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Dec. 3, 2011

Common Cents

We know something is wrong with our political system when we can’t stop the mentally ill from buying automatic weapons because of the NRA lobby, can’t evaluate teachers based on whether their students learn because of the teachers unions, can’t pass effective financial reform after the worst meltdown since the Great Depression because of the financial lobby, and have cities going bankrupt because they can’t rein in public union pensions. 

Special interests with money and organization now control our country.  As a result, the gap between rich and poor has been widening the last several decades, and the middle class has been slipping into poverty.  This should worry the rich as well.  If we lose the middle class, we lose stability and risk a socialist takeover (see Venezuela). 

Exotic new financial investments were deregulated through lobbying, and we then saw 30 % of the gain in wealth in U.S. in the last decade go to people working in the financial industry.  We bail out Wall Street and are still suffering through the economic collapse they caused.  What do they do?  They spent over a billion dollars on lobbying to water down financial regulation.

The meritocracy created by our Founders has become a monied aristocracy. Some saw it coming early on.  Thomas Jefferson famously said “I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country.”

Our government has been hijacked by special interests to serve their varied agendas without regard to the effect on the country as a whole.  The hijacking has been aided and abetted by a system that has evolved to extreme partisanship.  A weakened media has stopped being an effective watchdog and has become a tool of the special interests.  The infrastructure that our taxes pay for, and the way we have chosen to regulate our economy, enables vast wealth accumulation.  Fortunes were enabled with government granted limited liability to corporations, mining, timber and railroad rights-of-way on government land, and a host of subsidies and other laws. 

A capitalistic system already inherently favors those with capital (money).  Thus, the name capitalism.  The driving mission of business is to increase profits for the owners or investors (who provide the capital) by increasing productivity – which means cutting costs (e.g., firing workers and making the remaining workers do more for less money).  It is an inherently tilted playing field which has been made worse by the way we let those with money and organization control our government.  Those with that accumulated wealth, and organized special interests, are the only ones who can continuously lobby through the complexities of our government over years to get more benefits, tax loopholes and subsidies, continuing a vicious cycle

Shifts to more direct democracy have not helped.  A detached and ignorant public is manipulated by ads and biased programming to support the special interests even though it is harmful to us.  We are basically paying for the special interest to manipulate us.  They accumulated their money by working the political and economic system our taxes paid for and built.

Congress is like the early days of baseball - players could be bribed to throw a game by gamblers because the payoff was much higher than their salary.  The cost of running for re-election dwarfs their salaries, leaving them susceptible to the same influence – money to throw the game.  This system for Congress is like paying police officers only a fraction of what they need, and telling them to make it up by shaking down businesses for protection money.  Politicians become beholden to donors and if they cross a special interest, they risk losing their job.  A jilted special interest will move money to an opponent and run ads against the representative who dares to step out of line. Is it any wonder our laws favor special interests and the rich?

What would the Founders do if they saw how the system they created has been distorted?  They would add new checks and balances to offset this power of money and special interests, and to return us to a true meritocracy.  Here are some possible checks and balances:

  1. Public Financing of Campaigns - The solution to special interests buying our representatives is obvious – let’s outbid them.  Instead of having our representatives on the payroll of corporations and unions, let’s put them on our payroll for all of their expenses, so they really work for us.  (See http://fairelectionsnow.org)
  2. All lobbying should be public - Secret lobbying should be prohibited.  All lobbying should be videotaped and placed on the Internet. 
  3. Fact Checker Independent Agency – We need an independent agency, like the Fed or legislative analyst, to act like an expanded version of factchecker.org – with an advertising budget.
  4. Change Congressional Procedures that block votes on bills.  Eliminate the filibuster (see http://fixthesenatenow.org ) and riders (unrelated amendments) in the Senate.
  5. Balanced elections – eliminate stacking districts by Gerrymandering (see http://www.americansforredistrictingreform.org) and establish open primaries to counter the polarization of our parties (see http://www.openprimaries.org).

