PRIORITIES

What is wrong with our priorities as a country? When is America going to get serious about our fundamental, perpetual problems? There are subjects that politicians-including presidents-refuse to talk about. They don’t have the guts to tell the American people the truth and face up to the lobbies. Politicians avoid making tough decisions-it’s too big a political risk. So they don’t solve any of the persistent, serious problems. Here are some of them.

Federal Spending

You couldn’t run a company the way we run our country. We would have long ago gone bankrupt and out of business. But we just keep printing money and putting off addressing the financial problems and leaving them for our children and grandchildren to deal with. The national debt has been increasing significantly over the past 20 years and is now about $20 trillion. That is almost as much as the total gross domestic product/GDP of the entire United States. And it is at its highest level as a percentage of GDP since World War II. Despite historically low interest rates, the US government pays almost a half $1 trillion annually for interest on that debt - one of the large elements in the federal budget. The US federal government is currently spending nearly $4 trillion a year. “Mandatory spending” comprises about two thirds of that - primarily for Social Security and Medicare. And those two trust funds, which almost the entire population will be dependent upon at some point in their lives, are going broke and the politicians continue to do nothing about it. Of the “discretionary spending”, more than half goes for defense. The US has been running a budget deficit every year for the past 15 years. And even though it is lower now than at its peak during the recovery from the most recent financial crisis, it is still a staggering half trillion dollars. When are the politicians who are supposed to represent us and service us going to address this serious problem? For more related to this – see “Government Cost Performance” below.

Government Cost Performance

In the corporate world, a company can’t survive if it’s not effective and efficient. But the largest organization in the US, the federal government, has not been effective or efficient at least for decades. But the administration and Congress refuse to address it. And the taxpayers keep paying for it and the national debt keeps rising (see above). Consider some of the agencies with the largest budgets. The Department of Health and Human Services actually has the largest federal budget, almost twice that of the Department of Defense at over $1 trillion. Close behind that is the Social Security Administration at almost $1 trillion. They are followed by the departments of Defense and Treasury at more than a half $1 trillion each. Then you have the departments of Veterans Affairs and Agriculture at well over $100 billion each. Just the enormity of those budgets would make you believe that there has to be opportunities to lower costs and improve efficiency. But we all have some knowledge, and perhaps some personal experience, with some of these agencies, which are at best bureaucratic and in some cases known to be inefficient or even ineffective. We have heard much too much for much too long about the scandalous performance of the Veterans Administration. And then we frequently hear reports about government employees abusing the system. For example, apparently thousands of IRS employees don’t pay their taxes, but many of them received bonuses and raises. So when this was discovered, the new IRS policy was that employees who don’t pay their taxes will not receive bonuses! How about will not be employed by the IRS? Then there is the U.S. Postal Service, which is an independent agency of the US government. The USPS budget is about $70 billion a year and it has been running deficits of about 20% of that every year. It can’t compete and can’t survive at that rate. There are over 35,000 post office facilities in US. Almost every town and village has one. In New England almost every post office is located within 15 minutes of another one. And there over half a million post office employees - most with very good salaries, benefits, and pensions. This is unaffordable and our postal rates are the lowest in the world. Like many other government agencies and services, it should be streamlined and perhaps privatized. How about just giving the Post Office to the UPS and as part of the deal require them to continue and improve the service? The administration of the federal government, and probably at the state and local level also, is not managed like a business - it is run more like fiefdoms. The American people cannot afford this (see federal spending above) and deserve better.

Trade Deficit

The US has the largest trade deficit of any country in the world – over half a trillion dollars! We have been running trade deficits of between $30-$60 billion per month for the past 15 years - and have consistently had a negative balance of trade over the past 40 years primarily due to imports of oil and consumer goods. The largest trade deficit is with China – by far. “China’s entry into the World Trade Organization in 2001… gave the country’s exporters preferred access to American consumers.” This has come with serious consequences to the US. Economists have reported that “between 1999 and 2011, the growth in imports from China killed about 2.4 million American jobs, one million or so of them in manufacturing.” The US also has a large trade deficit with Mexico, primarily as a result of the North American Free Trade Act/NAFTA, which was implemented in 1994. It has been reported that caused the loss of about 700,000 jobs in the US - mostly in manufacturing. It has also been reported that “NAFTA strengthened the ability of U.S. employers to force workers to accept lower wages and benefits” – under the threat of moving jobs to Mexico. Of course, there are also some benefits to this global trading. US consumers have access to goods at lower prices and the exporting countries can significantly improve the quality of life of their population with the increases in jobs and pay. “Free trade” sounds good, but “fair trade” is better. The recent significant increase in the US production of oil has helped to reduce that portion of the trade deficit due to importing oil. However, the trade deficit due to importing goods continues to increase. We need better trade deals that are more balanced and sensitive to jobs in US. The administration and Congress have not done this.

