Example of how the media promotes conflict

In my business career, I became accustomed to the US regulatory process. Congress would pass laws and the Department of Labor (DOL), IRS, EEOC, etc. would pass regulations to administer the laws. And, they used to be reported as such. The DOL released proposed regulations today, e.g.

Now, to promote conflict, these departments are rolled up into one category – the Obama Administration. This likely started before with George W. Bush, but to me it is done to represent that the President must be extending his powers. When, in fact, it is these departments doing what they have always done, nothing more or less.

The process works usually like this. A department will propose new or revised regulations to address a new law or an outdated one. There will be a formal comment period where feedback is sought. Then, the proposed regulations will be revised and another comment period may occur. Then, the regulations will be released.

To their credit, the departments do listen to feedback. And, sometimes if the pushback is so severe, they will be pulled and redone. Back in the early 1990s, there were some regulations passed that were so-God awful (called Section 89 to regulate non-discrimination in healthcare benefits), they were pulled.

While regulations come in all shapes and sizes, I want to take the chance to mention my favorite regulations issued by the IRS. I call them the Mea Culpa regulations, but they are better known as the Voluntary Compliance Program. In essence, if an employer discovers an error in compliance, it can remedy the problem and approach the IRS with its solution. They would pay a set small fine from a menu of choices and demonstrate how they fixed the problem. Often, it would be restoring lost benefits or financial restitution to affected employees. This happens more than you would think, but it is a great example when government gets it right.

So, the next time you hear reference to the Obama administration doing something. Let’s not jump to conclusions. It may just shoddy reporting on a mundane task. Continue reading

A few ideas on the US deficit and debt

I have written in the past few years (and weeks) about the US deficit and building debt as it is a ticking time bomb. We failed to reach a grand bargain early in the Obama presidency after the marvelous efforts of the Simpson-Bowles Deficit Reduction Committee. And, that is unfortunate as it was a terrific model to start legislative conversations. While I think the President has done a pretty good job, I see shelving the Simpson-Bowles work as his biggest failure.

Recently, I cited the sixteen myths about our deficit and debt problem in the US, that I gleaned from a bipartisan organization called Fix the Debt which can be found at http://www.fixthedebt.org. As with the efforts of Simpson-Bowles, reducing the debt cannot be done by panacea and will require bipartisan trade-offs that include a mix of revenue increases and spending cuts. The Simpson-Bowles recommendations blended about 1/3 tax increases with 2/3 spending cuts to make huge strides in reducing the debt.

It will definitely not be accomplished by tax cuts as proposed by the two leading GOP candidates for president, who former GOP Senator Alan Simpson said would so significantly increase the deficit, that there are not enough spending cuts to bring the deficit down. Both leading candidates tax proposals have been scored unfavorably by The Concord Coalition, another bipartisan deficit and debt reduction group in this regard, which is a concern, especially with one of the candidates touting how much of a deficit hawk he is.

Solving this problem will require trade-offs and both political parties will need to check their baggage at the door. From an exercise called “Debt Busters, An Interactive Budget Education Exercise by The Concord Coalition” which can be found at http://www.concordcoalition.org, here are few examples of what can be done. This is not a complete list, but is indicative of the kinds of options that could be considered. Note, the numbers reflect the impact on the deficit over the next ten years as measured by the Congressional Budget Office.

Spending Cuts

It should be noted the three largest areas of spending are Medicare/ Medicaid, Social Security and Defense.
  • Reduce healthcare spending by adding a public option to the Affordable Care Act (ACA), limiting the subsidies to people making 3 x the poverty limit or less (it is currently 4 x)  and limiting malpractice suits = $327 Billion deficit decrease
  • Reform Medicare Part B premiums to be 35% of the cost (closer to the initial intent of 50%) and convert federal share of Medicaid payments to a fixed annual block grant = $749 Billion deficit decrease
  • Reduce specified defense spending deferring development of a long-range bomber and number of ballistic submarines = $41 Billion deficit decrease
  • Reduce domestic spending by reducing the size of the federal workforce through attrition = $49 Billion deficit decrease
  • Increase Social Security retirement age gradually to age 70 and calculate cost of living adjustments based on consumer good price changes = $217 Billion deficit decrease

Revenue Increases

Increasing revenue is something that has to be considered. Strong opinions flavor this discussion, but this is where the exercise earns its keep, as it let’s folks consider the trade-offs and priorities.

