Tax Law Should Not Inhibit Growth

What a state we have placed ourselves in, when U.S. companies with assets abroad must pay a 35% tax on all foreign-earned profits that are brought back into the country. Further complicating the situation, if profits from U.S. owned foreign subsidiaries are allowed to stay out of the country then that money is taxed at a lower rate.

In today’s Wall Street Journal Allen Sinai, chief global economist and President of Decision Economics wrote that under those conditions our government would do well to take action to reverse this trend by changing the tax penalty for American companies with foreign subsidiaries to provide incentive for those companies to bring foreign earned dollars back into the U.S. Sinai estimates that if that situation were to come about the U.S. would bring $545 billion into our economy without increasing our deficit. This is a novel idea.

If the government were to turn the current state of tax laws around so that instead of penalizing companies for bringing money into the country it would provide incentive for them to do so it could have a reverse domino effect on the contracting economy. Imagine what would happen if that amount of free market money, not government spending stimulus funds, were to get injected into our economy. The companies who brought the money into the country would not need to rely so heavily upon credit for their business operations. With a decreasing credit demand, these companies could be more financially independent than they would be if they had to use credit to move forward and foster their own growth.

Sinai argues that this would make these companies much more able to grow since they would be detached from that aspect of the country’s economic woes. This would help foster real economic growth without the need to repay a giant debt to the government. With this growth would come jobs, with the jobs would come more tax revenue. So the government could gain from this type of stimulus instead of having to foot the bill.

Obama wants to find a way to jump start this economy with a giant stimulus plan that is rapidly approaching $900 billion. With so many losing their jobs the general fund in Washington is shrinking faster than congress can vote on bills. We as a nation have placed a lot of trust in Obama and I am sure he wants to get things back on track as permanently as possible. He has made it clear that he doesn’t just want a quick fix unless it will also be the right one. He doesn’t want this contracting economy to just be forestalled temporarily only to begin contracting again when an ineffectual, temporary fix wears off.

Obama has mentioned that he wants to provide incentives for companies to invest their profits at home instead of elsewhere where there are no penalties placed upon investment. With our cost of living as high as it is, American labor costs are too expensive to compete with the same costs in, say, Mexico, Taiwan, Hong Kong or Sri Lanka. Under the current global economic conditions it is a wonder that our companies still have these tax penalties in place any more.

Obama is right to want to send some form of relief directly to the people who are desperately slugging it out while watching their neighbors get hit by layoffs one by one, all the time hoping that they themselves won’t be hit next. It is also right to try to find a way to stimulate the economy from the other end and change the tax laws in order to provide incentive for companies to bring money back into the U.S. and create jobs here. It could even relieve the government of some of the burden having to pay for all this.

Closing Gitmo Not a Simple Issue

Obama’s executive order to close Guantanamo in a year probably needed to be issued and he was wise not to close it right away, giving himself a year to come up with a plan for what to do with some of the more dangerous detainees currently held there. The prison at Gitmo could still have viable use in the application of our national security as long as that use doesn’t involve torture. When someone is being tortured they will do or say whatever they think the torturer wants to hear if they think it will cause the torture to stop. Consequently torture is not a reliable method for getting good intelligence from detainees. There are much better methods to get reliable information.

It is good that Obama has his sights set on doing the right thing. America’s foreign policy has not been administered well in the last few decades. We have backed dictators who themselves had total disregard for human rights in their own countries just so we can have allies in strategic places. We have also trained some who have later become our enemies. In doing this we have completely lost track of what is right and what is wrong by American standards. So closing Gitmo would seem to be a step in the right direction.

Still, after decades of having a foreign policy that was either aimed at having allies in certain parts of the world or at providing us with oil or other natural resources as a result of our backing any given nation’s government—we cannot expect to simply straighten the tangled mess we have created with such policies by doing an about face and abruptly deciding to do the right thing. Sudden changes, however right they may be could have drastic consequences. Most of us know what the right thing to do is, by American standards.

We should only be backing movements toward democracy in our foreign relations with other nations. One mistake we have consistently made is that we expect that all democracies should and would take form as the American clone. This is absurd. Democracy takes the shape and personality of the population which embraces it. Our government didn’t start off perfect or great and we should not be surprised to see other fledgling democracies get off to a jagged start. It is folly to expect a democracy in, say, Iraq, to take the same basic fundamental shape as our own. Iraqis have different values, different expectations of themselves and different goals in life than Americans do. Their definition of the difference between right and wrong isn’t even close to ours.

So after backing the Shah of Iran and Noriega of Panama, why do we expect the world to take us seriously when we berate China for human rights abuses? Nevertheless, putting the United States back on the world map as a champion of human rights and what is right over what is wrong is one of the tasks that Obama wants to do. One question is: How do we do that while fighting a war against terrorism sponsored by radical Islam? Do we need places like Gitmo to accomplish all of this? Did the previous administration simply decide to take short cuts in order to provide a winning solution to our war against terrorism? Is this a cut and dried issue? Is the line visible, or is there a large gray area where the difference between right and wrong is not so clear?

It is clear that Obama knows this is a complicated issue at best. Placing a one year deadline on closing the prison at Guantanamo Bay makes a lot of sense, no matter how badly many people believe it should be closed immediately. Stopping torture as a method of obtaining information is the right thing to do, but what should be done about the prisoners, many of whom are the most dangerous people alive today? Whatever we do about all of this we must stay focused about winning this war. (Not the war in Iraq, but the war on terrorism.) However this is handled we must not jeopardize our national security. We have not been revisited by another terrorist attack on American soil since the September 11, 2001 attacks. It is no accident that this is the case.

