Another Country

With apologies to James Baldwin for using his 1962 title to caption this post, I’ll share a few comments on a trip that Penelope and I made to the United Kingdom in October.  I emphasize both words, united and kingdom, since both contain some irony.  It’s also an opportunity to recall some often-confused geo-political basics.England is a country, occupying part of an island, Great Britain, which in turn is only a part of the political entity, the United Kingdom, which takes the northeastern chunk of another island to complete.

After just one quick day in London upon arrival (beautiful room, with a great view, in gorgeous fall weather, at the Sheraton Towers in Knightsbridge…dangerously close to Harrods), we traveled by car to Wales for a meeting of the Financial Planning Standards Board.  Just past Bristol, the road signs changed to include a Celtic language, in addition to English.  The driver explained that we were now in “another country”, Wales…and quickly added that the Welsh and the English don’t necessarily get along too well.  English weekend homeowners sometimes find their Welsh properties put to the torch.  Hmmm.

I also remninded myself that Charles is the “Prince” of this place and that Will and Harry have “Wales”, not Windsor, as their surname.   If Charles ever gets to the throne, one presumes that Will will take over the Princedom.  “Poor” Harry stays a mere Duke.

The country is green and wet and blustery in October; the sky changed dramatically from dark overcast to brilliant sun several times a day.  Because FPSB kept me busy during the days at The Celtic Manor (home to the Ryder Cup a few years earlier), there was little opportunity to explore; but Penelope took the train from Newport to Cardiff one day and had fun shopping and negotiating lunch to avoid cream, butter, and cheese.

We were treated to a large Welsh Choir’s performance (excellent!) one evening and a trip to a nearby castle for dinner theatre on another night.  Getting there was quite an adventure.  The driver of our bus (one of two) made a woefully wrong turn and, with much skepticism from those at the front of the bus, took us a long way down a very narrow, unpaved (so quite muddy), one lane road till we reached a firm barrier.  On either side were deep ditches and wheel swallowing mud, so we had no choice but to back up…at least a mile and an half, in total darkness…it was interesting to observe the range of responses, from great humor to near panic from the 40 or so international attendees, all of whom are accustomed to being “in control” in their own spheres.  I think the driver nearly had a heart attack and many of us were much more concerned about him.  Eventually, now very late, we found the castle and joined with our colleagues from the other bus who were refused (unexplainedly) anything to drink until the whole group had arrived.

After Wales, we flew to Edinburgh for several days of  history (there is much: start with Edinburgh castle itself), art, great food, sighseeing, in town as well as in the wild and beautiful Highlands, and getting into the spirit of yet another country.   So, of course I bought a kilt, learning that not many people really take specific tartans into account anymore, so my having not a drop of Scottish blood was no obstacle.  A taxi driver later explained to me that the outfit wouldn’t be complete without a “dirk”, the small blade true Scotsmen always carry in their stocking and that always gets him in trouble with our TSA.

We visited the Parliament of Scotland (it proudly has a separate one; and something like 40% of the population say they favor separation, “devolution”, from the British crown) and so much of the history of this place is framed in terms of it’s soveriegnty struggles and actual battles, some won, some lost, with the  English. A Scottish joke asks why God was so generous with Scotland: great beauty, fertile land, clever, handsome people; it seems unfair.  The response, “but look who he gave them as neighbors!”

Hail Britannia

Still, Edinburgh won the competition to be the permanent home of the recently decommissioned royal yacht, Brittania.  Touring it, complete with the Queen’s and Prince Phillip’s private quarters and the decidedly more modest quarters for the non-officer crew, brought to life the very strange (to Americans) situation of a hereditary monarchy living an almost other-worldly existence, now deep into the 21st century.  It’s not just that the family is extraordinarily rich, and enjoys a healthy budget provided by taxpayers as well, it’s that they are treated almost as if a superior species.

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Elections Have Consequences…Not Necessarily Obvious Ones

It’s now a few days after the election of 2012 and I’m still searching for something to be optimistic about in the results.  As I suggested in recent posts, this was to be an opportunity for a choice about the nation we want to be, the emphasis we want to pursue.  Sadly, my view is that the choice we’ve actually made is probably the wrong one on the economic and fiscal policy fronts.  And, my home state of California has gone even further in a continuing wrong direction than at the federal level.

Mitt Romney is indeed a very good man, smart, compassionate, and very generous, worthy of respect and admiration.   I disagree with several aspects of his announced social agenda, but I would be much more optimistic about good economic results in the coming years with him in the White House.  I am convinced that we’ve got to get the economics right before we can effectively tackle whatever social agenda is appropriate for any government to pursue…and, for me, that’s not really very much.  I would feel much more comfortable having government, with its potential for the tyranny of the majority and its susceptibility to influence by very committed, though small, interest groups, exert its huge power in favor of no social agenda at all.  So, I could tolerate a few cringe-worthy social policy perspectives, from either left or right,  in order to get the really higher priority economic issues on a better path.

We did come very close to what I think would have been, overall, a better result.  If the election were a few days earlier, before Hurricane Sandy took Romney off the front page and put the President in the role of Rescuer in Chief…  or a few days later, after the further doubts about Benghazi emerged in the main stream press, and Petraeus resigned in shame, and the increasing Katrina-ization of Sandy’s aftermath, Romney could have squeaked thru.  As it is, Obama’s “victory” was less emphatic (a narrower popular vote margin and fewer electoral votes) than his initial election 4 years ago; and it was pretty thin in any event.  50 million plus people voted for the other guy…and some of Obama’s crucial electoral college wins were in fact very close.

