Net Neutrality: Little ditty about where I stand

A few days back, I posted a link on Facebook.

In it, I implored friends unfamiliar with the issue of Net Neutrality to check it out and, if they were so moved, sign a simple petition.

A great friend of mine, who happens to work for an ISP, challenged me to defend my support of the current bill before Congress (H.R. 3458 – The Internet Freedom Preservation Act of 2009). So I shall.

Full disclosure: In my professional life, I currently have clients on both sides of this debate. However, the opinions stated below are 100% my own.

To begin, take a moment and read the bill. Not someone’s analysis or spin of the bill. Just the actual law that would go into place. It’s only 13 pages long, you can do it.

Next, let’s start with a bit of history. From the mid-1950s to mid-1960s, two visions of interstate highways were taking shape.

In President Eisenhower’s administration, a plan was developed and implemented to build the U.S. Interstate Highway System – dramatically interconnecting regions and building ties and commerce.

Just a few years later, some folks in the United States Department of Defense’s Advanced Research Projects Agency started thinking that “there ought to be one terminal that goes anywhere you want to go where you have interactive computing.” That idea was the ARPAnet. And from it, along with a few other players, grew today’s Internet (aka the Information Superhighway).

As I thought about these two reasonably simultaneous developments, a Tom Friedmanesque metaphor came to mind explaining the need for Net Neutrality:

Highways and Exits
The Highways part of the Internet business is where Internet Service Providers (i.e., phone companies, cable companies, satellite providers) provide us with our connections to the Internet. So building networks and increasing bandwidth has been the core business of ISPs for the last 18 years or so.

The Exits part of the Internet business is where we actually go and what we do there: Web sites (e.g., Amazon.com), services (e.g., VoIP) and applications (e.g., Google Docs).

Until recently, ISPs were not very involved in the Exits business. That is changing and is why we are here today debating the issue of Net Neutrality.

You see, everything was fine when the ISPs were strictly in the Highways business. They built Highways, they were allowed to charge tolls, they even were allowed to charge more money for faster access.

This model worked find as long as the ISPs were agnostic about where we, the drivers, went on their highways.

But over the last few years, ISPs have moved rapidly into the Exits business. And there is an inherent conflict of interest when they control both the Highway and the Exits.

First off, when highway owners build their own towns (Web content, Web services and Web applications), they have every incentive to favor them through preferred Exits. They will even shake down other towns (companies offering Web content, Web services and Web applications) to pony up money to become a preferred destinations with better Exits.

This favoritism will be far more significant than bigger Exit signs. It will likely grow into partnerships where giant detours are erected to keep drivers away from a particular Web site off ramps and send them to the ISPs favored Exit.

It is also likely that some ISPs will split the highway. The fast highway will only have Exits to the towns that paid them enough dough and every other town will reside off a two-lane road where drivers are stuck behind a tractor.

Secondly, when highway owners are allowed into the business of deciding which Exits may be hidden or closed, there is a legitimate fear that towns might be deemed unsavory due merely to their content by a Rupert Murdoch or George Soros-type owner who wants to extend their personal values or partisan politics to their companies.

The Internet is Critical Infrastructure
As great an impact the National Highway System has had on our nation’s growth, the enabling technologies of the Internet will soon dwarf it.

Over the last two decades, the Internet has helped businesses achieve dramatic gains in worker productivity, empowered entrepreneurs by the millions to compete with low start up costs, allowed students from around the country and world (including me) to study at U.S. universities they’ve never actually set foot in at times of their choosing.

Consequently, it has had a gigantic impact on U.S. GDP and tax revenues. That kind of thing, BTW, is just a bit important right now.

As such, the Internet meets any reasonable definition of belonging to our nation’s Critical Infrastructure and thus exists under a legal framework that allows it to be subject to regulation for the good of the state and its citizens.

Furthermore, there is not exactly unfettered competition in the ISP marketplace guaranteeing choice in case there are just a few “bad apples.”

By one count, there are only 325 ISPs serving the United States. Live in a rural area or inner city and you’ll have access to only a tiny, tiny fraction of that number. To ensure all of our citizens and businesses have equal footing on the information superhighway, we need unfettered access to the Internet.

The bottom line is not the bottom line here
Look ISPs, I understand why you want to get in the Exits business.

No, you’re not evil. You’ve simply determined that the Highways business is capital intensive, low margin work and that the Exits business can provide much higher margins and allow you to provide kick ass services through an end-to-end environment.

But when it comes to Critical Infrastructure and open competition in key industries, your profit margin is just not our problem. If this seems like a new concept to you, go and ask Microsoft about their little dance with the FTC over Internet Explorer.

As I see it, we’d be far better off as a country if you picked one of two courses: stick to the Highways business or quit the Highways business and go full bore into the Exits business.

(Of course, public wi-fi would also alleviate this issue but you’ve made it pretty clear how hard you’ll fight that idea in any city that tries).

In that environment, none of this regulation would be needed as you, the Highway owner, would get paid for building bigger, faster highways and nothing more.

But since that is not going to happen, since you are going to demand to stay in both the Highways and Exit businesses simultaneously, we’ll have to live with the dreaded “semi-regulated” industry where no one is happy (I believe my friend uttered the phrase “You call that capitalism” in response to the bill).

What I call it is democracy, an admittedly messy process to achieving the greatest good. Because an Internet that is any way comprised in access would be intolerably damaging to our citizens, businesses and democratic ideals.

A native’s view of the Olympic backlash

One thing I’ve always loved about Chicago, the city of my birth, is how welcoming we are to outsiders. Even beyond genuine Midwestern friendliness, the people of our city are particularly accepting to the people who move here.

Authors, chefs, artists, people from everywhere move to Chicago and are really judged solely on their talent instead of pedigree or connections. Open a storefront theatre or restaurant or show your work at Around the Coyote and we’ll give you a shot.

We even don’t ask anything in terms of cultural assimilation or respecting our own traditions. I mean, can you imagine someone opening a Red Sox bar in New York or a Redskins bar in Dallas? Yet, fans from any state you can imagine (even Wisconsin) gather freely, unmolested in public places to cheer their teams in the midst of a passionate sports town that loves its teams.

Because of our welcoming nature, I think many of you who have moved here from elsewhere seemed to have missed something fundamental about our collective psyche, hopes and dreams in the run-up to the Olympic selection based on your rampant criticism.

