The Three Pillars Towards Fiscal Sanity

Recently, the Congressional Budget Office (CBO)- a collection of economic analysts- released a report showing that the national debt stands at 74% of GDP whereas the average over the past five decades was 39%.  The report received no mention in the media.  This almost doubling of the debt is solely attributable to Barack Obama.  Even during the Great Depression, that ratio never exceeded 45%.  The all-time record is 106% of GDP and that occurred when the United States was fighting Germany and Japan.  Left unchecked, the CBO predicts that we will match our 106% high in 2039 and then exceed it.  Anyone with a rudimentary understanding of economics realizes this is not sustainable.

While the Obama administration and their Democratic lackeys in Congress congratulate themselves for cutting annual deficits from $2 trillion to $1 trillion and call that success, the main drivers of the debt- mainly entitlements- sit in need of vital reform.  Cutting costs while increasing revenue or productivity can also mitigate the bad effects.  Democrats are solely focused on the increasing revenue.

To increase productivity, the CBO estimates that serious immigration reform could accomplish this.  Immigration reform is the first pillar.   Everyone concedes that the current system is need of reform.  However, recent events illustrate that the southern border is not adequately secure no matter what Harry Reid says.  From a national security standpoint, this should be the first order of business.

Most illegal immigrants come here for jobs because a low-paying job in the U.S. is better than an average job “there.”  And whether we are talking organized labor or the Chamber of Commerce, most note a need for low-skilled labor, especially in the agricultural and service sectors.  In order to meet these needs, an orderly worker visa system must be instituted that is portable and cyclical.  It could last for three years after which time its holder returns to their country and gets in the back of the line again.  Second, we need to dry up the incentive to hire illegal immigrants through workplace enforcement with serious fines that increase with each subsequent violation.  As part of this, E-Verify should be mandatory for all employers.  

But addressing immigration as a means to increase productivity in order to decrease the national debt only makes sense if the purpose of the immigration reform is economic in nature.  Today, it is family-based chain immigration.  At one time we had cyclical immigration laws and they worked.  It makes no sense that we allow low skill illegal aliens to cross the border with impunity while forcing higher out skilled workers  (those more likely to increase productivity), or making it more difficult for them to come here.

The second pillar, which is part of the entitlement problem, is social security reform.  To me, partial, voluntary privatization of social security makes the most sense.  Why should funds collected from a pay check and the employer be “deposited” in a fake trust fund when it could be better used to invest in a retirement portfolio?  The fear is downturns in the markets, but over the span of a worker’s life any downturn is mitigated and gains are usually made.  It can be structured so that the younger workers can take greater risks, but those risks would be reduced as one nears retirement.  And the current retirement age- 65- is based on old demographics while the average American lifespan has increased.  It is time to bring this into the 21st century.

Furthermore, as Chile found out, retirement “ages” became obsolete because workers were deciding when to retire, not the government dictating when automatic retirement benefits kicked in.  The current system is also sexist and racist.  Since benefits are determined by your wok history and since women drop out of the workforce for longer periods of time to have and raise families, their benefits are smaller.  Minorities face the same problems since, for whatever reason, their unemployment rates tend to be higher than whites.  In effect, the current system blocks both women and minorities from entering the investor class.

The third main driver is health care costs so true health care reform is the third pillar.  Obviously, Obamacare has to go, but it needs to be replaced with something.  The first step is to establish some minimum community rating standards of coverage that all insurers- if they wish to- could sell policies across state lines.  This can be done.  Assuming it is, then you allow the sale of policies across state lines.  In order to avoid collusion, exempting insurance companies from antitrust laws requires that part of the McCarran-Ferguson Act has to be repealed.

Fourth, you disentangle employer-provided insurance by removing its special tax treatment or, in the alternative, allow individuals to opt out of employer-provided insurance but give them the same tax treatment employers are provided.  This employer-based paradigm is the legacy of a past era.  Depositing money into a Health Savings Account that is used to purchase a policy specific to the policy-holder and their family makes the policy more affordable and portable.

Fifth, you create informed consumers when it comes to health care choices.  State-run Angie List type of websites could help here to provide information.  Sixth, although a small part of the health care inflation problem, tort reform is a must by establishing malpractice claim review boards funded by surcharges on malpractice insurance.  They would handle the frivolous cases and refer only the serious ones to the courts.  But even then, punitive damages should be capped.  Seventh, allowing the importation of pharmaceuticals provided minimum safety and efficacy standards are met should be allowed to create downward pressure on the price of prescription drugs while providing the consumer with more choice.  Eighth, Medicare eligibility should be means-tested based on retirement income.  Ninth, this country needs more general practitioners because having one increases medical success and health.  Creating medical education grants, not loans, for people to become general practitioners for a specific period of time in a particular area (region) in need works in France and it should work here.  In exchange for perhaps six years service, they would have no medical education debt and be paid an annual salary of $55,000, but be exempt from payroll taxes for the duration. Some can even be placed in VA hospitals and clinics to address the problems there.  If they fail to meet their end of the bargain, then the grant reverts to a loan with interest accumulated.

Tenth, we encourage healthy lifestyles like smoking cessation programs, gym memberships and the like NOT through the heavy hand of government regulation and taxation, but through economic encouragement in the form of lower health insurance premiums.  Healthy competition and bottom-up empowerment of the consumer will bring downward pressure on overall health care costs.  Will there still be a need for Medicaid?  Of course, but states should be free to decide what works best for them rather than the federal government dictating to the states.

These are general ideas that make intuitive sense.  Unfortunately, Social Security and Medicare have become sacrosanct in the bizarre world of politics.  We have had enough studies and commissions and we need someone with leadership who is willing to tackle these problems head on NOT in a socialist fashion.  Doing nothing threatens not only us today, but the future of the United States.  Future generations are saddled with enough debt already.  This “living in the present” tinkering is not reform; it is dangerous political proscrastination.

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