Still, as everyone now observes, the Romney/Republican campaign failed to adequately capture the confidence of key…and growing…segments of the electorate, especially the young, women, and Hispanics and other immigrants.  If they fail to better welcome and respond to these groups, shame on them.  They won’t deserve future electoral victory and they probably won’t get it, despite the very high relevance to these groups of the key Republican themes of smaller, less intrusive government, self-reliance, and upward economic mobility thru one’s own effort.  It now seems clearer that they won’t get enough people to adhere to this set of values unless they also share more common ground on important social issues as well.  If Democrats, in turn, can also move from their current stance closer to the center on issues of long range fiscal discipline, we could all celebrate a very happy new day in American politics and be much more optimistic about the life of our nation going forward.

A Time for Compromise

Everyone says that they hope for it, and the “fiscal cliff” at year-end provides a deadline to get serious about it, but the actual political and structural fundamentals for compromise don’t look especially promising.  Yesterday, three days after the election, Obama, still in hot campaigning mode,  had selected citizens standing on risers behind him…in the East Room of the White House (!)…as he claimed a popular mandate and brandished his pen in a challenge to Republicans to send him legislation to sign that met his requirements of increasing taxes on wealthier Americans.  Meanwhile, the Republicans claim a mandate of their own, retaining control of the House and still having filibuster capability in the Senate.  Whatever mandate that is, however, is also pretty skinny; they now will hold fewer seats in both houses than before.

So, maybe those chastened positions, on both sides, provide an environment for progress; and maybe the first element of a recipe for collaborative success relies on a careful parsing of the respective rhetoric on taxes.  For a long time now, there’s been a deliberate obfuscation (particularly, I think, by Democrats) of the crucial difference between rates of tax, on the margin, and absolute volumes of tax collected.  Republicans insist on no increase in rates (and argue strongly for even reducing them); Democrats insist on making the “millionaires and billionaires” pay more.  Instead of comparing warren Buffet’s, or Mitt Romney’s, tax rate with the rate their secretaries pay, let’s have both sides acknowledge that you can increase the amount of tax anyone pays, without increasing the marginal rate…or even when lowering it… if allowances or deductions are reduced or eliminated and if additional categories of income are subjected to tax.

With the right leadership, the American people are smart enough to grasp this structural choice and the arithmetic involved  and to at least then intelligently debate the merits of marginal rate increases or decreases as incentives or disincentives toward economic growth.  The data, such as exists, is regrettably not conclusive on this.  For now, it’s more a matter of faith and logic on the side in favor of low marginal rates and a sense of distributive fairness on the other.  But, if the wealthy have their allowances reduced such that they actually pay more than they do now, even with no rate increase, the revenue increase the Democrats want should occur.  And, if the no increase in marginal rates that Republicans insist on actually does spur economic growth, there will be a potentially huge bonus in the resulting increased revenue across the board.

Romney alluded to this in the first debate, almost in passing…suggesting a cap on itemized deductions of a certain dollar amount (or perhaps a certain percentage of income) that can be used for whatever item (mortgage interest, charitable contributions, state taxes, etc.) that is most salient for each individual wealthy tax-payer.  No-one’s favorite deduction has to bear the entire burden.  And, if that cap is small enough, the amount of tax actually collected from the wealthy can increase even if their marginal rates come down.  Victory is available to both sides here.

A Bigger Fight over Entitlements.

More revenue from the wealthy, alone, won’t solve the problem of annual trillion dollar deficits.  There isn’t enough income or wealth among the wealthy to solve the problem even if the government confiscated all of it (and what’s left then for a second act?).  Much reduced spending is even more essential than revenue increases, particularly reductions in the area of our expected “entitlements” committments.  Here, the Democrats have the longest road to travel.  At least they are no longer asserting that there is no problem.  There is…and a very big one.  The demographics are working against these programs and the reserve “funding” is imaginary:  the government’s own IOU’s.  Major structural changes are necessary, and fast.

The Democrats will need to quickly abandon their pledges never to do anything to change these programs’ benefits nor ever employ viable alternative funding mechanisms.

To me, it seems that the only politically workable solution is to employ a combination of some form of grandfathering for current beneficiaries with many partial solutions for the future so that opposition to any one of them is too small to wreck the whole package:

  • postponed retirement ages
  • increased payroll tax rates
  • larger taxable base
  • means-testing of benefits
  • partial privatized accounts (maybe increased IRA and HSA opportunities, funded by a part of the payroll tax)
  • vouchers for parts of Medicare/Medicaid benefits (see blog post of  March 3, 2010)
  • mandated catastrophic insurance coverage, in addition to or in lieu of mandated “first dollar” coverage (also see blog post of March 3, 2010)
  • portions of governmental components’ prefunding committed to real, third-party investments, instead of Treasuries.
  • and, probably some additional solutions as well.

Further, gradualism will be key, so that everyone has an appropriate chance to anticipate and plan for what changes, if any, in their costs and benefits will occur.  We don’t need to completely solve this problem over night.  We just need to be on a credible and committed path to getting it solved eventually.

The American people are neither stupid nor blindly self-interested.  Let’s abandon all the pretenses. With a sensible plan and effective leadership, we can solve these problems.  To quote President Obama’s closing exhortation yesterday:  “Let’s get busy!”  Regardless of our vote on election day, we can all agree with that.

