be removed from Iraqi cities by June 30, 2009 and all combat forces be removed by December 31, 2011.

Politicians take credit for anything that they perceive as “good” that occurs during their watch, even if they had nothing to do with it. Barrack Obama took credit for the American withdrawal from Iraq, but, in fact, he merely executed the Bush Administration’s Status of Forces Agreement. The Iraqi government was unwilling to consider any option and Obama had no choice. When the combat troops left, Prime Minister Nuri al-Maliki announced that he had gotten rid of the American invaders. In addition, General David Petraeus recently said (on the Charlie Rose Show) that there is no assurance that keeping American troops in Iraq would have produced a better outcome.

Saudi Arabia

Saudi Arabia is the home to the birthplace of Islam – Mecca and Medina. Most Saudis are Sunnis. Sunnis make up about 85% of Muslims worldwide. The Sunnis are divided into four schools of jurisprudence: Hanafi, Shafii, Maliki, and Hanbali. The Hanbali latter spawned the Wahhabi and Salafi movements in Saudi Arabia. (The Shia also have four schools: Alawi, Twelver, Sevener and Zaydi.)

The dominate minority in Saudi Arabia are Salafis, who are an ultra-conservative religious sect within Sunni Islam. The Royal family is Wahhabi, which is similar to Salafi. Most of the Islamic terrorist groups are Salafi, including al Qaeda, the Islamic State, Boko Haram and al-Shabaab. These groups have been funded by Saudi families and tribes. It should also be noted that Hezbollah is a Shia terrorist organization funded by Iran.

The Saudis have been the primary sponsors of Islamic terrorism around the world for the last half century. Fifteen of the 19 terrorists who attacked the United States on 9/11 were Saudi citizens. Osama bin Laden was a Saudi citizen. The Saudis have very active social media sites, which are dominated by radical Islamists. Saudis have funded madrassas around the Islamic world that teach intolerance and Jihadism.

Although frequently referred to as America’s friend, Saudis have values that are very different from Americans. Saudi Arabia is not a democracy. It is not a market economy. The rights of women are severely restricted in Saudi Arabia. (Women have recently been allowed to run for and vote in elections of municipal councils, largely powerless positions.)

Hudud is the most severe and barbaric form of punishments in Islamic countries. It has been abandoned in most Islamic countries, but it still exists in Saudi Arabia. Saudis execute criminals for a wide range of crimes, including apostasy, blasphemy, drug smuggling, homosexual acts and sorcery. Beheading is their primary means of execution, although death by stoning is used for women who commit adultery.

In the summer of 2014, the Islamic State generated extensive publicity when they beheaded five foreign hostages and published these beheadings on social media. During the same period, the Saudis beheaded 19 people, with little publicity or outrage. In 2015, the Saudis executed a record number of people and started 2016 by executing 47 “criminals” including the Shiite cleric, Nimr al-Nimr.

The Islamic State practices the same brand of ultraconservative Islam, including Hudud, with the same penalties for the same crimes as the Saudis. When the Islamic State needed textbooks for school children, they printed and distributed copies of Saudi text books found on-line.

The Saudi government views the Shiite governments in Iran, Iraq and Syria as their primary enemies. Currently, the Saudis are focused on fighting the Shiite Houthi rebels in Yemen rather that fighting the Islamic State. The Islamic State and Saudi Arabia have nearly identical Wahhabi interpretations of Islam, making it difficult for the Saudis to fight the Islamic State without undermining their own authority.

The Saud family has remained in power for nearly a century, in part, by giving citizens large subsidies instead of political rights. With the significant drop in oil prices, many undertakings have become a drain on their Government. These include the subsidies to citizens, support for Egypt and Pakistan, involvement in Yemen and funding for madrassas and others around the world. Ironically, Jihadists funded by the Saudis may someday destroy the Saudi government.

United States

For 180 years up through WWII, the United State won all of its wars. Then the US failed to win four of the next five wars in which it became engaged. Military solutions have not produced expected outcomes. Instead, they produced unintended consequences.

There were certainly unintended consequences to the invasion of Iraq. Approximately 258,000 Iraqis died in war and 7.8 million were displaced. Iraq became the most anti-American country in the Arab world. The U.S. invasion of Iraq motivated Iran and North Korea to restart their dormant nuclear program. And, the winner of this war, according to most experts including Robert Gates, was Iran. The U.S. removed Iran’s worst enemy, converted Iraq into a close ally of Iran, and turned the country over to Iraqi leaders who were exiles in Iran. Conservative columnist, George Will, called the American invasion of Iraq, “the worst foreign-policy decision in US history.”