  • Increase the Social Security Taxable Wage Base to $177,500 from its current limit of $118,500 which would draw in more FICA taxes = $672 Billion deficit decrease
  • Increase gas tax to 35 cents per gallon (or something equivalent in mileage tax) earmarked for Highway Trust Funding = $469 Billion deficit decrease

I purposefully stayed away from more tax increases, but reconfiguring our tax code to get more corporations to keep revenue taxed here and simplifying our individual tax code should be considered. Those ideas could be deficit neutral or deficit reducing, but we should think very hard about lowering tax revenue as we cannot afford it in my view and the view of the above bipartisan sources.

Please check out these websites and speak with your congressional representatives and senators. And, ask candidates pointed questions about their plans. Their failure to do something about an obvious problem, telling us what we want to hear via promised tax reductions, does not help us and is a reason our younger adults are frustrated. They will be the ones who have to bear the burden of our poor stewardship.

Fiscal FactChecker: 16 Budget Myths to Watch Out For in the 2016 Campaign

I have written several times that we need to do something about our debt crisis, as the problem is only going to get worse. I liken it to having a water problem in your house. If you don’t fix it now, it will get far worse later on.

In addition to The Concord Coalition who I have mentioned before, a sister nonpartisan group to their effort spawns from the Committee for Responsible Federal Budget called Fix the Debt. The Board of Directors of the Committee include some big names who served in various government, think-tank and business roles. The Fix the Debt group was founded by former Chief of Staff Erskine Bowles and former Senator Alan Simpson of the Simpson-Bowles Deficit Reduction Committee.

I will provide a link below, but wanted to summarize a piece called “Fiscal Fact Checker: 16 Budget Myths to Watch Out For in the 2016 Campaign” which is dated August 6, 2015. Those myths are:

Myths about the National Debt

  1. We can continue borrowing without consequences
  2. With Deficits falling, our debt problems are behind us (this is expected to reverse in 2015-16)
  3. There is no harm in waiting to solve our debt problems
  4. Deficit reduction is code for austerity, which will harm the economy

Myths about Taxes

  1. Tax cuts pay for themselves
  2. We can fix the debt solely by taxing the top 1%
  3. We can dramatically lower tax rates by closing a few egregious loopholes
  4. Any tax increases will cripple economic growth

Myths about Health Care and Social Security

  1. Medicare and Social Security are earned benefits and therefore should not be touched
  2. Repealing Obamacare will fix the debt
  3. The Health Care cost problem is solved
  4. Social Security’s shortfall can be closed simply by raising taxes on or means-testing benefits for the wealthy

Myths about easy fixes

  1. We can solve our debt situation by cutting waste, fraud, abuse, earmarks and /or foreign aid
  2. We can grow our way out of debt
  3. A Balanced Budget Amendment is all we need to fix the debt
  4. We can fix the debt solely by cutting welfare spending

In addition to the above, I wanted to reiterate two global trends that impact the US as well. First, per the World Health Organization, we are the most obese country in the world, as well as having the highest costing health care system in the world. The Affordable Care Act has helped, but we are over-tested, over-medicated and future train wrecks waiting to happen This will create continued cost pressures on Medicare, Medicaid and the subsidies under Obamacare.

Second, per the World Economic Forum, we are an aging population. We are not as bad off as places like Japan, Greece, Portugal, Spain, etc., but as we age cost pressures on Social Security and Medicare/ Medicaid will heighten. For people in their 60’s, the average cost of health care is roughly twice that of folks in their 30’s. The aging is actually hitting some of our states and municipalities with increased retirement liabilities relative to fewer workers being hired. Detroit, Stockton, and Birmingham have all filed for bankruptcy, with this being a contributing cause, plus states like Illinois, New Jersey, etc. are having significant retirement cost pressures.