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Voting for Vengeance?

It’s the day before election day and like, I’m sure, most Americans, I’m exhausted by this presidential campaign…eager for it to be over, almost regardless of who wins the White House.  I yearned, throughout, for a more substantive discussion of the very serious issues facing our country, but there was very little of that from either side.  What is, however, increasingly clear is that there is a real choice in front of the American people about what kind of nation we will strive to be; where we will put our emphasis in the next several years.  Though I am not a fan of harnessing the coercive power of government to any particular social agenda, my instincts favor most (but not all) of what the Obama administration and its supporters on the left would also prefer. So, despite that personal preference, my vote has long been decided in favor of the Romney/Ryan ticket for what I believe it will do to foster good results in the more important(and more governmentally appropriate) and the more immediately urgent  issues of economic growth, fiscal discipline, tax reform, and structural changes necessary to solve the entitlements disaster looming on the near horizon.

So, I hope the Republican ticket wins.  Less important, I hope that Barack Obama loses.  I had voted for him in 2008 and hoped that he would be a true agent for change and the pragmatist he was reputed to be.  Instead, I’m afraid we got an inexperienced  ideologue.  I still find him an attractive personality, but I’m convinced he does not belong in the role of our nation’s head of state and our government’s chief servant.  I would be enthused to have him as a delightful dinner companion or an enjoyable weekend houseguest.  I would be eager to engage in spirited interchange with an obviously very intelligent, eloquent, and deeply commited person; but I do not trust him in a position of enormous power precisely because I do not share his convictions.

If I needed further convincing of that, it came a few days ago, where, at a campaign rally, in response to a comment from the crowd, he urged his supporters to “vote; it’s the best revenge”.


Revenge for what?  What wrongs have been perpetrated, by whom, against whom, does he feel need to be avenged?  And in what way would an election be the proper vengeance in any event.  If you saw and heard Obama’s statement,  it’s obvious that this remark did not appear on his teleprompter.  It was instinctual, in the moment, unscripted, coming from the man’s gut, revealing him as the class warrior and unreconstructed community organizer many fear.  It was an expression of genuine, unguarded belief not worthy of a man who should be President of all of the people of the United States.

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A Clearer Choice: Hooray!!

Romney’s selection of Paul Ryan as his running mate will, we can hope, move this Presidential campaign beyond trivia, name calling, and defamation.  The American people are hungry for genuine consideration of serious policy choices and are capable of discerning attractive resolutions within the unavoidable complexity.  The time for division, demogogic over-simplification, and class warfare should never have arisen; but it is now high time for it to depart.

So, for the first time in a long while, we can hope for a clear set of choices.  If the current administration has superior approaches to foreign policy matters, let them bring them to the public floor.  If the Republican challengers have more articulate plans for economic growth and rational tax policy, let’s hear them, clearly (if not loudly, thank you!).  If candidates have a set of possible solutions to the problems around the long term viability of Social Security and Medicare (see blog post of March 3, 2010), let’s bring them forward for careful consideration.  And, in any event, let’s agree that there are problems with these entitlements systems.  The most disingenuous position of the Democrats is that everything here is just fine.  The demographics/economics of these systems (in the US and almost everwhere else in the world…and especially in some parts of the developing world) are definitely not fine.  Either a great inter-generational injustice or a sudden retraction of long-standing promises…or both… is about to be inflicted.  Financial professionals have a duty to our fellow citizens, everywhere, to blow the whistle on this!

My sentiments among these choices favor the challengers.  I understand, of course, that there are many nuances here and I strongly believe that we should not harness the power of government to any set of social policies…Left or Right.  While, on a personal level, I am deeply sympathetic to the “social justice” components of their overall motivations, I see the general thrust of the Left’s economic policies being very seriously flawed: some version of redistribution of income and wealth from the more successful to the less so and a large role for government in economic decision-making.  Despite genuine good intentions, this choice repeats the error now on display in most of Europe and seems to ignore the great, failed economic experiment of the 20th century: Soviet Communism, which made everyone under its sway poor.  And, while I wince (or worse) at some of the social policy perspectives of the Right, I concur with their general desire for limited government intrusion and for  incentives to  foster individual economic success and to impose disincentives on failure to exert effort.

The debate, then, should be joined over which is the greater good: reducing disparities in relative wealth or enhancing virtually everyone’s absolute wealth, across generations, despite even greater relative disparity.  It’s not a case of “either/or”, but of emphasis.   It’s also a matter of understanding  and accepting tolerable costs for that desired emphasis.  How do we get to what we decide is the greater good?  Let’s understand the costs…we’re smartenough to do this; let’s decide, as a society, what costs, and how much of them, we’re willing to bear…we’re fair enough to do this; and let’s agree on the benefits we desire…we’re insightful enough and optimistic enough to accomplish this.

I vote for everyone’s greater absolute wealth… even at the cost of greater disparity in relative wealth.   History is on my side.  Even the “poorest” people today, almost anywhere on the planet, have much better health, longer  life span, greater access to movement and communication, and greater freedom of choice of economic outcomes than the “richest” people of just 100 years ago.  Not many well-informed persons of 2012 would trade places with even the wealthiest person of 1912.  Maybe it would be fun for a day or a week…but not many would make that permanent switch.