Donald Rumsfeld asked, rhetorically, “Are we creating more terrorists than we are killing and capturing?” The answer is that the invasion of Iraq led to a significant increase in the numbers of Islamic Jihadists around the world. The Iraq war will ultimately cost the US more than $2 trillion. . . . The bottom line is that the US must give far more consideration to unintended consequences.

The Sunni/Shia Divide

The Sunni/Shia divide was very combative in the late 7^th century. For the next 13 centuries, it was mostly peaceful, with a few notable exceptions. A major divide restarted in 1979 and 1980 with the Iranian Revolution and the eight-year war between Iran and Iraq. Today, the Sunni/Shia divide is probably the worst it has been since the 14^th century.

The divide between Sunnis and Shias bares some similarity to the divide between Catholics and Protestants during the Christian Reformation. The wars during that divide covered more than 200 years and included two Thirty Years’ Wars, 1618-1648 and 1733-1763. Ultimately, all of these wars between Catholics and Protestants took the lives of an estimated 50 million Europeans. (Some estimates are much higher.) The population of Germany, alone, declined from 20 million to 7 million. . . There are no easy solutions to the religious intolerance in the Sunni/Shia divide.

Alternative Strategies and Tactics

The current American solution is US air strikes. US air strikes may slow and reverse the advancement of the Islamic State, but they will not provide a permanent solution to Islamic terrorism. History has also shown that 162,000 US boots on the ground in Iraq did not solve the problem. Defeating AQI led to the birth of the Islamic State.

Arming Sunni tribes is a popular tactic, but it does not guarantee these tribes will fight for our side. Sunnis distrust Shiite governments in Damascus and Baghdad. Some Sunnis have supported the Islamic State and others may join the Islamic State as the lessor to two evil.

Ambassador Dennis Ross has said that only Sunnis can discredit the Islamic State. Saudi Arabia, the largest Sunni state in the Arabian Peninsula, has not engaged the Islamic State militarily in more than nine months through the end of 2015.

Arming the Kurds is another popular tactic among Western nations. Kurds are more secular and tolerant than Arab groups. However, Kurds are more interested in fighting the governments in Damascus, Bagdad and Ankara than fighting the Islamic State. The Kurds want to establish an independent country in Kurdish areas of Syria and Iraq and possibly Turkey and Iran. Our ally, Turkey, is engaged in a small scale war with Kurdish groups inside Turkey. Consequently, Turkey opposes arming the Kurds who want their own state. In addition, our quasi allies – Iraq and Iran – oppose arming the Kurds for the same reasons.

Arming and training the soldiers of the government in Baghdad is an element of current American and coalition strategy. However, Sunni countries object to bolstering this Shia government, which is likely to reinforce their sectarian policies that alienated their Sunni citizens and contributed to the creation of AQI and its successor, the Islamic State.

Sending in a large contingent of American troops is a strategy supported by some politicians. History in Viet Nam and Iraq has shown that this policy is unlikely to maintain long-term public support. In both cases, it failed to succeed. Sending in a large contingent of American troops has a further downside. It would foster a significant growth in Islamic terrorists around the globe, just as it did when the US invaded Iraq. This would stimulate the growth in terrorist attacks against Americans inside the US and around the globe.

Finally, there is the important and troubling question that politicians have not addressed: What happens after the Islamic State is defeated? Will the land they occupy go back to Syria and Iraq? The governments in both countries have killed many of their own Sunni citizens. History has shown that when one Jihadist group is defeated militarily, as was AQI, it is replaced by a new and worse Jihadist group, such as the Islamic State.

Former UN Ambassador, John Bolton, recommended that a new Sunni state be created. This seems like a better solution than giving back land to Syria and Iraq, but the probability of implementation seems extremely low. It would be opposed by Iraq, Iran, Syria, Russia and Turkey. In addition, Western powers do not have the authority to redraw borders of countries in the Middle East. Historically, the only way that borders have changed is through wars, with winners gaining territory and the losers losing territory.