Please check out these two websites and see who is involved in these nonpartisan efforts.

http://www.concordcoalition.org/

http://www.fixthedebt.org/

Also ask your Senators, Congressional representatives and Presidential candidates what they plan to do about this. Like climate change and the global water crisis, we can no longer wait on action.

Sequestration and GOP Candidates Defense Gutting Comments

I find it interesting when politicians and leaders try very hard to load blame on someone else. The rule of thumb is take credit for good things, even if you had a little do with it, and lay blame on others when it does not fit your narrative when you or your party did have a hand in it. Michigan Governor Rick Snyder’s blaming others for the Flint water crisis is a good example. Another is the Republican led Congress blaming the President for the Phoenix Veterans Administration disaster, when the problem has been festering for years and that same Congress just two months before did not pass a $60 Billion plus funding bill to shore up the VA.

On the Presidential circuit, GOP candidates are blaming the President for “gutting” defense, when they seem to forget this unusual word “sequestration.” First off, the military was not gutted and the cuts were based on military leader recommendations given a tighter budget, as a result of the sequestration cuts. But, the Republican led Congress played a huge role in sequestration to cause these cuts to occur, which the Republican Presidential candidates fail to mention.

Back in the summer of 2011, the debt ceiling needed to be increased. Speaker John Boehner and the President worked hard to reach an agreement, but Boehner could not deliver the votes from his strident conservative members. So, they agreed to lift the ceiling, but there had to be a bipartisan committee formed to come up with some plans for budget cuts. If the committee failed to agree, Boehner and Obama set up larger across the board cuts called sequestration that would automatically go into effect.

The two major players felt that if they made the sequestration cuts so onerous, no one would let them happen. Even they underestimated the inability of Congress to do much of anything. The bipartisan committee failed to agree on any actions being split by party lines. So, the cuts went into effect with the military leaders making recommendations based on the reduced budget. Members of Congress had varying degrees of reactions to these recommendations, especially when they realized it meant people in their states and regions being impacted. Yet, they are the ones who set this in motion as they had numerous occasions to stop the sequestration train.

I am not writing this to let the President off the hook for his role. Yet, to assign him the blame alone and overstate the cuts saying they gut the military is a little over the top. I do want people to know that the lack of collaboration and strident views of members of the Republican party in Congress had a huge role in the sequestration. In fact, for most of his tenure as Speaker, Boehner usually got “must-have” legislation using more moderate GOP members to vote with Democrats. In this instance, Boehner did not want to move in that direction to stop the full sequestration cuts on the military spending.

So, when candidates are blaming the President for every so-called bad thing that has happened, you may want to take that with a grain of salt. And, you may want to ask those candidates for a truthful answer on how the economy, stock market, jobs growth and unemployment has all fared under this President.

 

 

That deficit thing is going to get worse

The Congressional Budget Office released its projections that say the decrease that has been occurring in the deficit is coming to an end. With the improving economy, sequestration cuts and not funding as many troops in the Middle East, the deficit has quietly been reduced to a less painful level, but we are still in a deficit position. The last time we had a surplus budget was when President Bill Clinton left office and before the President George W. Bush tax cuts that put us back into deficit.

The CBO anticipates the deficit to rise again this fiscal year and continue to rise. So, the debt will continue to climb and interest costs will become increasingly an important part of the budget. There is a group called The Concord Coalition (see link below) who advocates for addressing this ticking time bomb now. They have a bipartisan group of Board members and help frame a discussion balancing the spectrum of needed spending cuts and revenue increases.

The major parts of our budget that should get our attention are in five areas:

Expenditures: Social Security, Medicare/ Medicaid/ ACA, Defense

Revenues: Corporate Taxes and Individual Taxes

The other stuff is minor relative to these big items, but of course we need to address each and spend judiciously. There are ways to shave spending off each of these key expenditures, without being too detrimental to the underlying programs and needs. And, we could be more dramatic if we want to make significant cuts, but people need to know what they would be losing. We also need to recognize there are some areas, such as infrastructure investments, that need to be increased and funded.

