What is the American Dream?

Now that America is experiencing an economic slowdown brought on by a banking crisis, many Americans feel that they are missing out on the American Dream.  But what is the American Dream?

I think that it used to be that a poor, uneducated person can come to America, work hard at his greatest talent and become very, very rich.  His children will be brought up with everything money can buy and go on to father generations of rich, well educated, attractive Americans. This dream is still alive for the billions of poor, uneducated people all over the world - that if they can get to America, the Promised Land, they will also be rich and successful.  It seems almost guaranteed.

For Americans after World War II, the Dream became having a good job, owning one’s own home with two cars in the garage, having at least two kids and retiring with a generous pension after a long career of good work.

But sometime around the 1970s or 80s the definition changed again.  In recognition of the fact that while all of us are created equal some have much more than others and some have very much less, we decided to level the playing field by stressing variety over performance, diversity over excellence and entitlement over hard work.  We now live in a country where half the population pays no taxes while one percent of our people own and control most of our country’s wealth.  A recent study found that the average white American has assets (like homes, bank accounts, IRAs, pensions, gold etc.) worth 20 times more than the average black or Hispanic Americans do - $120,000 versus $6,000.  And more alarming that 90% of Americans have total assets worth less than $600,000.  We are hearing that now one in five children lives in poverty defined as $22,000 a year for a family of four.  (This same amount is what many of our congressional representatives go through each month for their lifestyle.)  We have 14 million people out of work instead of the normal 4.5 million.  There are now almost 50 million Americans on Food Stamps up 40% in a decade.

What is our American Dream now - more generous Food Stamp benefits, another extension of unemployment benefits, a lowering not only of our mortgage interest rate but also the principal owed or more soup kitchens serving better quality food?

And what is the Dream for our children?  Can they look forward to excellent, affordable education, at least K-12?  Can they look forward to getting objective and comprehensive news coverage from the media or to having political candidates who have the country’s interest at heart and the intellect and integrity to realize their highest hopes for the people?  Must they continue to work to fund the biggest military force the world has ever known covering every continent with almost 1000 military bases filled with our 2.5 million military personnel or foreign aid to cruel dictators to prevent worse dictators from taking over?  Will they have good jobs that are neither outsourced nor insourced and will those jobs provide them with a substantial pension when they can retire at age 75?  Will Social Security and Medicare still exist and will living and affording it still be possible?

What could the American Dream be now and in the future?

Could it truly be the greatest country with the greatest people who are united as a people not distracted with their identification with their foreign ancestors?  Could we be a country rich enough to eliminate poverty among our people, wise enough to dramatically reduce waste and pollution, practical enough to realize the primary importance of providing the very best education from kindergarden through college, secure enough to pull our troops out of foreign lands and wars knowing that the best defense is a strong economy and an educated united populace?  Could we once again be known as a country that makes great things that the world wants while able to be self sufficient in raw materials, finished products and needed services?

Is it just a dream and not an entitlement or guarantee?  Yes, but it is a dream that we can make come true if we work hard enough for it rather than sitting around waiting for it to happen.

Saving Medicare and Medicaid

During the recent discussions about reducing our national debt some have mentioned Medicare and Medicaid as sources of future fiscal concerns.  Baby boomers, people born between January 1, 1946 and December 31, 1964, are beginning to turn 65 at a rapid rate.  The government estimates that 10,000 people are joining the Medicare rolls every day.  Medicaid, a medical program for low income Americans, will be gaining 30,000 recipients in the next few years when the medical reform signed into law goes into full effect.

Medicare is funded by payroll deductions made by employers and their employees.  When eligible because of age or disability, recipients pay about $115 a month for medical coverage.  Companies paying for their employees’ private health care coverage costs spend about $1200 a month or ten times the Medicare contribution.  This disparity is unsustainable.  The accumulated funding for this program is down to a few hundred billion dollars and the current ratio is down to three workers for every retiree, not enough to make up for the cost shortfall.

What can be done?

First we must find where the major costs are.  Almost half of Medicare and Medicaid costs are in end-of-life care.  This includes nursing homes which can easily cost $100,000 a year; expensive surgery to extend life a little; and prosthetic costs for everything from knee or hip replacement to new dentures and dialysis for those not eligible for transplants as the biggest source of cost. The fact is that we are living much longer and using science to stay alive as long as possible as though in some kind of longevity competition.

We will have to make some moral decisions about our final days.  Do we want to exhaust all remedies to prolong our lives no matter how painful or costly?  Is quantity more important than quality?  I suggest that we must consider quality over quantity and think in terms of costs and benefits. 

If we are offered an optional surgery that will cost more than $100,000 while costing us only $20, should we consider its cost?  It’s not our money.  I say, yes, we should consider the cost as though we were paying for it ourselves. But do we?

In the new economy, we are being asked to make sacrifices for the greater good.  Here is a good kind of sacrifice.  Let us be willing to call it a day when our time comes and not accept expensive means to artificially extend our lives.