For a more detailed discussion of this topic, click here: Common Cents


 

 

Oct. 17, 2010

Propositions on Nov. 2, 2010 ballot.  Here are the CalCentrist recommendations:

Proposition 19 – Legalizing Marijuana.  Vote Yes.  Marijuana is less addictive than alcohol and caffeine.  We waste a lot of money on law enforcement and high prison populations, not to mention fueling the drug gang violence in Mexico.  Whatever flaws 19 may have, they can be fixed later.  Let’s get the legalization process started.

Proposition 20 – Redistricting of Congressional Districts.  Vote Yes.  We passed Proposition 11 to take drawing district lines away from the state legislature and end Gerrymandering.  This extends it to federal Congressional districts.  The only downside is that California is Gerrymandered to elect more Democrats, so making it fair will favor Republicans.  Unless Texas and other states Gerrymandered in favor of Republicans follow suit, this will give a net gain to Republicans.  However, we need to start somewhere.

Proposition 21 – Vehicle license fee for parks.  Vote No.  We need the revenue, but earmarking it for parks is a bad idea.  California already has too many restrictions on how budget money is spent.

Proposition 22 – Prohibit State from borrowing transportation funds.  Vote No.  We don’t need more straightjackets for how the budget is handled.

Proposition 23 – Suspend Cap and Trade to fight Global Warming.  Vote No.  This hasn’t even taken effect yet, we need predictability.  Proponents quote a study that says it would cause job losses, but fail to point out the same study mentions job losses in fossil fuel industries, but job gains in green energy, with a net job gain.

Proposition 24 – Repeal of tax changes for business.  Vote No.  This proposition would repeal changes that make California business tax favor locating in other states.  A repeal would likely cost jobs, but would put more money in the budget initially.

Proposition 25 – Ends 2/3 vote to pass California budget.  Vote Yes.  End the gridlock.  Although this would end the Republican leverage to limit tax increases by Democrats, the Republicans have abused this to shoot down any tax increase, and we clearly need some.

Proposition 26 – Requires 2/3 vote for certain fees.  Vote No.  This is a blatant attempt by cigarette, oil and alcohol companies to avoid tax increases on their products.

 

May 16, 2010

We need to end the partisan gridlock. Vote yes on Proposition 14 for open primaries and yes on Proposition 15 for a pilot public funding of the Secretary of State race. The election is June 8, 2010.

Open Primaries

By allowing all parties to vote for each candidate in an open primary election, the moderate, centrist voters will have more influence, offsetting the current advantage of the radicals. This is the promise of Proposition 14.

Public funding

Many other countries and some US states provide for public funding of political campaigns (currently, the US only provides matching funds, and only for the presidential candidates).  The cost of public funding would be more than covered by the potential cut back on pork Congress doles out to contributors and the waste resulting from their addressing special interests instead of the people.  A similar benefit is postulated for California campaignsProposition 15 is a baby step in that direction, providing a pilot test of public funding only for the Secretary of State office.

 

Oct. 2, 2009

Last Piece of the Puzzle for Obama Health Care Reform – Effective Cost Controls

Imagine your grocery bill if you could simply take whatever you wanted from the store and everyone was billed the same each month?  Add an administrator charging 30% for billing and telling you which store you can go to.  That is our insurance based healthcare system.  Substituting the government would reduce the 30% by eliminating the profit (but not the overhead), but would not change the rest.

There are two structural problems that lead to high costs: 

(1) Excess insurance.  Insurance is used for more than its normal role of covering catastrophes.  Normal insurance doesn’t cover everyday costs.  Home insurance doesn’t cover painting, auto insurance doesn’t cover oil changes. 

(2)  Wrong incentives. The incentives are in the wrong place.  The “competition” is between middlemen - insurance companies and employers - not doctors and hospitals for patients.  The present system provides incentives for insurance companies to make profits by cutting coverage for the sick and only covering the healthy, rather than providing incentives to doctors and hospitals to compete to provide the best care for the lowest price. 