Here are twelve things always on the minds of Chicago natives:

1. That when people on both coasts dismissively refer to “flyover states,” they mean us.
2. That the Bill Swerkski’s Super Fans sketch on SNL was not about people laughing with us.
3. That most films and TV shows set in Chicago won’t deem to film here unless a director with local ties makes a heroic effort. They’ll even film in Toronto first.
4. That movies premier in New York and L.A. because, well, what would us hicks know?
5. That when you travel abroad and say you’re from Chicago, you’re lucky if the person replies “Michael Jordan.” Mostly, you’ll hear “Al Capone – bang bang.” That’s the extent they know our city.
6. That despite our bevy of award-winning chefs, no New Yorker or Los Angelino can be taken out to dinner here with sneering at his or her food. They seem to especially relish attacking our pizza and steakhouses.
7. That when the character Joel in the movie Risky Business said “Looks like the University of Illinois,” this wasn’t really a plus in his mind.
8. That while we have no shortage of NCAA basketball history, local and state teams, the Chicago area has not hosted a Final Four since the 1950’s. BTW In the past decade, even Minneapolis, Indianapolis and St. Louis have had that honor.
9. That it does not really matter how many great plays originate at The Steppenwolf or The Goodman. They only deserve an award once they’ve “made it to New York.”
10. That it takes the average travel show until around season five to get around to Chicago.
11. That the phrase “Second City” was mostly definitely a dig and comes from a 1950’s New Yorker article.
12. That Forbes magazine, through its “Most Miserable City” hack job, proves they are intent on keeping it that way.

To grow up in Chicago is to grown up engulfed in that disrespect.

It is a permanent chip on our shoulder, it fuels us and it is always there in the back of our minds.

That’s why, with the exception of people with an ax to grind against Daley, most Chicago-born residents don’t just support the Olympic bid, they really, really support the bid.

If you are against the bid because you think it will cost too much, well, I can’t help you if the facts of the matter (e.g., U.S. Summer Olympics just don’t lose money) don’t convince you. We’ll just have to disagree.

But if you think this bid is about Daley and his cronies, you’re just wrong. It’s not. It is about us. It is about a three-week infomercial for Chicago that is a once-in-a-lifetime chance to forever change our image – the way Barcelona did in 1992.

So when you trash the bid, you are not thumbing your nose at Daley. You are trashing the dreams of millions of people who grew up here, who built this city, who made the city the place you wanted to move, who accepted you as you were and supported you when you got here. And you are trashing me. This isn’t policy for us. It is personal.

Stupid is as stupid polls

I’m sure you’ll be shocked by this, but I was a huge fan of the political drama The West Wing.

One of my favorite moments in that show revolved around the results of a poll of U.S. voters on the subject of foreign aid. As memory serves, Josh, the senior political operative reacting to the results says:

68% of Americans think too much money on foreign aid. 59% say they want it cut. So 9% of Americans think we spend too much on foreign aid but don’t want it cut!

Which takes me to this week’s spate of health care polls. I spent a good twenty minutes pouring over the most recent CBS/New York Times poll* to prep for this column. Here are my takeaways:

The numbers

• Most Americans (78%) believe the U.S. healthcare system needs at least fundamental reform
• Most Americans (78%) are at least somewhat satisfied with the quality of their health care

—

• A majority of Americans (56%) are at least somewhat concerned they could someday lose their own health insurance without a government guarantee of converge
• A strong majority of Americans (65%) want a government health insurance option for themselves
• Barely half of Americans (51%) want the government to guarantee health insurance for all
• Even fewer support health insurance for all if it raises their taxes (36%) or premiums (38%)

—

• Most Americans (80%) favor a ban on denial of insurance coverage due to preexisting conditions
• Most Americans (73%) favor limiting the amount insurance companies can charge them
• A majority of Americans (59%) say they don’t understand the current proposals
• Most Americans (70%) believe the current healthcare proposals (which include both these provisions) would either hurt them personally or have no effect

So listen up Washington

Read these numbers and what the average American voter wants is clear.

You need to come up with a simple bill that gives him complete assurance that he will always have health insurance at a reasonable price through a plan that asks absolutely nothing of him in the way of taxes or higher premiums. Oh, and as far as he is concerned, everyone else is on their own.

A libertarian friend of mine, with whom I agree on very little politically, once said something I totally agree with and that is relevant here:

The U.S. could never win World War II today because we’d never individually be wiling to make those kinds of sacrifices.

That’s my read as I look at these polls. I guess this kind of pure selfishness is the “common sense” of Main Street that Sarah Palin is championing in her “throw the bums out” tour.

Republicans, in my analysis of this, should not rejoice in these numbers. Because the simple plan that does all of this is just letting any individual or business buy into Medicaid and just pay premiums that cover the costs.

Personally, I think that’s a bad idea. But keep pushing a “No Bill of Any Kind” agenda and this is what you might get.

It gets much worse
The Washington Independent published a terrifying piece that laid out belief in the two largest domestic conspiracy theories of the last decade: people who believe President Bush knew in advance about 9/11 and people who believe that President Obama was not born in the U.S.

First, the ridiculous 9/11 conspiracy theories. It is nothing sort of an embarrassment that close to 40% of Democrats polled believes Bush may have had some kind of advanced knowledge of the attack. But even more incredibly, so do 10% of self-defined Republicans and close to 20% of independents.

Second, the stupid and dangerous “birthers” movement that, in the face of no shortage of definitive proof, believe that it is possible that President Obama was not born in the U.S. The numbers of this group stand at more than 60% of Republicans, almost 40% of Independents and shockingly more than 20% of Democrats.

How in the hell can we hope to have legitimate policy debates in this country when strong segments of f the population believe the last president let 3,000 Americans die or that the current president is legally barred from the office?

And is it really not a stretch to think this could get out of hand? The last time I remember these kinds of conspiracy theories getting this much play was in the mid-1990s. And the end result of those was the Oklahoma City bombing.

Obviously, if you are reading this blog, you are pretty interested in policy and government.

So right, left or center, let me ask you one favor. Call out lies and untruths everywhere you see them – especially on your own side of the debate. Don’t nod silently when people you know spout off whoppers just to make nice. We can’t afford it.

* Ok, all my friends on the right are going to question the source. Fact is, I looked at lots of polls and settled on this one after most of the pundits I read ON THE RIGHT were using it. The numbers very SOMEWHAT among different polls but the ratios of voters pro and con on various questions are exactly the same. Let it go.