Taxes

The US tax system, at the federal and state level, is ineffective (see federal spending above), incomprehensible (the IRS tax code is 9000 pages!), and inequitable (some specifics on this below). Many people and politicians think that we should tax the rich more. But it turns out that the top 5% income earners already pay 60% of the federal income tax. And more than a third of those filing personal income tax returns (which is not everybody) paid no federal income tax – including thousands of millionaires! Many large corporations pay no federal income tax. But the US federal corporate tax rates are the highest of developed countries, so many US companies keep their foreign income outside United States. The IRS tax code was written by politicians, lawyers, and accountants influenced by a wide variety of special interest groups. How about the tax exemption for “non-profits” - including many large organizations that make a lot of money - like the NFL, NHL, and PGA Tour that pay millions to player athletes? Or the many other nonprofits that can spend up to half their revenue on political lobbying? Why should the ordinary taxpayer be subsidizing these profitable organizations? Or the hedge fund managers - many of them billionaires - whose income is treated as capital gains with a much lower tax rate than ordinary income would be taxed. And there are all kinds of tax credits and tax breaks at the federal, state, and local level - an extremely complex process which provides, in many cases, large benefits to a small number of individuals and companies with questionable benefit to the ordinary citizens who are paying for it. There are many other examples of tax law that makes no sense or can and is abused. Why not just simplify the tax code and reduce the cost of the IRS, tax accountants, and attorneys? What would be wrong with a “flat tax” - with no deductions, exemptions, or special rates? And/or a consumption tax (e.g. a “value added tax” - like in many other developed countries)? Paying taxes should be like paying dues to a club or association. If you want to be a member of the club - in this case a citizen of the United States - you have to pay some dues to support the cost of government services. Everyone knows that the tax system is broken and abused, so why don’t our representatives, who are here to serve us and solve problems for us do something about it?

Infrastructure

America once had the most advanced infrastructure in the world -interstate highway system, utility systems, airports, bridges, railroads, etc. But now it is falling apart and we are doing very little if anything at the federal and state level to fix it. For example, the federal transportation/highway trust fund has been running deficits for years and risking insolvency. The major source of revenue for the fund is taxes on motor fuels, which haven’t changed in over 20 years despite the significant increases in the price of those fuels and of course, the ever increasing cost of maintaining our highways. Our highways, bridges, railroads and water systems are crumbling - with all too frequent accidents, failures, and closures - many well over 50 years old. And many of our airports and railroad stations are “Third World” facilities – embarrassing! But, the US spent trillions of dollars on failed wars in the Middle East and bailing out large banks. We’ve got our priorities wrong - and politicians need to recognize that they are responsible to the people for maintaining the country’s infrastructure.

Healthcare

Why can’t the US get healthcare right? Other countries do a better job than we do. It has been reported that government spending for health care at the federal, state and local level is currently at about $1.4 trillion annually. And that in total, the US spends more on healthcare than any other country in the world and yet it has been reported that it performs worse than most developed countries in health outcomes. The recent implementation of the Affordable Healthcare Act expanded health insurance coverage, but also experienced many problems. The system is plagued by inefficiencies, bureaucracy, and escalating costs. Have you ever looked at the breakdown of charges and payments on some of your large medical insurance claims? I often find that the initial charges by hospitals and healthcare providers are extraordinarily and artificially high and then negotiated down to some level acceptable to the insurance company that would then pay some portion of that leaving a balance for your co-pay. This seems to be a rigged system designed to facilitate continuously escalating costs. Some of the largest health insurance companies have recently opted out of the system. And then there are the reports of fraud and waste - such as in the Social Security disability program. This is a complicated subject, but it’s important to the lives of all Americans and deserves to be managed better. However, the U.S. Congress and federal administration only spend their time fighting politics and not addressing the problems.

National ID

There has been talk for years about creating a single, common national identification system. But the politicians will not touch this for fear of public opposition. I just don’t understand who would oppose it and why. What’s the big deal? We have all kinds of government-issued IDs, some mandatory - such as driver’s licenses, passports, Social Security and Medicare cards, birth certificates, and more recently “Known Traveler Identification”, etc. You can’t drive a car, get on an airplane, cash a check, or even buy a six pack of beer without a proper ID. And of course many companies issue security badges and IDs to their employees. A high-tech ID system including photo, personal data (e.g., description, current address) and some kind of biometric (e.g., finger prints), together with a comprehensive federal database could solve a lot of problems. That would include illegal immigration, voting fraud, tax avoidance, identity theft and more. Why shouldn’t every US citizen have a national ID? If you’re a member of a club - in this case a citizen of the United States - you should have a membership card. For those who think this would be an imposition or invasion of privacy, you might think about when every man who reached 18 years of age had to register for the draft and get a draft card. Some people who are against this - especially some politicians - actually support issuing driver’s licenses to illegal aliens! This just makes no sense. I think all citizens should be required to register at birth or when they gain citizenship - with expanded identification when they reach 18 years of age. This may take time to do, but is not unlike many of the existing identification systems and worth doing. We have wasted years talking about it and doing nothing. It can start now and get it done.

Wars

Who appointed the US to be the “global policeman”? Since World War II, the US has been involved in some kind of war somewhere in the world almost continuously – Korea, Vietnam, Iraq (twice), Somalia, Kosovo, Afghanistan (for 15 years – and counting), Libya, Syria – and other lesser conflicts. For some reason we think we have to intervene in every regional conflict around the world - many of which have been failures. You could argue that some of these wars were for humanitarian purposes or, as in the case of Afghanistan, in retaliation for 9/11 against Al Qaeda. But many of them are for intervention into civil wars to support regime change. As we discussed above, this country can’t afford to do that financially, but you also have to question whether it should be doing it morally. The US should not continue to fight other countries’ wars. It’s time for politicians-especially our presidents and military leaders to take a hard, objective look at what we are doing and why.

Gun Violence

Despite a rash mass killings and increasing shooting incidents in big cities, politicians do not have the guts to pass or restore legislation to control guns. In particular-an assault weapons ban, no purchases of those on “no-fly lists”, etc. This situation is out of control and it’s time to do something about it. For more on the subject click here for our commentary.

- And there are many other problem areas-perhaps more on them later.

All Rights Reserved © 2016 Henry P. Mitchell