We know true competition brings down costs, while increasing quality, in other areas, such as consumer electronics and non-covered procedures (e.g., LASIK eye surgery).  That is because for non-covered procedures the competition is between doctors for patients, not between insurance companies.  The money is already there – we can move the premiums paid for everyday care to our own pockets, and use it to pay doctors directly without paying 30% to insurance company middlemen.

Would you get that extra test the doctor says isn’t needed, or would you shop around, if you were paying for it yourself?  Would you be more motivated to exercise or stop smoking by the far off threat of medical problems or by your premiums going up?  Perhaps you’d rather have a lower premium than pay for coverage for acupuncture, marriage counseling, hairpieces, and contraceptives, which are currently required to be covered by many states. 

The costs of health care are hidden.  We currently pay for everyone else’s healthcare – though taxes (Medicare, Medicaid, and tax subsidies for employer plans) and lower wages due to employer provided healthcare costs.  Next time you pay your taxes or don’t get a raise, remember you are paying for those who rush to the doctor for every headache, demand tests the doctor says aren’t needed, and clamor for the advertised new drug that is no better than the generic.

Excess costs are due mainly to (1) people with chronic conditions (often obesity or smoking related), (2) excessive end of life care (often unwanted) and (3) needless tests and procedures (doctors guarding against malpractice, or patients asking for everything because someone else is paying).

The coverage issues are dealt with by the Obama plan.  But to cut costs, we need to eliminate insurance for everyday care and only use it for catastrophic events or beyond a significant yearly deductible.  This solution should also be applied to Medicare.  The elderly as a group are wealthier than the young, so we should only subsidize the old that are poor.  In addition, we should give rate discounts for those with good personal habits (no obesity, smoking).  We should also allow lower rates for those foregoing excess end of life care.

Programs for all these cost solutions exist, but are in limited use.  Health Savings Accounts let patients pay themselves, and keep the excess in an IRA type account.  But there aren’t enough to affect the market and produce competition to reduce costs, and the accompanying deductible plans are priced too high by insurance companies (guess why?). 

Not only is Congress not taking on the insurance companies, it is giving them more business.  That is because Congress is owned by the insurance companies – the Republicans get money from insurance companies, and the Democrats get money from unions, which don’t want to give up their gold-plated policies that someone else pays for. 

There is a group that could influence Congress, but they don’t spend the time to learn the issues and insurance funded campaigns have scared, confused and manipulated this group.  This is also the only group that can control costs - through personal responsibility.   Unfortunately, this group has a poor track record on all these counts, and wants change, but not if the change affects them. So I’m not optimistic.  But imagine what would happen if each voter sent their representatives this article with a note saying they are willing to take personal responsibility for their end of health care, they are willing to live with change, and they will hold the representative responsible for his/her end.

See Health Care Reform.

June 28, 2009

Coverage is a red herring - It's the health care costs

Obama’s health care plan addresses symptoms (coverage) not causes – high costs due to profits of unnecessary middlemen (insurers), bad personal habits (obesity, smoking), excessive end of life care, and too much insurance (auto insurance doesn’t cover oil changes and home insurance doesn’t cover painting, yet health insurance covers everything). We currently pay for it all (through taxes or lower wages due to employer paid premiums) with insurers making decisions.

Competition brings down consumer electronics costs (and non-covered procedures, such as LASIK eye surgery), while medical costs increase.  Why?  The “competition” is between insurance companies and employers, not doctors and hospitals for patients.

Why don’t we just give people the insurance premiums for everyday care with a health debit card?  This will provide more money for health care by eliminating the 30% now going to profits and overhead.  Insurance would be for catastrophic events – the normal use of insurance.  We have this in Health Savings accounts (HSAs) today, but insurers don’t offer competitive prices for the accompanying high deductible plans (guess why?).  The patient decides what to pay for, and gets to keep unused funds as an IRA.