Nevertheless, redrawing borders by the Arab League (with possibly others participating) is the solution most likely to provide a long-term solution. Redrawing maps was ultimately the solution of the wars of the Christian Reformation. It took more than two centuries and killed about as many Europeans as World War I and World War II combined.

The other solution is for religious tolerance to become imbedded in the laws and customs of the countries in the Middle East. This seems even less probable than redrawing borders without wars. Nevertheless, the United States could tie American support for each country to progress in their religious tolerance. Without changing the harsh authoritarianism, substantial human rights violations and profound intolerance of Middle East governments, it is unreasonable to expect an enduring solution to the Islamic State.

The Islamic State is an Arab problem created by Arabs, led by Arabs and funded by Arabs. The Islamic State requires an Arab solution, not an external solution imposed on the Arab world by the U.S. or any coalition of western countries. The US can provide advice and training, but the solution will require extensive involvement by Arab countries.

For more information, the recent book, “The ISIS Apocalypse,” by William McCants is informative, well written and well documented.

Gas Tax: Congress Becomes Socialists

The tax on gasoline is a user tax. Revenue from this tax goes into the Highway Trust Fund, which uses this revenue for road maintenance and road construction. The gas tax has been held constant at 18.4 cents per gallon for 22 years. In the meantime, cars have improved miles per gallon by 25% during this period. The Highway Trust Fund is running out of money. The United States now ranks 11^th in quality of highway infrastructure.

In a market driven economy, the gasoline tax should be raised so that the users of the highways pay for the maintenance and construction of the highways. This is capitalism. This is normal procedure in a market driven economy.

Members of Congress, however, have become die-hard socialists on this issue. They do not want users of the highways to pay for maintenance of the highways. They wanted to find some other source of funds so that users of the highway get a free lunch.

Grover Norquist and Americans for Tax Reform have also become socialists on this issue, opposing increasing the user tax on gasoline.

Increasing the gas tax would improve decision making in our market economy. Some people might choose more fuel efficient cars. Others might choose public transportation.

People who support capitalism and a market driven economy should support an increase in the Federal tax on gasoline. Congress did not. The Bipartisan Budget Act of 2015 did not raise gasoline taxes, but did provide 233 pages of tax breaks for those who could afford lobbyist.

The Capitalist

Guns: 36 Countries Have Found Solutions

Guns: 36 Countries Have Found Solutions

Since 9/11/2001, more than 400,000 Americans have been killed by guns. That is four times the number of Americans killed in the Korean War, the Vietnam War, the 1^st Gulf War, the Afghanistan War and the Iraq War all combined. In 2014, 92 people per day were killed by guns in the United States, according to the CDC. According to the American Academy of Pediatrics, over 10,000 children are killed or injured yearly with guns. Is the gun lobby’s de facto motto, “Children’s lives don’t matter?”

In the first nine months of 2015, there were 294 mass shootings of four or more people. Terrorists killed less than 1% of the Americans killed by guns since 9/11/2001 and most of those were on 9/11.

Among the developed countries, the United States has the highest death rate per capita from guns. A person is five times more likely to be killed with a gun in the US than in Canada, nine times more likely than in Germany, 42 times more likely than in Great Britain and 177 times more likely to than in Japan. Australia, which cracked down on guns, now has a gun homicide rate that is one-twentieth of the United States.

Massachusetts and New York have some of the most restrictive gun regulations and they have three to four gun deaths per 100,000 per year. Alaska and Louisiana have some of the least restrictive gun regulations and they have more than 19 gun deaths per 100,000 per year.

The US ranks first in guns per capita. Yemen is 2^nd, Serbia is 3^rd and Iraq is 4^th. The US has 5% of the world population and 50% of the guns in the world.

Thirty-seven countries make up the developed world including United States, Canada, Western Europe, Japan and Australia. Thirty-six developed countries have found solutions to reducing gun deaths. Hence, it is an undeniable fact that solutions exist. The United States is the only developed country that has failed to find a solution. Unfortunately, the United States Congress has largely taken the position of the famous line in the movie, Gone with the Wind, “Frankly my dear, I don’t give a damn!” This is unlikely to change until members of Congress suffer deaths from gun violence in their own families.

Reducing Terrorist Attacks

Reducing Terrorist Attacks

The United States could take five steps to reduce the risk of terrorist attacks against Americans. The first three should be easy to implement. The last two will encounter political resistance.