Healthcare: How I’d do it

A national debate over something as important as healthcare is supposed to be rigorous. And history shows us that these debates can get ugly, petty, selfish and just plain libelous.

But even by that standard, this process has just plain sucked. And I am frankly mad at everybody on both sides.

From the Republicans, as the opposition party, from whom I would have hoped would have addressed any of the many rational, conservative objectives to the various Democratic proposals (e.g., exploding costs, stifled innovation, giveaways to unions), we got:

• A total failure to censure the party’s far right wing nut jobs while they spared no expense to scare the bejesus out of independent’s and seniors with flat out lies. And in many cases, the GOP actually embraced those lies.
• A bizarre, right-wing defense of the status-quo of Medicare through an argument that somehow a Democrat might take away a single benefit from a senior. (Besides under Bill Clinton, name one time that has happened? And aren’t you the party that wants to cut government spending?)
• An incredible abandonment of conservative principles by passing on an enormous opportunity to finally remove the burden of paying for health insurance off of U.S. employers, which makes them far less competitive with foreign concerns.
• A horribly missed opportunity that could have really pushed the debate toward what conservatives SAY they want (private based coverage, cost neutral, moving Medicaid and SCHIP to private insurance) by supporting Wyden-Bennett and daring Democrats to vote against it.

From the Democrats, from whom I would have expected could have gotten their crap together with an off-the-shelf bipartisan plan and strategy after spending decades preparing for this fight, we got:

• An infuriating refusal to even consider Wyden-Bennett considering it is the only plan that has been scored as cost-neutral and achieves almost every objective the President articulated at the outset.
• An even more infuriating refusal to incorporate the two GOP ideas that make tons of sense and are exceptionally popular with independents: national insurance competition (seriously, the Dems as supporters of state’s rights?) and tort reform.
• A stubborn resistance to consider compromises on the public option such as co-ops or triggers, allowing August to be the month of “government takeover” talk.
• A staggeringly stupid appeasement of labor unions who don’t want benefits to be taxed – one of the only ways to pay for the proposed programs and an actual tax Republicans have supported.
• A predictably weak ground game, where the Dems apparently knew ahead of time that the GOP had hired Frank Lutz, who coined the phrase “death tax,” and were yet somehow surprised that he came up with “death panels” and made it stick. You could not have a plan to get in front of that or the town hall mobs?

From the media, who could have actually proved to be relevant again in the era of the blogger by providing trusted context and analysis, we got:

• The complete failure to understand that presenting both sides does not mean presenting both sides’ lies. It would have been so helpful if that anytime anyone on either side of the aisle said something untrue, the very next sentence in the article would have been an independent validation or contradiction of that fact.
• A complete lack of news judgement. I don’t give a crap if you think “fact checking” is not “entertaining.” If you can’t do this critical public service, the notion of democracy “needing a free press” is just so much bunk. Calling out liars is not picking sides, it is doing your job.

From our nation’s citizens, to whom our constitution has entrusted with the privilege and responsibility of participatory democracy, to whom elites should not “condescend,” we got:

• Seniors demanding that congressman “Keep the government out of my Medicare!”
• Citizens egged on by both sides reading off party-provided cheat sheets that spout complete untruths and then contending that they’ve “read the bill” (asking them which of the five bills in the House and Senate they are referencing mostly draws blank stares BTW).
• Voters asserting that they don’t care about the eminent collapse of Medicare or of the risk of medical bankruptcy to other innocent people if it requires one ounce of sacrifice on their part.
• Protestors holding up pictures of President Obama as Hitler and patrolling outside town halls with firearms

Honestly, in the face of all this nonsense, I’ve been putting this column off for weeks. Every party to this conversation has failed to meet their basic obligations. This debate mattered folks, and so far American democracy has failed.

But with President Obama set to try and get his agenda back on the rails, I can procrastinate no more. There is still time and therefore there is still hope that we won’t kick this problem down the road again.

So I’ve taken the best ideas of both sides and put together my own bill. While I don’t exactly have the power to get my plan scored by the CBO, it ought to be dramatically cheaper than the Dems plan if not deficit neutral and it ought to make American businesses much more competitive, which should increase tax revenue.

Here goes:

THE GOAL
In this plan, we strive towards a model where most individuals and families own their insurance policy within two years.

HOW WE GET THERE
Employer-based coverage is still allowed but taxed as income starting year one. Employer contributions to employee’s HSA allowed pre-tax for first two years and then taxed after that.

Every individual or family who is not enrolled in an employer-based plan is automatically enrolled into a private plan after six months if no proof of insurance is provided (none of that penalties crap – this is a mandate).

All taxes raised from employers still providing benefits are used to help pay for tax credits for poor families. Medicaid and SCHIP recipients move onto the private plan of their choice or are automatically enrolled in one if they fail to act.

WHAT INSURANCE COMPANIES MUST OFFER
A minimum national standard is set for a basic high-deductible health insurance plan. This bill would give insurance companies a target cost for offering this basic high deductible coverage, so that a family’s total cost of premiums and deductibles is no more than 15% of the average household income for the region in which they live (i.e., pricing is tagged to the average wages within a region).

By national law, all insurers must offer guaranteed issue (i.e., there are no preexisting condition clauses of any kind) and community rating (i.e., you pay what everyone in your region pays regardless of medical history and age). No exceptions, you apply and make payments and you are covered.

HOW FAMILIES GET COVERAGE
Individuals and families can choose from any plan they want nationwide – including the plan they currently get from their employer if they choose.

Individuals and families in this plan will pay no more than 15% of net income on premiums and deductibles and there will be a sliding scale down to 10% for lower middle class families and free for poor families and children.

If individuals or families want a plan that is more expansive than the basic coverage, they may buy it but the costs on top of the basic plan are not reimbursed through the tax credits.

Medicaid and SCHIP programs are eliminated and replaced by this coverage.

HOW EMPLOYERS WILL HELP PAY FOR TRANSITION

Obviously, employers in this plan will enjoy huge immediate cost savings. They will need to pay some of the freight to transition employees to owning their own health insurance.

For starters, Congress would enact an automatic $1/hour increase in minimum wage along with automatic employee enrollment in private HSA in which this increase ($2,080 gross annually for full time worker) is deposited.