What we need is (1) a government plan for preventative care and the high deductible insurance to force competition, and (2) an end to the tax deduction except for HSAs.  The government plan should (1) cover the poor, (2) have incentives for healthy behavior and (3) provide lower premiums for those foregoing extraordinary end of life interventions. See Health Care Reform.

 

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Archived Blog entries

May 13, 2009

“Just say no” to California

A vote on budget (yawn) propositions is Tuesday (May 19).  Vote NO on everything.  No, no, no, no, no, no.  Send a message that we don’t approve of compromise, that we want more deadlock and we’d rather bring the whole state to a standstill and fire all those pesky government employees (teachers, firefighters, etc).

The polls show the voters plan to vote no and prove that California is ungovernable.  The Democrats in the Legislature wanted no funding cuts and the Republicans wanted no new taxes, but somehow they came up with this compromise mix of temporary tax increases, funding cuts, and borrowings.

The Republicans who compromised and violated their party’s “just say no” to taxes stance have since had their campaign funding eliminated by the Republican party and one was forced to resign as county party chief.  The rank and file Democrats refused to agree with their leadership at their convention because they are angry at their own party - they don’t want any funding cuts to education, health, or whatever their favorite program is. 

Sure, because of the recession everything needs to have cuts.  And sure, because education is half of the budget, it is impossible to balance the budget without either raising taxes or cutting education.  But we the people have been polled, and we don’t want to cut education and the other programs we like, and don’t want taxes raised.  Why can’t the legislature operate with these simple instructions?

A no vote will teach a lesson to those “reasonable” Republicans who compromised.  Let’s see if they do that again, after already having been stung by their party, then by the voters they stuck their necks out for.  Since we barely got the 2/3 majority to pass the budget based on these propositions, this will throw the Legislature into real deadlock.  Now that’s sending a message!

Vote no on Proposition 1A.  Setting up a rainy day fund?  No way – we want to spend all the money when it is there, and we refuse to accept it won’t be there some years (like now).

Vote no on Proposition 1B.  Don’t let those sneaky teachers get away with getting a payback of cuts to education funds in following years. 

Vote no on proposition 1C.  How dare they borrow from future lottery funds to keep from laying off more teachers now. 

More details.

March 22, 2009

Too big to fail, too big to exist

The Internet is robust because if one computer fails, communications get re-routed. It is a distributed system. The same model could be applied to our banking system. The antitrust laws should have a "too big" provision - no one should be allowed to accumulate the power to bring down our whole economic system by their bad decisions. Although there are efficiencies to size, we now see that they come with increased risk.  Just as high return stocks come with high risk.  America needs a more conservative portfolio with its banks.  Some may say that other countries will then become dominant.  We can make size a condition of doing business in the US, or simply allow other countries to play Russian roulette with their banks.  We’ll be safer in the long run.

 

Jan. 3, 2009

California Budget Crisis is an Opportunity

The budget crisis offers the chance to make needed changes that would not be politically possible otherwise.  Education accounts for half the budget, and thus is the biggest issue.  There are multiple reasons we have a crisis, but the main ones are (1) unsustainable increased spending when we had a surplus to reduce class sizes and increase teacher salaries, and (2) instead of supporting schools with property taxes, as was done pre-proposition 13, they are supported by volatile income and capital gains taxes, which are way down.

It is time to introduce cost-effectiveness into education funding, rather than simply throwing money at the problem – since we no longer have the money.  Reduced class sizes are the most expensive way to improve student performance, since it requires hiring more teachers and building more classrooms. The benefits are marginal, and are eliminated if, to reduce the class size, unqualified teachers are used.  This is what has happened in California – an unintended consequence of reducing class sizes.  Small class size has the most benefits for the early grades (kindergarden - 3rd grade) and has little effect in well-behaved classes.