So, America has a now clearer choice this November:  do we want to be, in the words of our national anthem,  more of “the land of the free and the home of the brave” or instead move further toward being the land of the indebted and entitled and the home of the timid and dependent?  We get to choose; we have to choose!

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ENOUGH!!…about Romney’s Tax Returns

If I were Romney, I would publish the tax returns that his political opponents are clamoring for…but not because he has a duty to do so; but only to get this issue behind him.  And I wouldn’t do it in the way they request.

I respect his right to privacy about his returns.  We all should. We should  understand that he is already complying with the existing laws relating to disclosure.  If the degree of disclosure is not enough to satisfy legitimate needs for understanding better his financial circumstances, then change the law and make more extensive disclosure mandatory.  But, meanwhile, it would probably be good, as a political expedient, to volunteer to do more than is now actually required.

And, I believe that there are ways to do that that will not compromise his and his family’s legimate privacy interests.

But, first, a comment on the apparently malicious, or at least ignorant, charge or innuendo that his acknowledged holding of overseas accounts must mean that he is somehow avoiding the payment of appropriate US taxes.  It is fundamental that all US citizens must pay income taxes on all income, from anywhere in the world.  If Romney were using foreign accounts to avoid paying proper US taxes, he would be, already, in very serious violation of the taxlaw and would no doubt be disqualified from any political candidacy.  The continued implication of this wrongdoing, and the glee with which the media reports and repeats it, is shameful.  The only excuse would be that the accusers are truly ignorant of this fundamental principle of taxation of worldwide income and ignorant of the many legitimate reasons for persons of even modest wealth to pursue the protections offered by certain overseas jurisdictions.  Many medical professionals, for example, maintain “asset protection” accounts in places like Switzerland or the Caymans as a way of shielding those assets from the scrutiny of opportunists (but not from the scrutiny of the IRS) and from the claims of unjustified creditors. But no US citizen can, legally, use them to avoid income taxation of the income they may generate.  If  knowingly false accusations would be shameful,  the alternative of ignorance is nearly as bad.

So, here’s what I would do if I were Romney:  enlist a small group of impeccably highly qualified persons (say, the heads of the personal income tax practice at each of the Big 4 accounting firms) to review the returns and then report, publicly, their findings on two points:

  • had there been any illegitmate manipulation of the tax law?
  • had the Romneys taken advantage of tax planning any more agressively than they would have condoned for any of their similarly situated clients?

If the answers to both questions is “no”, that should put an end to this inquiry, without further violating the Romney’s rights to privacy.  If the answer to either question is “yes”, then, the very negative political outcomes may be only one of Romney’s problems.

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It’s Not Too Late

Only a little over two weeks since Aurora, (see post of July 22, 2012) America again faces the pain and frustration of a mass shooting. What incredibly sad irony, the killing and wounding of Sikhs, and first responder police, within their temple, and during a worship service. The Sikhs are gentle, tolerant, peace-loving people. It’s hard to imagine a religious group less likely to inspire violence against them. And, here again, the murderer gave little indication of the huge threat he posed to those around him and, I suspect we’ll learn, acquired his weapon or weapons fully legally.

It is well past time…and it’s not too late…to seriously address the significant problems of public safety that our current culture and law of gun tolerance presents. Joe Klein, in the current issue of TIME Magazine, presents very sobering statistics about the prevalence of these mass shootings throughout at least the past 35 years and how prior assault weapons controls showed no apparent relief from the carnage. However, that implies a logical fallacy. Because that particular legislation failed to lessen the violence it does not follow that no legislation, no cultural shift can do so. Klein also, with chagrin and apparent resignation, also cites polling data that shows much reduced support for stricter gun controls over the past 20 years. I am more optimistic about the future.

The data are what they are, but they are not destiny. With strong and persistent leadership, from public opinion-makers, from legislators, from whoever resides in the White House, we can effect a change in this mentality toward access to weapons and toward aggressive treatment of mental illness that threatens us all. The current balance between individual liberties and public welfare and safety is just plain wrong. We can do better. We must. Shame on us all if we don’t even try.

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Let’s Get Serious about Gun Control!

This weekend’s events in Aurora, Colorado are tragic, senseless, and, I think, should make us all very angry on two fronts.

Where are our cultural leaders daring to speak out about the glorification of violence that, in deeply sad irony, was on the screen as backdrop to the killing and wounding.  Dark Knight is only one, the latest, of a long line of films, videos, and  “games” that trivialize the pain and destruction that guns inflict, in some subtle way making us all feel that gun-play is normal and even fun. While we may not be able or want to “ban” such violence, we don’t have to culturally aggrandize it…the commentary in the entertainment news about how much Dark Knight’s  first weekend box-office take was going to be now leaves me feeling sick.  I understand and support the notion of freedom of expression involved here, but we don’t have to permit the manufacturers to promote violence as entertainment. Just like it’s now illegal for tobacco to advertise in most media, we could make the advertisement of gratuitously violent fiction subject to considerably more stringent limitation.  But even more important, our cultural leaders (high among them being our 24/7 media) can help to make that violence very “uncool”…just like most young children these days find smoking a nasty, anti-social act.  It takes time, and leadership, but it’s not impossible to gradually change mentality on this.