Congress would also negotiate voluntary agreements with U.S. Chamber of Commerce and other trade groups to work towards similar raises and auto-transfers for salaried employees after two year period of tax-deferred HSA contributions.

HOW EMPLOYEES WILL PAY FOR THEIR COVERAGE
Personal tax-deferred HSA contributions will be allowed up to 15% of net income. This is the primary way individuals and families pay for coverage.

If no insurance company offers a plan at the 15% threshold within a region, tax credits will be issues those individuals and  families to cover the difference.

Furthermore, all lower middle class families will be issued tax credits to cover costs between 10% and 15% and poor families and children receive free coverage after mandatory minimum wage contributions to HSA are exhausted (see above).

WHAT IF INSURANCE COMPANIES FAIL TO PROVIDE PLANS AT TARGET COSTS?
After five years, in any region where no insurance company has managed to create a plan that meets the 15% target, a national public plan will be made available. This plan would offer plans at the price targets outlined above.

HOW WILL COSTS BE CONTAINED?
The bill will require price transparency for all treatment regimes to allow patients to make informed decisions. The requirements will be straightforward.

Upon a physician making a treatment recommendation, he or she will engage all related parties (doctors, hospitals, hospice, etc.) and they must collectively supply the patient’s insurance company with an estimate request within 24 hours and the insurance company must in turn provide the patient with a complete, firm estimate (full costs and patient’s share) and explanation with 48 hours.

Failure to provide estimates in said time period will result in a $500 fine to be deposited in the patient’s HSA. The insurance company may also solicit bids from other institution to provide to the patient in that time frame.

The bill will also include significant tort reform, some firm but reasonable limit on pain and suffering judgments, but also provide for a new medical board that will allow patients to report potential negligent care in order to sanction or remove the medical licensees of incompetent physicians.

So that’s the Blumer plan. Probably enough to piss off everyone a little but give everyone a little. Got a better idea? Let’s hear it.

Marc takes the bait

Sorry for the absence, but Grande Americano is back: untanned, sleepy and cranky.

Lots of important things that I could discuss: healthcare, the economic recovery, the sudden appearance of roving gangs of angry white males.

Instead, I am taking the bait on the University of Illinois clout story.

Some backstory
I am a 1992 graduate of the University of Illinois-Urbana/Champaign’s journalism school. What’s more, I was not accepted into the U of I out of high school despite good grades and a solid ACT.

Instead, I attended Southern Illinois University for two years, getting the best grades of my life and getting hired onto the paid newspaper staff as a full-time reporter my sophomore year (a fairly rare event).

With these credentials in tow, I then applied and was accepted into U of I’s very competitive College of Communications as a junior. I did well in that program, graduating in 2.5 years (having lost 17 credit hours in the transfer).

So understanding my background, this clout story is supposed to make me mad, that politicians and power brokers used their influence to get some qualified students preference and to sneak a few unqualified students in?

Well, I am mad.
I am mad that an entire generation of parents can refuse to act like grown ups.

And I am mad that a premier news organization chooses to drive sales by egging them on.

Let’s look at the cases of the aggrieved:

Parents at top suburban high schools. Odds are, if there is a highly qualified kid who missed the cut because of the .5% of slots given to the clout list, he or she is yours.

But did you know that U of I has ALWAYS limited the number of kids from schools like yours, giving preference to downstate and city kids as tiebreakers?

They do this to ensure that the entire senior class of Glenbrook North does not take a mini-van convey down to Champaign. And as a state, there is mass agreement among voters that regional diversity (as well as ethnic diversity) is important at the state’s flagship school.

So if your kid did not get in with good grades and test scores (as I did not get in back in 1987), it is vastly more likely that his or her slot was taken by a kid from Ana or Englewood than by a friend of a politician. Have you protested this fact?

Furthermore, and this is my favorite part, when it comes to your child’s stellar GPA, how much of that was due to them and how much due to you?

You see, as a transfer to the U of I, I took the place of one of the thousands of students who flunk out every year – who could not handle getting their drunk butt to class or turning in assignments on time without mommy asking if they had done their homework or daddy checking their math.

What is great about U of I is once you get there, success is absolutely about the student’s merit (not the parents). You are one of 38,000 students, a social security number in flip flops. The school could care less if you flunk out. Just like the real world.

And you have to admit, if not your kid, than at least most of your kid’s classmates have been given a support structure that is totally unlike what they will get at the U of I.

So admitting them based entirely on their success within that warm bath is (a) not a good indicator of future success and (b) not really fair to the kids of working parents in blue collar and inner city schools doing it all on their own. Is it?

Parents at inner city, blue collar and downstate schools. Ok, your kid has overcome some odds to get good grades and a solid ACT.

First off, if your kid had GREAT grades or a GREAT ACT, we are not having this conversation as the regional weighting discussed above would have ensured your kid got in – probably at the expense of a kid from the North Shore of Chicago.

Second, are you really doing your kid a favor pretending that the world is somehow a perfect meritocracy? That they will never miss out on a job they are perfect for because another applicant knows that owner? That they will never miss out on a promotion they deserve because a colleague is better at politics or is prettier? That they will never lose the boy or girl to a jerk who has more money?

Third, are you really telling me that their kid’s life will never recover from attending another of our state’s many public colleges and universities?

The Chicago Tribune. In 1988 and 1989, I applied for internships at your paper. I had clips from a sophomore year of writing full time for the SIU Daily Egyptian – a paper staffed almost exclusively by upperclassman. My grades were stellar – good enough to warrant my acceptance into the University of Illinois’s top ranked journalism program. And I did not warrant even an interview.

Maybe I deserved to get an internship. Maybe I did not. I can’t know.

But can you guarantee that some student did not get that internship because he or she shared the same Medill professor as the editor running your program or that some other, non-merit factors came into play?

And if that happened, should my parents have called the Sun Times and launched a daily protest. After all, a newspaper is a public trust, right? Or are you maybe just a giant group of muckraking hypocrites?

College is about growing up
Ideally, college is the place to start learning how to be a functioning adult. And in the real world, there is no such thing as a perfect meritocracy. Things don’t go your way, you put your head down, find another option and, if you have talent and work hard, things do work out.

I am proof of that lesson – one encouraged by the parents in my parent’s generation.

What our current generation of parents is doing through this mass outrage is teaching our children an amazingly damaging lesson about the nature of making your way in the world and how you respond if you are going to succeed. And that is an outrage.