Thus money is better spent on fewer, better teachers.  This means letting go the bad ones, closing classrooms (by closing some schools), and providing significant pay opportunities for the good ones to keep them.  This performance pay can be based on criteria that teachers approve, but it needs to be merit based so that teachers aren’t discouraged and quit because they see lousy, lazy teachers making the same. (see School Reform). 

It is also time to modify Proposition 13 to exclude corporate landowners and high income homeowners from its limits, and also remove the 2/3 voter requirement for special taxes (see Unbalanced Economy).

 

Nov. 2, 2008

A combined Obama-McCain Heath Care Plan is best

The best health care plan thus would appear to be a combination of Obama’s plan and McCain’s.  Obama addresses the uninsured problem and those without employer healthcare, while McCain tries to address medical costs by putting money in consumer’s hands, so they make the decisions.  Both are needed.

Obama’s plan provides purchasing pools for those without employer care, to help the uninsured and those with pre-existing conditions.  McCain’s provides a tax credit and elimination of the employer tax deduction.  By giving the tax deduction only for HSA’s, and having the pools only provide HSAs, people can be moved into these.  As set forth in Obama’s plan, this would not require changing doctors, and would make health care portable.  The tax deduction for non-HSAs could be phased out as was done for entertainment business expenses, with 80% deductible the first year, and reduced yearly thereafter for a gradual transition.

Health Savings Accounts can save money two ways: (1) cutting the cost of health insurance, and (2) cutting the cost of the actual medical services by putting the patient in charge, and thus creating incentives to shop around.  HSAs have been more successful on (1) than (2).

HSAs have not resulted in reduced prices because (1) price information isn’t made available and (2) there aren’t enough for service providers to care about the competitions.  See Health Savings Accounts have not created shoppers.  Also, those with these policies have tended to defer care as a way to save money.  This points to the need for government funded preventive care, or, perhaps better, HSA plans that include 100% preventive care coverage, as many now do.  There also needs to be a requirement or incentive (competition) to advertise prices.  Doctors used to advertise costs and compete back when patients paid directly, but no more.  (See Controlling Health Care Costs)

Below are examples of cost saving behaviors that don’t compromise care, and currently aren’t motivated because a 3rd party insurance company will pay for both (and the cheaper one requires more consumer effort):

- Buying drugs at drugstore.com or CostCo instead of the corner drugstore can save 67%.
- a double dosage pill often costs much less than twice the normal dosage pill, so buying the higher dosage pills and cutting them in half saves money. 
- Local anesthesia vs. general for minor surgery.
- Only take allergy drugs for severe, not minor, symptoms
- expensive MRI and CRT screening tests when the doctor says it isn’t needed, but currently patients sometimes insist on because they aren’t paying
- dilating eyes vs. more expensive digital picture without dilation
- health insurance that doesn’t cover some more exotic practices currently required to be covered, such as pastoral counseling, marriage counseling, chiropractors, acupuncture, massage therapist, social workers, IV fertilization, and hair prosthesis

 

Oct. 14, 2008

Obama v. McCain tax plans

This site supports adjusting the tax system to lessen the burden on the middle class, and end the lower rates paid on capital gains, which make up much of the income of the very rich.  In addition, this site supports eliminating the deficit, which erodes the buying power of the dollar for the middle class. 

Between Obama and McCain, Obama’s tax plan is hands down better than McCain’s plan.  McCain wants to lower capital gains even more (on seniors, most of whom are actually richer than the rest of us) and lower corporate taxes.  McCain also will keep the unreasonably low Bush tax cuts which led to the deficit in the first place, and will add to the deficit if continued.   McCain proposes to cut corporate taxes, and is right that corporate taxes need to be low to compete with other countries, but if all the tax breaks and tax shelters are counted, the actual rate paid is competitive, and the share paid by corporations has decreased significantly.  This site supports lowering them, but only combined with closing the loopholes and the subsidies.