Since much of health care costs are hospitals and nursing homes, we must ensure that they are run as efficiently and effectively as possible. 

Then there is the cost of medical doctors and specialists.

Medical doctors must first go through years of education.  Undergraduate pre-med student spend at least three years taking chemistry, physics, biology and calculus, exclusively.  They take no philosophy, psychology, humanities or literature courses.  They are not encouraged to read novels. They are less well rounded than the average liberal arts major.  This could contribute to an alienation from the full human experience.

If they study hard and focus primarily on their studies and on getting great grades, they can get into a medical school.  They spend four years studying more about the science and math of the human body.  They then spend two years interning at a hospital followed by two to four years as a resident learning their specialty - internal medicine, heart surgery, oncology, etc.

By the time a doctor is ready to set up a private practice or join one, s/he is about 32 years old.  If the new doctor is not from a wealthy family, and many are, then there is a loan worth in the six figures to begin paying off.  The doctor must get insurance in the event that some ungrateful patient and crafty lawyer conspire to make money of this doctor’s hard work.  The doctor must earn money, real money and now.

Today there is a concern that doctors who are trained as primary care physicians cannot make enough money to pay off their loans, pay their insurance and live in a lifestyle appropriate to their rank and status. What will we do if doctors decide on more lucrative specialties?  Who will do the job?

Doctors going into specialties seem to quickly forget everything they learned that does not bear directly to their specific area.  A cardiologist doesn’t have to know anything about diabetes, or cancer or back problems or broken bones. An oncologist does not have to know much about heart function.  Most specialists show very little interest in any other area. 

Why is medical education so long, expensive, difficult and seemingly unnecessary while being so limited? Is this education meant to provide all the needed tools or is it a system to weed all but most elite within very narrow definitions?  Could medical training be made both much shorter and more relevant?  Instead of all that chemistry, physics and calculus, what about more courses in the social sciences and humanities?  What about courses in management so doctors can manage their staffs as well as their personal business affairs?

And if primary care physicians don’t get paid enough, why not use nurse practitioners for almost all primary care?  Can they be used as specialists too? Nurses are more hands-on than most doctors and rely more on the person’s body than on test results.  It takes about three years to train a nurse practitioner and they cost much less than doctors.

Then there is individual responsibility and, perhaps, sacrifice.  What would happen to healthcare costs if we all kept our weight under control, didn’t smoke cigarettes, exercised regularly, drank a minimum of alcohol and a lot of fresh water - became aware of and thereby controlled many of our unhealthy beliefs and practices?  What would happen to health care costs if we could prevent and/or cure cancer, heart disease, and diabetes?

This is, the kind of thinking needed to bring down the cost of all American health care including Medicare and Medicaid.

Reducing the Budget Deficit

The president has just agreed to a deficit reduction deal that would reduce federal expenditures by $900 billion over the next ten years beginning October 1, 2011.  The annual shortfall is currently at about $1.1 trillion.  This agreement would cut that to $1 trillion. 

There is a provision to come up with future cuts of more than $1.5 trillion over the ten year period.  That would reduce the $1 trillion annual deficit to about $850 billion.  Our current $14.4 trillion accumulated deficit would be $23 trillion in ten years if these cuts take place.

Some of us may remember that we tackled the deficit in the mid 1990s.  By fiscal 1999-2000, under Democratic President Clinton, we were running an annual budget surplus and headed to eliminate our then accumulated deficit by 2003.  But after 2001, our Republican President cut taxes mainly helping the highest earners and got the country into two wars.  The two wars costs were not considered as part of our budget which was running $500 billion in the red without these costs.  Then to make matters worse, the tax cuts added no new jobs and when the housing bubble burst, so did our economy.  We lost millions of jobs.  With as many as 15 million Americans out of work and losing 750,000 a month, the country’s tax revenues shrank while government costs for unemployment insurance and health coverage rose dramatically.

The incoming President inherited a $12 trillion accumulated deficit and was forced to spend more than $1 trillion a year more than we were taking in to save our very economy.

Now the deficit is at $14.4 trillion and we have to stop increasing it and then must work to eliminate it.  But how?  We are recovering from a devastating recession and still have very high unemployment.  The wrong kind of cuts could further weaken the economy.

Here’s what I would do.

First I would cut all costs which leave our country.  These dollars do not circulate here and stimulate our economy.  The first expenditure that comes to mind is foreign aid.  The U.S. which is now borrowing $.40 for every dollar we spend, gives 51 countries a total of $50 billion a year in foreign aid.  The biggest single recipient is Israel at about $5 billion.  But Egypt and Pakistan are also getting billions a year.  Most of the aid is misused and goes to corrupt leaders rather than their intended needy.  Some of our money actually goes to fund our enemies.

I say end all foreign aid, even to Israel the country that probably deserves it the most.  That would save $50 billion a year or $500 billion over ten years.  It would not cost any American jobs.