The GOP’s soft spot for the French

While spending the last month NOT blogging, as my wife and I were firmly ensconced within Northwestern University’s fine hospital system, I’ve never the less had lots of time to think about … healthcare.

As I’ve read the various U.S. proposals and rebuttals, I’ve come to agree that the prevailing Democratic proposals are tragically lacking in needed price controls.

And yet I’ve been underwhelmed by the GOP leadership’s* complete lack of ideas on how to cut costs. This from a party that portrays itself as the keeper of “fiscal discipline.”

* There are actually a few nifty bipartisan ideas out there, such as the Wyden-Bennett “Healthy Americans Act” – but neither party’s leadership takes them seriously.

Problem is, serious cost cutting requires serious sacrifice and creative ideas that challenge strict party orthodoxy. And that’s just not the modern GOP.

This is really a shame for the country. In times of great challenges, you need a vibrant opposition party.

So here’s a freebee from the political center. Let’s look at prescription drugs with a fresh set of eyes:

“Prescription drugs are a small part of healthcare spending.”
Around 10%, to be exact for a total spend of $220 billion and $742 per capita. But this adds up fast, as we will see.

“I knew it! You want to impose price controls and kill innovation.”
Nope. I am fully in the Megan McArdle camp on this one: I believe in free markets and accept that the profit motive is critical to getting life-saving drugs to market.

But I have a huge problem with the fact that the U.S. pays twice as much for our prescription drugs as other first-world countries.

In 2007, for example, U.S. private insurance companies and federal, state and local governments paid collectively around $110 billion more for their prescription drugs than if they’d been charged rates paid by the EU based on that two-to-one pricing assumption.#

(# Exact figures on all total country-by-country pharmaceutical spends hard to come by since different drug mixes are available in each market. But most experts I found accept the U.S. pays twice as much per dose for the same Rx as does the EU).

“R&D budgets would be slashed if the U.S. paid what other countries are paying.”
I mostly agree.** So I am not suggesting we have price controls. My plan gives them an equal amount of profit to what they get now if they want it. They could even make more.

** Yes, I’ll ignore the inconvenient fact that U.S. pharmaceutical companies spend so little of their profits on R&D. Let’s move on. My seething liberal friends, go get a drink and catch up later.

“Huh?”
I think it is time the GOP was as exercised about the French living off the largess of the U.S. taxpayer as you were about “welfare queens” and “loser homeowners.”

Simply put, it’s time we shared the R&D burden with our first-world peers.

What I propose is very simple legislation. Neither the U.S. government nor any private insurance plan based in the U.S. will pay one penny more for prescription drugs than the average charged to other first-world countries.

Notice that there is no mandate that the pharmaceutical companies cut U.S. prescription drug costs. We just won’t pay more.

The pharmaceutical industry, whose individual players would through this legislation have a level playing field in which to act, could, if they chose, simply charge the EU, Japan and others the prices the U.S. already pays.

Or they could cut prices charged the U.S. to the levels charged elsewhere. Or (most likely), a combination of the two.

So this legislation leaves it 100% up to the pharmaceutical companies HOW they change their pricing or if they EVEN cut our pricing at all. I expect we will see real savings, but there is no mandate.

The only thing for sure is we let them know that the U.S. taxpayer is done being played for a sap.

“And that’s going to save big coin? A potential, partial cut of a 10% line item?”
Let’s do some back-of-the-envelope math.

Total U.S. spending on healthcare in 2007:	$2.2 trillion
Total U.S. spending on prescription drugs in 2007:	$220 billion
Cost-per-capita for healthcare in 2007:	$7,421
Cost-per-capita for prescription drugs in 2007:	$742
Direct government spending on healthcare as %:	45%
How much more we paid for prescription drugs (public and private) than if charged EU prices:	$110 billion
How much more we’d pay over next 10 years  assuming 5% cost growth:	$1.6 trillion
What would we save if drug companies charged first-world countries 25% more and U.S. 25% less:	$400 billion

Assuming 5% annual growth in prescription drug costs and the fact we are paying around twice as much as the EU, that means that over the next ten years, we will pay $1.6 trillion more than if we’d been charged EU prices.

Umm, let me repeat that: $1.6 trillion dollars. Do I have your attention now?

But let’s not get greedy. To me, a fair start would be for the pharmaceutical companies to charge the U.S. 25% less and other first-world countries 25% more. That would net a cool $400 billion in savings over the next decade. That’s a full 1/3 of the cost of the current healthcare reform proposals.

Again, it would be up to the pharmaceutical companies how much more they charged others.

But I find it difficult to believe that the GOP would chose to continue to soak the U.S. taxpayer to pay for a Frenchmen’s cheap prescriptions rather than ask something difficult of the pharmaceutical industry. You wouldn’t do that, would you?

See, my conservative friends, you can find ways to cut costs that are consistent with your broad principles. So stop sniping and start thinking.

I’m just asking (North Korea edition)

So I’m watching Fareed Zakaria’s GPS interview with Henry Kissinger this morning. (Which, BTW, has become Must-See TV for every policy nerd I know.)

And as Kissinger laid out the various reasons why China hasn’t previously cracked down on North Korea’s general nuttyness, I began to wonder about the kind of central questions NOT being asked outside of wood-paneled think tank boardrooms.

So today is the first of what will become a regular series of hypothetical policy questions that I’ve titled “I’m just asking.”

The idea is to prod public conversations on entrenched geo-political disputes, centered around my thesis that the U.S. might actually be able to ask MORE of other world powers if we started by taking the time of understanding THEIR bottom line and thinking more creatively of what we might offer up to get there.

Today’s question:

What might it take for China to decide regime change is in order for North Korea and to take decisive action to make that happen?

How China has viewed the problem

Pretty much every policy analyst lists three central reasons for China’s continued support of North Korea (both serious aid and its U.N. Security Counsel veto).

One, China worries about the potential of a huge refugee crisis on their border if the current dictatorship in North Korea were to fall.

Two, China views the prospect of a unified Korea as a likely U.S. ally that would then sit right on its border.

And three, as Kissinger noted today, China believes they have one, and only one, chance to threaten North Korea.

This notion of having but a single chit is made even more perilous within the Chinese Politburo mindset in that they are privately worried that, were they to cash it in and fail, the Chinese government would lose face globally.