And where are our political leaders, at all levels of government, calling for us to do something more…maybe much more…about the accessability of these deadly weapons. That the Aurora murderer apparently acquired his arsenal of guns and ammunition and explosive devices legally is eloquent in its condemnation of our existing legal restrictions.  These situations are of course the work of insane people…but people who did not display their deadly insanity in advance to put the world on notice.  the University of Texas Tower sniper, Columbine, Viginia Tech, and now Aurora quickly come to mind and in each of these, and far too many others, the insane person was able to wreak so much death and destruction because of guns.  If we can’t prevent the work of madmen,  at least we can make it much more difficult for them to do so much harm.

Today, President Obama visited the wounded and consoled many of the families of those who lost their lives.  As always, he spoke with passion and moved us with his calls for recovery from this sadness and his confidence in the goodness of the American people.  But I was greatly disappointed that he didn’t take this ocassion to move beyond the role of Consoler in Chief.  I hoped for, and even half-expected, him to move from that tone to close on a tone of righteous anger, saying something to this effect:

“It is now time…it is now way past time…to get serious about truly effective gun control in this country.  That the shooter in this tragedy acquired his weapons “legally” tells us there is something terribly wrong with what is “legal” in our land.  I know of course that there is Constitutional protection for the use and possession of firearms, but I also know that the Second Amendment has important limiting language about  “a well-regulated militia…”as the basis for that protection, and our Constitution embraces many compromises and balancing acts.  The current situation regarding guns is clearly out of balance.

I am aware of all the arguments against more effective gun control;some of them have some merit.  But overall, I believe the American people are no longer convinced.  I believe the American people are ready to strike a new balance.  I believe the American people should hold all their leaders accountable to make significant improvements in public safety from gun violence.   The right to expect that public safety is at least as important as the many other rights our governments go to great lengths to protect.  We’ve fallen far too short here.  We must make this better!

I pledge the balance of my term as President…and my next term if the people give it to me…to do everything I can to lead Congress to enact legislation and to insist that every department of my Administration does everything in its power to reduce this blight on our country.  For example, I will redeploy some of Homeland Security’s TSA army to help prevent this horrible domestic terrorism which has done so much more harm to our country than any foreign terrorists have been able to accomplish.  If it takes a Constitutional amendment… and it might…I pledge to you that I will do everything I can to bring that about.”

Alas, he didn’t say that or anything like it.  That leaves it to Governor Romney to depart from the agenda of one slice…maybe a small one… of what people identify as his “base”.  The American people are, I’m convinced, ready for some brave leadership on this issue.  Like Johnson on the Civil Rights legislation, like Nixon in his opening to China, like Clinton on welfare reform, it may take the perceived tribune of the status quo to achieve a real breakthrough. Please Mr. Romney, be your own man; do the right thing…even if it does cost you the prospect of being elected.  You may just be surprised.  There are many people out there, at every point of the political spectrum,  hungry for a man of principle to step forward on this.  Be that man!

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Solving the Health Care Mess: an Update

I’ve recently reviewed what I wrote on this topic more than two years ago (Solving the Health Care Mess,  March 3, 2010), and am even more convinced that I was onto the right combination of solutions.  This past week’s Supreme Court ruling on the consitutionality of The Affordable Care Act validates several of my concerns then and now, but still leaves unfulfilled a comprehensive result that only legislatures and executive leadership can give us.

First, as a lawyer and student of and great admirer of our Constitutional system, a few comments on the Supreme Court ruling itself and its immediate political aftermath.

  • I was very pleased to see the Court’s strong majority (7 – 2) upholding a key element of federalism (the respective sovereignties of the States and the federal government) by voiding penalties imposed on States which do not participate in certain Medicaid aspects of the law.   The core genius of our governmental system is in limiting the risk of too much power lodged in any one branch or level and in reserving to the States those aspects of governmental power that are likely to have the most immediate impact on most people.  Most of the evolution of this power balance has been from the States to the federal government over many, many years, but it’s gratifying to see the Court come down strongly on the notion that there are still some limits on the exercise of power on the federal level.
  • I was also pleased to see the majority (though only 5 to 4, here) rejecting the notion that the “individual mandate” was a valid exrcise of the Commerce Clause power. While we learned in law school years ago that the federal government’s power to pre-empt State regulation of inter-state commerce is almost without limit [Europe should have taken an important lesson here that commerce among sovereign entities needs some central arbiter to avoid protectionism within a single national entity...but that's something for another post at another time], it was encouraging to see the Court draw the line on that power to void an attempt to impose affirmative duties on individuals to engage in a commercial act that they otherwise choose not to do.  If it were legitimate to base the individual mandate on a Commerce Clause notion, that notion could justify the federal government’s requiring individuals to do just about anything.  On the federalism theme, nobody doubts that the States have such power to compel action; the issue was whether the federal government had any basis for exercising it.
  • So, the mandate was declared constitutional (a different 5 to 4 majority) on a theory that the Administration and slim Congressional majorities denied was at work when the law was passed in 2010.  Words matter; theories and rationales matter.  If the only basis for the mandate’s constitutionality lies in the undisputed power of the federal government to tax individuals for reasonable(whether wise or unwise) purposes, then the political establishment must live with that reality.  Calling it a “penalty” or “fine” simply won’t work…and is frankly disrespectful of the Court’s decision and of the people’s strong desire for less spin, more transparency in government.  The American people…with most of them in the center… are smart enough to grasp these distinctions and I don’t think they’ll let the Democrats get away with wanting to have it both ways.
  • And, the Republicans, so far, are missing the most important part of the message they can respond with.  The American people…at the center…are also not going to be comfortable with a strident “Repeal, Repeal, Repeal!  solution. Their message should  quickly emphasize it’s next thought…”and replace with something much better!”