Do Not Announce the Killing of 10,000 Muslims

On June 3, 2015, Deputy Secretary of State, Tony Blinken, announced that the US-led coalition killed more than 10,000 ISIS members. For some radical leaning people, that is an announcement that the U.S. killed 10,000 Muslims. It motivates some to justify the killing of Americans in the U.S. and around the world. Consider how Americans responded after Japan killed 2,403 Americans at Pearl Harbor. The U.S. entered World War II. Also, consider how Americans responded after 2,996 people were killed on 9/11. The U.S. entered wars in Afghanistan and Iraq. The announcement that the U.S. killed 10,000 Muslims unnecessarily motivates certain people to kill Americans. These types of announcements should be discontinued.

Allow Americans to Leave the U.S.

American citizens who want to leave the U.S. to go to the Middle East and join terrorist groups should be allowed to leave on the condition they give up their U.S. citizenship and have their U.S. passports revoked upon their arrival. Keeping them in the U.S. increases the risk that they will engage in terrorist attacks in the U.S. Letting them leave reduces the risk that they will kill Americans in the United States.

Use Information Technology to Change Minds

ISIS is effectively exploiting social media to reach potential recruits to their cause. They are winning the information technology propaganda war on YouTube, Twitter and other sites. The Federal Government should create and fund a committee of information technology experts in the field to social media to counter the ISIS in the information technology propaganda war. Experts in Islam must serve on this committee.

Make it Harder for Terrorists to Purchase Guns

United States is one of the easiest places in the world for terrorists to purchase guns. The U.S. could require background checks for all gun sales, including gun shows, and not allow sales until backgrounds checks are completed. Congress could re-establish the Federal Assault Weapons Ban, which expired in 2004. This might have saved the lives of five Marines in Chattanooga. In addition, the U.S. Government could use Federal purchasing power to demand that gun manufacturers distribute guns through responsible dealers. Guns recovered at crime scenes come from a disproportionately small number of less reputable gun dealers.

Allow People in the Middle East to Solve Their Own Problems

The U.S. was fully engaged in the Iraq war, which has become a failed effort. The U.S. used limited engagement in Libya, which was a failure. The U.S. adopted no engagement in Syria, which is a failure. The U.S. cannot solve current Middle East problems. People in the Middle East should be allowed to solve their own problems. Their most important division is the religious divide between the Shia, led by Iran, and the Sunni, led by Saudi Arabia. The U.S. has entered this conflict largely on the side of the Shia, which has upset leaders is Saudi Arabia, an American ally. During the Reformation period, Christians killed an estimated 30 million people before resolving differences. Americans should try to understand that there is little the U.S. can do to solve the religious differences in the Middle East. This requires a change in thinking among both Shia and Sunni in the Middle East, which may take a long time.

The Greatest Challenge of the 21st Century: Global Governance

The Greatest Challenge in the 21^st Century: Global Governance

Some Chinese philosophers believe that when China dominates the world, there will be no borders. There will be one great nation with great harmony. China will create a more just world. The capital would be in Beijing. The first part of this – China dominating the world – is very likely to come true in this century. Great harmony and more justice is very questionable.

The U.S. economy has been the global leader since overtaking Great Britain in 1872. The Chinese economy will become the global leader during this this century. The impact on global affairs will be profound.

Although the media has paid very little attention to this event, China will pass the United States this year in the size of their economy, according to the World Bank, based on Purchasing Power Parity (PPP). PPP is a measure used to compare economies by factoring in differences in the cost of goods and services among countries.

In addition to China’s new position, India will pass Japan this year in PPP to become the third largest economy. What about a comparison based on nominal Gross Domestic Product (GDP), that is, a comparison at current exchange rates?

The Economist magazine’s Economist Intelligence Unit predicts that it will be ten years before China passes the U.S. in nominal GDP. Even then, U.S. per capita GDP will be much higher than China.

China has a population of nearly 1.4 billion. The U.S. has a population of 319 million, which is less than one-fourth the population of China. Consequently, when China’s per capita GDP reaches half that of the U. S., China’s economy will be more twice the size of the U.S. due to their larger population. (If you are not interested in the numbers, skip to the paragraph that begins with “Consequently.”)

An examination of the historical data may be helpful in contemplating the future. GDP in China changed very little during the 27 years that Mao Zedong led China. When Deng Xiaoping took over the leadership of China in 1978, per capita GDP was $90.[i] In that same year, 1978, U.S. per capita GDP was $10,225, which was 114 times greater than China.