What has to be troubling China

Simply, China has to fear what we all fear: that Kim Jong-il is nuts; that the only thing his team of thugs have publically achieved is joining the nuclear club; that their regime may very well USE their weapons if the alternative is losing power; that Japan and South Korea are getting nervous and may (understandably) develop their own nuclear capacity – leading to an Asian arms race.

What carrots might be tempting?

Well, the humanitarian/refugee problem seems the easiest.

Look, an 879-mile border should not be that big a deal when you have the largest free standing army in the world (1.7 million troops). Keeping North Koreans in North Korea is something China could handle assuming there is not total chaos.

That’s where the U.N. comes in. Dealing with the care and feeding of 23 million people while a new government is negotiated is obviously a serious challenge. Already, China provides North Korea with 90% of its power and 40% of its food. That has to be serious coin.

However, this kind of massive aid is the one thing that the U.N. can actually do and do well and I can’t think of an easier issue to get global support in supporting and funding.

The issue of a unified Korea is harder.

But what if part of the deal is that the new, North Korean government would be immediately recognized by the U.N. Security Council and that its initial constitution would require a period of no fewer than 25 years before it could enter into talks with South Korea regarding reunification?

That would allow several generations of North Korean politicians to gain experience and public trust without help/support from the U.S that might permanently ingratiate it. Meanwhile, the United States military would have already pulled out of South Korea, meaning that even a reunified Korea at mid-century would not be a sure U.S. ally.

Of course, this would require the current administration to walk back from comments about South Korea being one of America’s “strongest allies.”

However, personally, I’ve never felt like the average South Korean has exactly shown us the love anyways and it is not an alliance I’d put ahead of ridding the world of Kim John-il.

Finally, there is another carrot that might seem less obvious: U.S. support of Taiwan.

Any objective reading of the China-Taiwan conflict is that reunification is going to happen. China has too much face on the line. And as China grows in power, U.S. leverage on Taiwan becomes weaker and weaker.

Simply put, we are not going to go to war with China to protect Taiwan. Ever.

So why not throw Taiwan on the table? If China is willing to withdraw all support for North Korea and help facilitate regime change, we have a little chat with Taiwan and tell them to cut a deal fast. Otherwise, we publically change our foreign policy to one that demands reunification.

Would a package of global assistance of all humanitarian aid, assurance of a neutral North Korea and fast resolution of Taiwan get China to change policy and act? I’d love to hear your thoughts.

My tortured argument

Three weeks ago, as I went on vacation, I left behind a roaring debate on President Obama’s release of the “Torture Memos.”

But my lack of comment on the issue, sadly, had nothing to do with my trip. The truth is, I’ve been incredibly conflicted on the subject.

Since his inauguration, I’ve been, well, comforted by the president’s approach of first banning torture and then simultaneously requesting that we simply move forward.

And while I think President Obama has since struck the right balance – choosing transparency in releasing memos whose contents we already knew and choosing delay in releasing photos whose content is known but whose impact would endanger troops in harm’s way – something nagged at my core.

At first, I found an odd, warm blanket in Peggy Noonan’s treatise that echoed the president’s approach. But I knew it was too easy.

Then, Slate’s Jacob Weisberg nailed it for me. Stop right here. Read Weisberg’s analysis. I’ll wait.

Finished? Ok, here’s my take.

In the days after the 2001 terrorist attacks, you did not have to be a raging “September 11^th changed EVERYTHING” neocon to be both scared and angry. I know I was both those things.

Quite simply, the intelligence failure was maddening. And as a foreign policy realist, I know and accept that intelligence is a murky business. So I clearly remember thinking, at the time, something along the following lines:

Go find who did this. Find out everything they know. Do what you have to do. And, by the way, try to make sure I don’t actually have to know what you did in the process.

And while I was not alone in thinking this way, I was, in every measure, wrong.

My first mistake was a failure to retain the lessons of history. Study 2,000 years of wars and you cannot come to any conclusion but that it is inevitable that any army will come to dehumanize its enemy.

Please know that I say this without judgment, as I have never set foot on a battlefield or faced an armed enemy. It is just a reality of war and one that, unchecked, has far too frequently led soldiers down evil roads.

Understanding this, the abuses of Abu Ghraib and Guantanamo Bay were entirely predictable in an environment where rules of engagement were relaxed from the highest levels.

Torture is the ultimate slippery slope. Open the door a crack and it will always devolve under the pressure of the battlefield.

My second mistake was more fundamental and I’m saddened by what it says about my character.

Along the lines of Ben Franklin’s famous quote “Those who would sacrifice liberty for security deserve neither,” who we are and want to be as a nation demands that we do not torture.

The discipline to live up to this standard in the face of a terrifying enemy is indeed incredibly hard. But we, as a country, have chosen a path that demands we live up to it. Always.

Beyond that, the “24” ticking bomb scenario is pure fiction. With time, we can get the information we need from suspects. In fact, torture does not even really seem to work.

So where do we go from here? With torture banned, do we need to congressional hearings, a truth commission, even an independent counsel? Here’s my take.

First off, I agree with Weisberg that no matter what, this conversation has to be taken out of the political and legal arenas: No congressional hearings. No special prosecutors.

But I do think we need to have a public reckoning for what we did.

And I mean “we.”

My preference is an independent, non-partisan, non-binding commission that looks at every angle of how we got to this point and creates a historical record. We admit it. We apologize for where we went wrong. We move on.

(Two exceptions here: One, I think disbarment of John Yoo and other Bush lawyers who twisted legal advice to permit a policy of torture is perfectly appropriate. After all, this is not jail or even a fine but a judgment on their professional conduct as lawyers by lawyers. Two, if Nancy Pelosi did lie to Congress, I agree 100% with Newt Gingrich and others that she should face a full investigation and removal from office.)

But in the end, a government of “We the People” must hold the people ultimately accountable. I’m one of them. And I was wrong.

Diagramming arguments

My blog post from last week led to some great arguments with a few of my friends on the right.

The primary complaint challenged my support for a longer school day and year in order to address the challenges of improving education in poor urban and rural areas.

Our debate was spirited. Here’s a representative quote:

Why should I work so hard … why should I pay 50% or even 75% of my income … to pay for parents who won’t do the work to raise their kids right? I dare you to say you support that in your next blog post.

You got it.

Yes, I support returning to the tax rates of the Clinton years, which will raise top marginal tax rates, to pay for Obama’s education plan. I say this knowing this will undoubtedly help the children of a sizeable group of crappy parents (among millions of pretty good ones.)