What would that “much better” be?

First, the tax should used to directly solve the problems of “adverse selection” (being a free-rider until you actually need the medical coverage).  Insurance works, in every realm, where people buy it because they want to protect themselves from an unaffordable financial consequence, or are forced to do so, well in advance of ever needing the coverage.  The most sucessful homeowners insurance situation is never actually having your house burn down, or losing your roof to a storm, or suffering other major calamities.  So, if we’re going to tax free-riders, we need to make the tax big enough to actually motivate the desired action.  Not many healthy young people are going to volunteer to buy a $5000 or more insurance policy merely to avoid a $1000 tax.  Assuming that a small tax, all by itself, will prompt appropriate, but more expensive, societal behavior is naive.  Most people will make the rational economic decision to pay the small tax until they actually need the more expensive insurance. So, the “free-rider” situation doesn’t go away until the tax is as stiff or stiffer than the cost of the insurance.  And, then, with that tax revenue, the government should actually buy the insurance coverage (thru 3rd party commercial insurers) that the taxed individual never got around to doing him or herself.  That would put everyone in the same third-party intermediated, individual choice of care situation.

Pre-existing conditions coverage, covered medical exams, etc. can all be part of the mandated coverage.  “Buy it yourself or we’ll buy it for you with money we’ll take out of your pocket!  And if you’re too poor, so we can’t tax you, we’ll give you a voucher you can only use to buy it.  But, however you get it,  once you’ve got it, you’re on your own to use it wisely”.  With everybody in that insurance pool, healthy and sick, young and old, actual premiums would likely come down.  And, they could come down much more if the realm of covered costs made more sense.

So, even more important that getting to universal coverage is to change what is covered.  This will take lots of leadership and a patient effort at re-educating the public, but the most significant change would be shifting the insurance mentality from “first dollar” to “last dollar” coverage.  Some grandfathering of existing beneficiaries (eg, for those already in the Medicare system) and some gradualism, maybe over decades, will no doubt be necessary, but the ultimate solution is to put individuals in charge of their first dollar costs so that competition among providers and careful prioritization by consumers applies to medical care as it does to everything else.  To my thinking, the ” much better” would be a tax rationalized individual mandate used to purchase catastrophic, not basic, insurance coverage, with the tax cost on a par with the premium cost of such coverage.   Putting people squarely in control of… and insisting that they take financial responsibility for…their everyday and elective medical care needs, but as a society making sure that catastrophic, non-elective costs don’t bankrupt individuals through universal insurance against that risk, will be the real revolutionary solution to the mess we have now.

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Three Days in May in Mongolia

Direct from the Asia Foundation meeting, about 30 of us continued on to Ulaan Baator (“UB”), Mongolia’s modern capital and home to nearly half of its people.

As we approached the grey/brown landscape of central Mongolia by air, the plane took a very wide circle around the city below and eventually landed.  Only a little later did we learn that at this time of year, the winds crossing the single runway are so strong that many landings are aborted for windshear.  One more pass and we would have headed back to Beijing.  “Chinggis Kahn International Airport” in bold letters above the terminal were among the last words in Roman letters we were to see.  A big surprise is that almost everthing is rendered in the Cyrilic alphabet, even signage on major, new buildings.

Russia made Mongolia its first satellite…in 1921…not long after the revolution and imposed its alphabet on the pronunciation of the native Mongolian tongue.  There were other displacements, of course, including the near destruction of Buddhist teachings and all but one or two monasteries.  Among the first, imposing but ugly, things you notice on the very bad road from the airport are several gigantic power plants.  These provide light, and heat, and hot water to the city through a form of physical grid unknown in America, but common in the old Soviet sphere.  Giant pipes bring warm air and hot water to individual buildings throughout the city like a system of capillaries.  One wonders how much of this is an attempt at efficiency in the very cold winter climes of the old Soviet world and how much it served as a method of control and coercion.  We’re of course accustomed to every edifice supplying its own heat and hot water thru small, very local devices…how quaint…how inefficient…but how independent….and how very Mongolian.

The life of the traditional, nomadic herder today is little changed from the days of the great Kahn, except that the ger (we call them “yurts”) now has satellite TV and a small solar panel to power the electronics.  When the herders pick up their complete belongings and move to (literally) greener grass several times a year, their 21st century equipment moves with them. In any event, spring was just beginning to arrive in Mongolia (most, but not all, of the trees were first showing green buds) and the gargantuan urban heating system was undergoing some seasonal readjustment, resulting in unapologetically unreliable access to hot water the first day we were there.

The Ulaan Baator Hotel claims to be UB’s first 5 star hotel.  “First” is an important part of that claim since the place was built in 1961 (Krushchev was still master of the Kremlin then) and the definitions of stardom have no doubt evolved in the intervening half century.  The hotel hasn’t changed much so you can easily imagine a group of commissars making themselves at home, toasting with vodka, singing The Internationale, while they plot their next opportunity to get back west of the Urals.  Our suite (living room, dining room, bedroom, two weird closets, and a bath and a half) was, I imagined, the site of some intrigues over those early years.  Penelope was convinced that there were blood stains on the very old and patched carpet.  There are much nicer and newer hotels in the city, but none with its cachet…or location right at the center of power in Mongolia.