Yet, we also need to reform our tax system to make it simpler for all and make it easier to repatriate some offshore corporate income which goes untaxed here. In my view, we also need to garner more revenue as we are one of the least taxed (relative to GDP) countries of the 33 member countries of the Paris based Organisation for Economic Cooperation and Development. So, we need to base our decisions off comparative information to other countries, as no one wants a tax increase, but that is something that should be considered.

Regardless of what we need to do to accomplish the task at hand, we need to move forward before the interest costs get too burdensome. Also, as we age as a country, our costs pressures will increase with healthcare and retirement costs. If we wait too long, the cuts will need to be more severe and more of us will be impacted. Learn what each candidate will do about these issues. They seem to be silent on these issues and that is not a good thing.

http://www.concordcoalition.org/

Simpson-Bowles still gets the conversation started

In honor of November 8 being Deficit Day, meaning our US revenue for the year has run out in covering our expenses, I think it is important to revisit some of the saner voices on these issues. Former Republican Senator Alan Simpson who partnered with former Chief of Staff (for Bill Clinton) Erskine Bowles to lead a committee to address the deficit, has penned an interesting editorial. In essence, he is critical of the various tax plans submitted by GOP candidates for president all of which would materially increase the deficit. He notes they are so poorly conceived, that there are not enough legitimate cuts to overcome the loss of revenue.

Simpson knows of what he speaks. The Simpson-Bowles Deficit Reduction Plan combined strategic spending cuts with revenue increases to reduce the deficit. It was well conceived, but not perfect, as nothing is. People found faults with elements of it, which is a reason it did not move forward. Yet, it was a terrific conversation starter. It was something to work with and modify, as needed. And, it spoke to the need to increase revenue along with spending cuts.

One of the issues conservative folks have with the plan is the revenue increases, but let me state three truisms, two of which are universal, and one that applies to the United States.

  • Of course, people don’t want to pay higher taxes, but they do realize a need to pay for expenses.
  • Any politician can get elected saying they will reduce taxes. But, that promise should not be confused with good stewardship.
  • Per the Paris based Organisation of Economic Cooperation and Development (OECD), the US is one of the least taxed countries of 33 countries who have participated in analyses dating back over forty years. In fact, the US is well beneath the median tax rate of the recurring OECD surveys.

The deficit is important and we need to be smart with what we cut and actually increase spending in some areas. Yet, we must garner more revenue or we will never get there. There is a reason President George W. Bush fired his Treasury secretary as he argued against the Bush tax cuts. It should be noted the budget was balanced by President Clinton the last several years of his presidency, which was handed over to Bush.

While President Obama has done many good things, he is an imperfect president, like they all are. One of my biggest criticisms of the president is not embracing the Simpson-Bowles Deficit Reduction Plan and say let’s start with this. It would have been a great conversation starter and still could be.

 

Tell me why – a sequel

“Tell me why you cry and why you lie to me,” sang The Beatles. I have observed a few universal truths in my fifty-seven years on this planet, so let me share a few for your consumption and critique.

– the people who cry the loudest about how unjust something is does not necessarily make them right. It does not make them wrong either, so it is important to understand the issues.

– the people who require the most tolerance of others in dealing with them tend to be the least tolerant of people in dealing with others.

– the people who are more zealous in selling you some product, service or message means that the sale is far more beneficial to the seller than the buyer.

– all politicians are prone to lying given the nature of the job and its funding. It is all a matter of degree and to what purpose. In the immortal words of former Senator Jon Kyl when caught in a lie, ” You have mistaken what I said as the truth.”

– when someone says something is not political, you can take it to the bank it is political.

– someone’s history matters. We all make mistakes, but if someone has a history of exploiting people for gain, that is a good window as to how they will be in the future.

– the 80/20 rule applies to business leaders as well. 20% of leaders are effective in their jobs, with the success of  the other 80% rising and falling with the tide. A rising tide lifts all boats.

– business leaders do not create jobs, customers create jobs. A business leader will try to get buy with as few people as possible to turn a profit.

– when people squelch debate, name call or label opposition, that usually means their arguments are poor.

That will do it for now. I could keep at it, but would love to hear your thoughts. Have a great weekend.