By 2014, Chinese per capita GDP increased 81 times to $7,333. U.S. per capita GDP increased 5.4 times to $54,980. Hence, US per capita GDP is now only 7.5 times that of China. This reflects a vast improvement in life style for Chinese people.

China’s economic policies are a major contributor to their rapid economic growth rate. The other major contributor is that China started from a very low base. China still has a low base compared to the U.S.

Consequently, China’s economy may be double the size of the U.S. economy, in nominal dollars, by the middle of the century.[ii] If China spends the same percent of GDP on defense as the US, they will be spending twice as much as the US. This will significantly impact global leadership.

Some question this raises are these: What actions should nations take now to insure protection from the world’s dominate economic powers in 2050? What should China and the U.S. do to avoid the Thucydides Trap?[iii] Certainly, this subject is worthy of Government funded study of our alternatives and best course of action. China is studying various forms of government, focusing on Singapore, Sweden and Chile, but not the U.S. World Federalists have advocated solutions since the 1940s.

Global governance will be the greatest challenge in the 21^st century. As obvious as this is, few Americans grasp the significance. Politicians cannot see beyond the next election. Consequently, little action is likely to occur until it is too late.

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[i] Source: IMF’s “April 2014 Edition, GDP per Capita” in nominal dollars.

[ii] Assumes 2.5% growth rate for the US and 7% growth rate for China for next ten years, declining ½% each subsequent decade.

[iii] See “The National Interest”, July-August 2014, “Thucydides Trap 2.0: Superpower Suicide?”

Solving the Deficit Problem

Tax Reform & the Deficit Problem

To solve the deficit problem, Congress is focused on entitlements for the elderly and the poor. They should also focus on entitlements for the wealthy – tax expenditures – which are comparable in size to Social Security and Medicare, combined.

Tax expenditures are entitlements for upper income individuals and corporations. These entitlements are listed in “Estimates of Federal Tax Expenditures for Fiscal Years 2012-2017” published 02/01/13 by Congress’ Joint Committee on Taxation. According to this report, 87% of tax expenditure entitlements go to people earning more than $100,000 per year.

Tax expenditures include entitlements for NASCAR, the tackle-box industry, farmers, oil companies and multi-billion-dollar benefits for hedge fund managers plus hundreds of other entitlements. Tax expenditures cost the US Treasury about a $1 trillion per year, which is more than the Federal deficit. And, tax expenditures are a transfer of wealth from the vast majority of middle income Americans to a small minority of upper income Americans.

Approving a bill to repeal all $1 trillion in tax expenditures would produce a $300 billion surplus in the Federal Government budget in 2014, but it would create a few undesirable results. Consequently, the highest priority tax expenditures (such as tax deductions for charitable contributions) should be restored after the blanket repeal of all tax expenditures.

A blanket repeal is necessary because every tax expenditure entitlement has a lobbying group supporting it and these lobbies contribute to political campaigns. The healthcare industry, as an example, has 2,374 registered healthcare lobbyists, 23 lobbyists for every member of Congress. Any attempt to repeal individual tax expenditures would fail. Only a blanket repeal of all tax expenditures will work.

While Congress has focused on reforming Social Security and Medicare, tax expenditure entitlements represent a more important fiscal challenge. Currently, the revenue from Social Security and Medicare taxes pay for the cost of these programs. Tax expenditures have no specific taxes to pay for their costs. Like Social Security and Medicare, future tax expenditures should include a corresponding tax to pay for them.

In an article on American tax issues, The Economist magazine (Jan. 21-17, 2012, page 14) argued: “It would be far better to close or limit loopholes and deductions, currently worth 7% of GDP, which distort behavior and mostly benefit the affluent.”

This is not to suggest that Social Security and Medicare should escape reform. The qualifying age for Social Security, as an example, needs to be raised continuously as long as life expectancy continues to rise. But, tax expenditures are a significantly greater problem. Many American are uninformed about the magnitude of tax expenditures and their impact on the Federal deficit. The print and television media has done little to enlighten anybody, possibly because they receive advertising revenue from the beneficiaries of tax expenditure entitlements.

The primary solution to the deficit is to repeal tax expenditure entitlements.

Author: dle2012