The “5 Star” Ulaan Baator Hotel
Aside from the very new Government House anchoring the main square, the other buildings at this city center (Opera, banks, offices) all seem to date from the ’20′s and look much like the architecture and bear the colors of early Soviet style.  You could imagine yourself in St. Petersburg for a short moment…especially, again, since the script everywhere is Cyrilic.  The Government House is home to both Parliament and the President’s office and, out front, a huge statue of Chinggis Kahn makes it clear where the self-recognized history of the Mongolian people begins.  His visage appears on all the money (tugrics) as well.  The Asia Foundation party spent a lot of time in this part of town, enjoying a reception by the US Ambassador, meetings with members of Parliament, Supreme Court Justices, and a breakfast meeting with President Elbegdorj Takhia.  Elbegdorj was a key revolutionary at the fall of the old Soviet satellite leadership in 1990 and subsequently studied at Harvard before going into domestic Mongolian politics and rising to be head of state of the parliamentary democracy that supplanted the old Communist regime.
Government House, Sukhbaator Square
For its vast size, Mongolia has surprisingly few people…only about 2.7million in the whole country.  That wouldn’t comprise even a middling city in China now.  That stupendous land area…and few people… are landlocked between two even vaster neighbors.  Cultivating good relations with the US, as its “3rd Neighbor”, gives Mongolia an even stronger hand in playing Russia and China off against eachother as the only foreign policy available.  Most countries can take for granted their access to open seas for trade and defense.  Imagine the complications of having to rely on everything coming in or going out over some other country’s land or airspace.  Happily for Mongolia, China’s huge supply of labor and immense appetite for natural resources could rapidly enrich the relatively few native Mongolians…or more likely, in the near term, the Australian and Canadian mining companies now at work extracting coal and copper and rare earths.  For now, however, the people are still “poor”, but not impoverished in spirit.  Each person receives a small, monthly stipend from the government and is entitled to a small plot of free land, enough for a sizable family to assemble a workable homesite and garden.  But, somehow, it seems very inapt to try to endow a many centuries old nomadic people by rooting them to a particular piece of land.

On our way to the Tuul River Lodge, we were able to visit a small herder family, a strong, handsome young man and a beautiful young woman with their rambunctious 6 yr old son.  The boy was just “home” from a long stint at boarding school and a daughter, a little older, was to return to the ger soon.  All Mongolian children must attend school to age 16, most in a boarding situation in town, and spend their summers with their parents and, if herders, their flocks.  That nomadic life must be coming to an end, soon, though.  Our host was one of 11 children, but the only one still living the life of a nomad.  It’s hard to imagine that the boy, now loving his freedom and the very sweet affections of his parents and riding and herding with his father, will ever actually take up that life.  The jobs in the mines or the offices in town will offer too much more comfort and ease.  But not necessarily more wealth.  With hundreds of livestock (horses, goats, sheep, and cows), the father could be considered rich by Mongolian standards…but it is such a hard life…and the long, cold winter is the worst enemy.  We learned how to tell direction from the positions of gers.  The one door always faces south, because the brutal winds tend to come from the north.  Not infrequently, the cold is so deep for so long, the dzud, that virtually all the animals die.

Double E-Ticket in Mongolia-land!
Getting to the Lodge was the greatest adventure of the trip.  I had envisioned a permanent set of buildings…”lodge”…rather it was a temporary, a la nomade, set of gers on the side of a gentle slope looking down on a river meandering among woods and greening fields.  Very pretty.  It was “civilization” after the trip over the mountain to get there.  Normally, getting to the lodge is a matter of taking off-road vehicles around and thru the river after leaving the paved road from UB.  For us, recent rains and the melt of recent snow ruled out that passage.  Instead, in old Russian military vehicles, looking a lot like something out of Mad Max, we went over the mountain, literally, no switch-backs, just straight up one side and straight down the other. We should have had headgear, inside the vehicle!  We dubbed it the “super, double-E ticket in Mongolia-land!”  Getting back, later that night as the sun was setting in a beautiful purple aura, was even more harrowing.  We were in the last vehicle to leave, a long while after others so there was no one ahead…or behind.  As we began the steepest part of the climb, now in total darkness, the engine started to smoke and gave off the smell of burning cables.  The two Mongolian drivers seemed reasonably unperturbed as the six Western passengers shared half-hearted words of encouragement and not very funny jokes about having to spend the night in old Russian hardware before a search party would venture out for us.  Happily, we had thought to bring a spare bottle of wine as a roadie.  After some consultation and Mongolian cursing and, Penelope is convinced, the application of some chewing gum, the old crate lurched back into life.
Outside a ger at Tuul River Lodge
A final note on the contrast between the modern urban environment of UB and the ancient nomadic past:  on one of our evenings in town, there was a reception at the Museum of Contemporary Art, for the who’s who of the capital to honor the Asia Foundation visit.  Many of the women and quite a few of the men were wearing traditionally inspired formal attire and drank good wine and grazed on a broad array of foods and listened to a string quartet playing Mozart, followed by a contemporary Mongolian rock/traditional band.  And the art and photography forming the backdrop was worth the visit in its own right.  Hard to imagine a place further away from the sophisticated cities of the “first world” than Ulaan Baator, but that night, one would have found it hard to tell any real difference.
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Beijing: May, 2012

Travelled to Beijing with the Asia Foundation and to meet again with my Chinese friends in FPSB-China.