Next I would look at our 700-1,000 military bases overseas. 

I would bring our troops home from Iraq, Afghanistan, and Pakistan closing all our bases there. I would close all of our non essential bases everywhere else including Asia (Japan and South Korea as well as the Philippines), Western Europe defending against a Soviet Union that no longer exists, and the Middle East.  Host countries that want us to stay, if any, can pay all our related costs.

The troops that are in the reserves stationed in Iraq and Afghanistan would return home to their civilian positions.  The enlisted service personnel coming home to U.S. soil would be free to leave the service or stay on meaning that we would recruit fewer replacements.  Over a 10 year period, this closing of foreign bases as well as ending our wars in the Middle East would save us at least $4 trillion.  Remember most of the  money we are now spending overseas, stays overseas.

Next, I would look to cut waste and fraud in federal programs.  That is said to be $150 billion a year according to a recent congressional study.  That is $1.5 trillion over the 10 year period.

That would be $6 trillion in savings over a ten year period.

But what about increasing revenue?  I would eliminate the subsidies for farmers and oil companies.  Then I would simplify the federal income tax code for individuals.  I would eliminate all itemized deductions and replace them with a standard deduction of $15,000/$30,000 for individual/couple. I would have all sources of income treated the same and combined.  So the net wages (not taxing the payroll deductions) would be added to the interest amount, the Social Security benefit payments, unemployment benefits, dividends, lawsuit settlements, bonuses, stock options etc.  There would be just five tax brackets ranging from 10%, for net incomes up to $50,000 up to a maximum of 30% for income over one million dollars a year. There would be no credits like for education or “earned income.”  Taxes would take minutes to compute.  The top earners would see their marginal tax rates decline from about 36% down to 30%, but the 30% will be with no deductions other than the standard.

This change in the tax code would generate approximately $300 billion a year or $3 trillion over ten years

Self employed and corporate tax codes would also be streamlined and simplified producing more revenue with fewer deductions.

All told there would be $9 trillion in savings over the ten year period.  It would leave us with only a $16 trillion deficit (not a $25 trillion one) which would be eliminated in another 10 years with more people back to work by then and therefore paying instead of costing taxes.

And who would be hurt by all these changes?

The rich would be paying more than they are now.  Every dollar over one million would be taxed exactly 30% and every kind of income would be treated equally - no more 15% for capital gains. They would have less money to invest and less to spend lavishly, which while decadent,  pays the workers well which then passes through the economy.  They might be less generous in their donations to charities since they will not be deductible.
Institutions that relied on tax deductible donations might suffer, at least at first.  Soon people will find that they give because they want to help, they want to give back.  That is their motivation and not getting 15 or 25% of it off their taxes.

Will people stop buying homes because they can’t write them off?  Most home owners do not itemize more than $30,000 on their joint returns.  They would get a standard deduction of $30,000 under this new plan.  Again, soon people will realize that saving a little on taxes is not a big or good reason to buy a home.

The people at the bottom of the economic scale will also suffer some.  Half of all wage earners not only pay no federal income taxes, they actually receive money in the form of Earned Income Credit and Making Work Pay Credit - about $115 billion a year.  This would end.  And everyone earning more than the standard deduction ($15,000/$30,00) would pay some tax whereas now they would be getting money.

Tax preparers, who usually are seasonal, would lose because anyone who can add and subtract could do their own taxes in minutes. In fact in a few years the system could do it for the taxpayer.  It would know every income source tied to the social security number and since there are no itemized deductions, IRS would know exactly what your tax was. Tax preparers would still be needed for self employment and other business tax returns which would also be streamlined but would have to have deductions like payroll costs and rent.

Our reduction in foreign aid will mainly hurt the corrupt government officials who build palaces, secret weapon systems or large Swiss bank accounts with our aid money.  It would hurt Israel, the one country that uses the aid wisely.

Withdrawing our forces from around the globe might actually make the world a safer place and create a better image especially in the Arab world.  Getting out of Iraq and Afghanistan might mean that they will eventually fail.  It will be their failure as it will their success if all goes well.  We must let countries succeed and fail on their own.  It builds their national pride and self esteem so that they can appreciate us as friends and not as overlords.

Many of our troops fighting in Iraq and Afghanistan are in the reserves and would love to come home to their regular lives.  Others, stationed overseas would like to come home and return to civilian life.  They would be happy about these proposed changes.  The question will be how many are left and where can they be assigned here in the States or in select strategic positions and what kind of forces do we need. The support personnel at the foreign bases would lose their jobs.  The base teachers, nurses, custodians etc., many from the host country would suffer in this change.

After all these changes, America would be stronger economically and even militarily.  America and the world would be safer. We will no longer be the 911 of the world.

All these recommended changes do not address the creation of more jobs, keeping Medicare and Medicaid solvent and protecting the future of the Social Security system.  These issues will be addressed in a separate column.