My testimony complete, I want to return to my conservative friends’ statement, as it is fairly representative of those of the larger teabag nation.

So since we are talking about education, let’s go to the blackboard and, just as we once diagrammed sentences, diagram your argument.

“Why should I work so hard …?”

Let me answer your question with a question (my blog, my rules):

What if you lost your job tomorrow and the only job you could get paid 66% as much? Would you exert less effort?

While I cannot KNOW what motivates another human being, my belief is that for most people, the answer is no. You are either a person who works hard or you are not.

Say what you want about me, but I have a hard-earned reputation for working my tail off. I did it in my part-time jobs in high school and college. I did it working on a construction site (getting threatened by union workers in the process). I did it when I started my first job making $20,000 a year. I did it by pursing a master’s degree at night while working 50-60 hours a week. I do it now while I make many times that initial salary.

Why do I work hard? Because I have pride in what I do. Because my employer pays me a salary. Because I don’t want to let down co-workers and customers. Because I don’t want to find myself out of a job because other people have worked harder.

In all honestly, the prospect of more money has never played a role in my daily decisions about how hard to work.

That said, even when I’m putting in a late night at the ad agency where I work, I don’t think for one second that the Polish cleaning lady who is vacuuming the floor at 8:00 p.m. while I’m banging out copy works less hard than I do.

The difference in our salaries is not a matter of effort. It is a matter of circumstances and talent. The marketplace values what service I provide more than what she offers, just as the marketplace values what doctors provide more than my services.

Yeah, effort matters in what you achieve in life. But it is only one factor. To me, effort is not to be rewarded, it is to be expected.

The only place where I will at least entertain the supply siders’ argument, that higher taxes on the wealthy discourages hard work, is with entrepreneurs.

The notion that lower tax rates would make more people take the leap and start businesses that would then create more jobs is worthy of debate.

For 10% of entrepreneurs, those who start businesses with the goal of becoming wealthy, there is huge merit to the argument of lowering their tax burden.

But I have personally helped evaluate research among entrepreneurs that shows the other 90% of people who start businesses do so for reasons that have nothing to do with money.

They do it to improve their quality of life; to never again work for others; to do something they enjoy more.

So if you can find a way to segment out those 10% and lower their tax rates, I’m on board. But as the husband of an entrepreneur who never wants to grow to the point of hiring anyone, I can say firsthand we don’t need or deserve a tax break.

“… Why should I pay 50% or even 75% of my income …?”

I’ll address “why” in the next section. But in term of the percentages, the truth is you don’t, exactly.

Since there is such wide misunderstanding of marginal tax rates, let’s review.

If you are married, filing separately, and make:		$8,350	$33,960	$82,250	$100,000
Here are the taxes you pay broken out by rate segment: (For simplicity, I’ve included but not broken out deductions)	10% tax bracket ($0 – $8,350)	$803	$803	$803	$803
	15% tax bracket ($8,350 – $33,960)	$0	$3,679	$3,679	$3,679
	25% tax bracket ($33,960 – $82,250)	$0	$0	$8,294	$8,294
	28% tax bracket ($82,250 – $171,550)	$0	$0	$0	$9,597
Total tax paid:		$803	$4,482	$12,776	$22,373

While your tax bracket is based on the last dollar you earn, the way you are taxed is not. Quite simply, for every segment of income, everyone is taxed at the same rate.

What this means is you only pay the higher tax rate on the dollars above each bracket. So NO ONE in this country pays 50% of their income in taxes. That is why it is called a marginal tax rate.

Let’s compare a person making $100,000/year vs. someone making $82,250. The difference in salary is $17,750. The higher wage earner pays an additional $9,597 in taxes on that additional $17,750 in gross income (net $8,153 income after taxes).

But if the higher wage earner stayed at the same 25% tax rate as the person making $82,250, he or she would have still paid $8,569 in taxes on that $17,750.

So, to make the extra $8,153 in net salary, this person kicked in an extra $1,000 in taxes over the lower tax rate.

The question is, of course, do you think that the extra $1,000 in taxes discourage someone from taking a promotion that would put an extra $8.153 in their pocket?

Really?

And if you do and find yourself in that situation, don’t take the promotion. Someone else will be happy to get it.

“ … to pay for parents who won’t do the work to raise their kids?”

Another question for you:

What if you were President and you could lower tax rates for every taxpayer by 20%, without running up any additional debt or cutting any services?

But to do it, you’d have to give $1,000,000 to tens of thousands of deadbeats across the country. Not criminals, mind you, just jerks.

However, every town would have one and you’d personally see him or her every day.

Would you do it?

If you said no, you are absolutely entitled to your opinion. But you are not in any meaningful way a conservative. A Republican, maybe. But not a conservative.

To govern is to choose. Making policy choices for 300 million citizens will always mean imperfect solutions: where some segment will get less of what they want or more of what they don’t; where some are asked for sacrifices to fix problems not of their making and SOME who caused the problem get bailed out.

Look, you can’t on one hand say that government is completely incompetent and incapable of managing large enterprises and then expect that it can somehow also craft programs that, with 100% efficiency, produce desired outcomes without unfairly rewarding anyone who does not deserve it or unfairly penalizing anyone who does not.

In businesses and the market, these kinds of choices are made every day without conservative outrage.

Here’s an example: A company is planning layoffs. Two employees are on the block:

• One is a great worker
• The other is totally disorganized

However, the latter handles a customer critical to the business and, due to his lack of organization, letting him go would risk losing the client.

The organized employee, by nature of his being organized, has clients well situated to transition to another employee with no risk to any disruptions of service.

This is a painful, but straightforward, business decision: You let go of the better employee. I’ve been part of this decision. And any true conservative gets why you make it.

Well, the same is true in public policy. Any entitlement program will find some of its dollars in the pockets of people who don’t work hard. Any business subsidy will find some of its dollars in the hands of businesses that are not making hard choices or should, on balance, be allowed to fail.

So if your argument as a conservative is that any rewarding of the undeserving  necessitates we should therefore do nothing, I completely disagree with you. But I understand your position and we really have nothing more to discuss.

But if you, like the vast majority of Americans, think we DO need to address the economy, financial markets, education, environment, etc., may I suggest this?

In evaluating public policy proposals, first consider the following: What are the probable and possible benefits? What are the probable and possible negative outcomes? What are the projected and worst-case costs?