First, I must acknowledge the great hospitality of my FPSB colleagues in China.  As before, a party of officials greeted Penelope and me at the still awe-inspiring new Beijing Capital Airport, handled our baggage and drove us to the hotel.  For the next several days, we were treated to car, driver (Mr. Wang), and guides/interpreters to make sure we had a great time and didn’t lose precious time in navigating Beijing’s sometimes horrifying traffic.  Many thanks, again!

May 19, 2012, Beijing.  My translator, at left

I had the opportunity once more to address a group of about 100 financial planning practitioners and officers of banks which furnish most of the wealth management services in China.  I also again had the pleasure of interviews with financial planning trade press.  As my hosts confided to me over dinner, the Chinese may sometimes pretend that they care little about what others think of them, but in fact they care greatly, and especially, about what the Americans think of them.  This was meant to be a comment about geo-political relations, generally, but it applies especially in China’s ongoing development of the financial planning profession..

Speaking of dinner, Beijing now boasts some of the world’s most beautiful restaurants, serving truly outstanding cuisine.  While guests of FPSB and, later with our friends in the Asia Foundation, we ate at four of the most spectacular restaurants we’ve ever seen:  DaDong, Duck de Chine, Temple (in an ancient-looking building next to an authentic Ming Dynasty temple near the Forbidden City that had been converted into a television factory during the Cultural Revolution), and finally, on our last night there, the best of them all: brand new Cuisine Cuisine.  No expense seems to be spared in the finishes, the art, the spacious private rooms (seating from about 6 to maybe 20, at single round tables; these are customary features of the high-end restaurant scene in China), the number of servers, and the quality of the food.  We observed the same thing in Hong Kong and Shanghai in recent visits.  And the diners are no longer mostly rich, older Westerners, but Chinese…young, and rich.

Jillian Schultz, Paul Slawson, Mary Slawson
The art scene in Beijing is vibrant.  With our friends, Paul and Mary Slawson, with FPSB-China provided guide and driver, we ventured to the Three Shadows Photography Art Centre, run by a young American woman, Jillian Schultz, friend of our Jewish “god-son” and renowned music director, Doug Peck.   In the CaoChangdi community of art galleries, some designed by the famous (now, especially, for being repressed) artist, architect (the “bird’s nest” stadium of the 2008 Olympics), and dissident Ai Wei  Wei, we found graphic art, sculpture, photography, and video to rival anything in volume and interest one can find anywhere  It was a weekday and, besides some school children playing in one of the grassy yards, we had it almost entirely to ourselves.  Despite confusing, unmarked streets, Mr. Wang eventually managed to find our target restaurant for lunch, filled with 50′s American kitsch, and then insisted on picking up the bill.  A few days later, I decided to fill an unscheduled morning with the short walk from the hotel  (home to the Beijing Bentley and Rolls dealers…next door to the newly opened Maserati dealership) to Tien an Men Square and the Forbidden City.  Almost immediately, a young Chinese man approached me asking where I was from.  They often do this to Westerners as a way of practicing their English.  Quickly I learned that he was an art student and his school was on the way that I was headed.  Eventually, I purchased a four scroll depiction of the four seasons that he had done and a piece by one of his teachers.
Nearing the entrance to the Forbidden City.
This lavish landscaping is found everywhere in Beijing.
One of the poorer air quality days
With these inexpensive treasures slung over my shoulder, I continued on to what must be the greatest man-made tourist attraction in the world.  If only the Chinese come to marvel at the works of their imperial past, the numbers would be huge…but they come, from everywhere, in unimaginable hordes, to view what was always intended to be seen as the center of the universe.  Long before the British placed the “prime meridian” at the observatory in Greenwich, the Chinese measured everything under the heavens in relationship to the center line of the majestic imperial compound…directly bi-secting the perfect symmetry of the palace grounds and sequence of buildings.  Even though it was my third visit, I was quickly overwhelmed again by the subtle grandeur…it’s intended impact, I’m sure.

Beyond the dining and sightseeing, of course, the meetings of the Asia Foundation assembled an extremely accomplished group of senior foreign service professionals, academics, and a handful of Western and Asian business people to consider social, economic, and political developments in China.  Among the most interesting for me was the rise in private philanthropy in China.  Niall Ferguson, historian/economist/philosopher, whose recent book, Why the West rules…for Now,  I had just read, would align this trend with the more general growth of “Christian” adherence and the rapid development of a “Protestant Ethic’ in China.  He sees this as one of the unrecognized keys to China’s otherwise notorious economic success.  Caring about the welfare of society beyond the family, being able to trust in one’s fellow business relationships, and a having a high propensity to save…to defer gratification…has, he argues, helped to create the most rapid advance in economic growth in all world history.

And with that growth, continuing still today at quite rapid rates, the wealth of currently developed nations…especially the US…will likely decline, on a relative basis.  Before too long, China’s economy may even surpass America’s in absolute terms…the numbers, multiplied by 1.2billion and counting, have a relentless impact. Still,  it will be quite a long time, perhaps never, before the Chinese, on a per capita basis, will forge ahead of their American counterparts.  If you see yourself as a world-citizen, it may not matter much if they do.  And, for the Chinese, by the time they may get there, it also may not matter much.  I hope it does turn out that we all approach it with that non-chalance.

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