Obama’s plan is to raise capital gains and let the tax cuts on the very rich expire.  This evens the playing field and will help reduce the deficit.  He also proposes a modest tax cut for the middle class and poor, which further evens the playing field.  Advantage Obama.

 

Oct. 7, 2008

California Prison related propositions

Three of the propositions on the Nov. 4 ballot deal with prisons, a topic of this site.  California has one of the highest incarceration rates in the world, without improving the crime rate, and the amount of the budget spent on prisons has more than doubled.  The only ones benefiting from this are the prison guard unions.  Here are our recommendations:

Proposition 5 – Nonviolent Drug Offenses.  YES.  Although imperfect, this is a first step toward reducing prison costs by using rehabilitation for drug offenders instead of prison.  Opponents are correct that rehab doesn’t work more than half the time, but that is a glass half full attitude.  It works better than prison.  It also will reduce prison crowding and expenses due to the parole boards current insistence on sending parolees back to prison for technical violations.

Proposition 6 -  Law Enforcement Funding.  NO. This requires $1 billion/year for local law enforcement.  It also adds a number of new crimes, mostly gang related crimes.  It goes the wrong directions, creating more defined crimes and requiring longer prison sentences.  This will lead to an increased prison population and costs, in addition to the mandated law enforcement expenses.

Proposition 9 – Victims Rights.  NO.  We already have victims rights.  This goes farther, and includes restrictions on early release of prisoners.  Sentences are already long, causing high costs, and this would limit efforts to reduce sentences to limit costs.  This has some good features regarding restitution, but goes in the wrong direction by limiting sentencing flexibility.

 

Sept. 27, 2008

The 2008 Credit Crisis
Everyone is talking about the credit crisis and the $700 billion bailout.  This is an example of unbridled capitalism without appropriate regulation, with the result that the middle class pays the bill.  It's fine to let people take risks and fail, but not when the consequences are to take all of us down with them.  Here’s a good description of what caused the crisis:

The Financial Crisis Explained

In summary, the credit crisis is due to home prices being driven unreasonably high.  Speculators bought, unqualified people were given loans and encouraged to take out home equity loans by banks wanting in on the action.  Investment firms packaged and sold the mortgages as securities.  Then the house of cards collapsed.  Investments banks, because of these bad investments, didn’t have the money to make more loans.  Credit has dried up in the last week.  Businesses can’t get loans to open new stores or refurbish, contractors don’t get remodeling work, equipment makers lose sales, which cause layoffs, which causes a chain reaction. 

There is a real danger of this spiraling into another depression. The costs to the taxpayers if that happens will dwarf the $700 billion. Distasteful as it is to bail out those who made bad investments, most economists say some action along the lines of the proposed bailout needs to be taken, and soon.  Even with the credit problem addressed with the $700 billion, we are still going to be in a recession. We can't avoid the recession, we just hope to avoid the depression.
Perhaps the one silver lining is that homes will be more affordable, once people are able to get loans.  The unbalance in supply in many areas due to NIMBY regulations limiting building was apparently overcome by the profits to be made.  So in many areas, the supply is there, limiting future upward pressure on prices for some time.

 

Sept. 21, 2008

California Budget

The new California budget just approved continues to “kick the can down the road.” As governor Schwartznegger noted.  A little less so after his veto threat, but we’re still borrowing against the future.  California is like a family restaurant business.  We had a good year at the restaurant and moved into a new home.  But the novelty of the restaurant has worn off, we have less customers, and aren’t making enough to cover the mortgage.  So we have three choices – get another loan, move into a smaller house, or change the restaurant business to adapt.  We’ve gotten another loan.

Since most of the California budget is for schools, moving to smaller house means cutting expenses during this recession, such as by increasing class sizes.  Changing the business means making the system more efficient, such as instituting performance pay for teachers and re-vamping the expensive, back ended pension plans to 401B plans for new teachers.  These steps could help address the costly teacher turnover, and improve the education of our future workers as well.

 

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