Then, answer one, and only one, question:

On balance, is the policy proposal better that what we have right now or the other options on the table? And if it is better, be a grown up and do it.

Look, in a partisan system, it is understandable and indeed necessary for opposition parties to bring up the negative consequences of a policy proposal.

But it is also necessary for all involved, especially citizens, to take the time and effort to wade through the pros and cons, make choices and live with those choices – both good and bad. Again, to govern is to choose.

On education, there are many reasons to allocate funding to enable a longer school day and year. For starters, it will improve the performance and, indeed, the lives of poor students (who BTW did not choose to be poor or, if they have crappy parents, to be raised by them). This is one of the core responsibilities of a society.

But if that is not enough for you, consider that funding a longer school day and year will make our economy more competitive with other nations, which will mean more jobs and (yes) more high wage earners to share the tax burden.

And it will mean fewer people that we have to provide entitlement programs for during their working years or pay to lock up in prisons. The ROI for society of this is a no brainer over the lifetime of today’s young, poor student.

Knowing this, and then digging underneath today’s question, there is only one real reason to not support funding a longer school day and year. That reason is spite.

Sadly, spite has been a fantastic crop for the GOP, planted by Nixon, harvested by Reagan and brought to market by Lee Atwater, Roger Ailes, Karl Rove and thousands of their minions.

I wish I could believe that spite as a political platform has run its course. Sadly, it never will. But if you want to argue politics with me, know this. I will never support or fail to support any policy out of spite.

Sorry for the length of today’s post. Going on vacation. See you all in a couple weeks.

Three things I’d like to see during Obama’s next 100 days

With all the Obama/FDR comparisons, it is not surprising that CNN and others are planning “report cards” on the president’s first 100 days.

Frankly, I’m more interested in looking ahead to the next 100 days.

Because that’s when we finally get to see how the President’s domestic campaign platforms translate into actual policy.

Out of necessity, the first three months of the Obama administration have been focused on addressing the rapid collapse of the economy. So, with a few small exceptions, we’ve seen lots of the rhetoric of change without very much of the legislation of change.

That’s about to change in a hurry: Healthcare, energy and education are all on the administration’s proposed dance card.

Umm … wow.

And that policy list does not even include AfPak, North Korea and Iran diplomatic efforts plus growing grumbling on the left to throw immigration into the mix.

Our country clearly is going to have to multitask along with the Blackberry-in-Chief. So it probably behooves us to figure out pretty quick what each of our bottom-line demands are for the major domestic issues of the day. Here are mine:

(1.) Sever health insurance from the employer-provided model

I’ve read a lot of health care proposals. Some have strong upsides. All have flaws.

For me, the most important aspect of any new policy is that it ensures that my health insurance becomes MY health insurance.

Working in a knowledge-based industry, the simple reality is that the “free agent nation” will become a reality for me in the coming decade.

All trends point to a marketplace where knowledge-based workers will be primarily contract-based. Quite simply, companies that must complete globally are far better off brining in talent with niche skills as needed and not paying the overhead year round.

For this rapidly growing sector of our economy, it is critical that workers have control of their health insurance if they are to be independent contractors.

Yes, we could all incorporate. But the costs of a healthcare plan bought for me, by me, as a company are not nearly as low as those projected if buying into a far larger risk pool of self-employed workers.

Beyond my own needs, healthcare costs and complexity are crippling to U.S. businesses (especially small businesses). There is no reason for U.S. businesses to waste resources addressing health care that is, frankly, not their problem.

(2.) Don’t build an education plan around “super-human” teachers

My early read of President Obama’s education plan is heartening.

First, he clearly understands that overcoming poverty in education means that schooling must begin at an earlier age, include more math and science, take place over a longer day, continue over a longer year and, at a minimum, include SOME college.

Second, he is clearly willing to take on the unions, who have moved from protecting the average teacher to protecting the worst teachers. More than anything, this approach is critical for consensus building among citizens across the political spectrum, who shares their outrage when unqualified teachers cannot be fired.

However, as I’ve read the President’s plans for teacher recruitment and the policy papers of the Teach for America crowd, I’ve become concerned. Because they all love to trot out statistics about how much poor students improve when put in a classroom with an uber-talented, Ivy League degreed, super-committed 23-year-old teacher.

Well, yeah, I’m sure those students do just great.

But as anyone who has hired employees for a living will tell you, finding 10 talented, driven employees is amazingly difficult. Any plan that requires we find 3.3 million of them is bound to fail.

Yes, we should recruit the best teachers we can, reward them based on their abilities and get rid of the really bad ones. But to think we will not primarily have “average” teachers in our school systems is amazingly naive.

When push comes to shove, the most important thing in improving the quality of education for poor students is to find ways to pay for a school year that starts at age three and runs 44 weeks a year, eight hours a day. That’s where the money needs to go.

Honestly, if we could get that and have to live with 100% competent teachers (no stars and no dogs), we’d be golden.

(3.) Don’t make cap-and-trade the only carbon reduction option

Since I spent a lot of time last week on energy policy, I’ll try to be brief here. Obviously, I prefer a more simple gas tax to the elaborate cap-and-trade plan proposed by the Obama administration.

I’m not the only one. In fact, resistance to this plan on both sides of the aisle is causing the EPA to consider an end-around.

Here’s the thing. I understand why President Obama wants to go this way: he thinks cap-and-trade is way to pass a tax without calling it a tax. Problem is no one is falling for it.

Cap-and-trade it complicated. If we had NO OTHER issues to deal with, I don’t think the president, with all of his rhetorical skills, could explain it to the American people in a way that would be widely understood. Hell, I barely understand it after ten years of reading Tom Friedman (BTW he thinks it is a bad idea too).

The reality is, I already don’t think President Obama can get energy done this year with everything else on the table.

More than that, I know he can’t get energy done through Congress at all if it is built on cap-and-trade. If he does let the EPA mandate it, I worry that the president has a good chance of facing a GOP house in 2010.

I mean, the PROSPECT of higher energy bills through President Clinton’s proposed BTU tax helped kill the democrats in 1994. Higher ACTUAL bills surely do even more damage unless voters are on board ahead of time.

So a plan voters cannot understand cannot do anything but hurt democrats. At the very least, the President has to let Congress weigh all options and be willing to sign on to the consensus of that process, even if it drops cap-and-trade in favor of a straight gas tax.