This security must continue and even get better in spite of the fact that we are closing down Gitmo. Is it doable? Yes. Can it be done without stripping us of our liberties? Yes. Will radical Islam use our liberties and freedoms against us? They have already demonstrated that they will. These are solid challenges and will test our focus as a nation. Our resolve is important here, for we cannot accomplish this shift to doing what is right in spite of our needs unless we stay resolute.

Obama Is In, And Change Is Coming

In a call center in Denver, Colorado where 400 employees answer help calls when people phone in questions concerning their health insurance coverage, all of the phones went silent at 10:00AM. The call center turned on televisions so the employees could watch the new president take the oath of office and deliver his inaugural address to a crowd of an estimated 1.4 million people. Not one of the 400 phones in the call center rang during the ceremony. After Obama’s address, all of the over 400 call center employees erupted in cheers.

At a traffic light in the north Denver suburban community of Westminster, Colorado a car radio blared out an opened window and into the street, a broadcast of the inaugural address. People went to Washington from all over the country for the privilege of standing out in the cold so they can see the inauguration. Much of America came to a halt while Barak Obama was sworn in as the 44th President of the United States. For the first time in decades America elected a president who is not from a wealthy background. The entire nation stood still, dead in their tracks to witness the inauguration of this man who has inspired our trust. We don’t really know why but we don’t simply trust him, we have been awaiting his arrival at the white house as though he were a messiah.

After a long night of celebrations he began very early the next morning and issued executive orders that banned any former white house staff member from lobbying the white house for any reason and froze all staff wages and salaries. He dug right in when no one would have blamed him if he were to have spent the entire day sleeping after having been up almost the entire previous night attending all of his inaugural balls.

An overwhelming majority of the population of this nation has placed their faith in Obama to do something positive to address our weak economy, our damaged way of life and our decaying ability to make ends meet. We have all been stricken by a daunting feeling that we as a nation are in decline. Much of the reason is because we have been fighting a very expensive war and the time has come when we now have to pay the bill. But it’s worse.

We have a health care system that makes money by not taking care of us, a national security system that protects us by stripping us of our rights and freedoms and a banking system that although they have received billions in bailout funds they have no intention of changing their business model. Instead of using these funds to inject life back into our economy as the bailout was intended to produce, they are sitting on the money for future use in mergers and acquisitions.

People’s life savings are dwindling and their ability to be prepared for old age is slipping away. Those of us who have lost jobs cannot even find a good replacement job. What jobs we do find take months to land and pay so little that we have to find a second job just to keep from losing the house. We have slipped from a nation of two job households into a nation of four job households. Husbands and wives are both working two jobs just to be broke all of the time.

We are giving up our gym memberships, our eating out once a week, our Saturday night movies—and for many, even our cable or dish television service just to make ends meet at the end of the month. On top of all of this, we are making progress in the wrong war and losing the one we should be fighting. We are in a dismal fix as a country.

Yet in the shadow of all of this there were people celebrating all over the country when Obama was sworn in. There was elation everywhere. We are so ready for this change and from the looks of things it has begun. It will be good to see America back on its feet again. And like many others, I can hardly wait.

Hamas is No Innocent Victim

In the wake of the almost three week war between Israel and Hamas in Gaza it looks like for now the two sides are backing off from each other. After reading continuous accounts on Al Jazeera of the relentless Israeli attacks on Hamas and the resulting civilian casualties I am amazed that I see in their coverage no evidence of disgust at the Hamas practice of hiding their weapons and armaments in public schools and hospitals to create as much collateral damage as possible within their own community. Israeli commanders have stated that Hamas first placed themselves in those critical positions; then they launched their missiles into Israeli neighborhoods to provoke the predictable aftermath.

They are either stupid enough to believe they are safe because they are hiding in the schools, hospitals and other places full of civilians and children—or they are cunningly placing Israel in the position of having to take out innocent people in order to hit Hamas. It is quite crafty really. If Israel doesn’t target them it looks weak, which can be exploited by Hamas as a propaganda victory. If Israel targets Hamas in spite of where they are hiding, Hamas can simply let Al Jazeera broadcast all the bloody pictures and films of the dead Palestinian children and wait for the rest of the world to cry out for both sides to stop their conflict.

For the United States to think it can intervene and bring about peace in the Middle East is folly, really. Until Palestinians are willing to admit that Israel has a right to exist, and until Israel is willing to share its territory some how, some way with Palestine in such a way that both sides recognize the need to coexist—this conflict will have no end in sight. And this is not news. How they come up with this solution may not even be something that we in America can envision at this point. In fact it is entirely possible that the United States can only make matters worse over there no matter what we try. But until Israel and Palestine find a way to live together on what is Holy land to both of them this conflict will continue.

According to reports of this war, both sides are resorting to very crafty tactics against each other. Hamas has been trying to bait Israeli forces into entering buildings which have been set to blow up when entered, and Israel, being aware of this is simply blowing up the buildings without entering them at all. When the world cries outrage at either side for violating the rules of war they are forgetting the most basic axioms of warfare. And that is that war is basically the art of deception.

Nevertheless, it was Hamas who fired rockets into Israel which triggered this three week long Israeli attack. And it was Hamas who used their own citizens as sacrifices for this conflict without asking for them to volunteer as martyrs. By western standards this looks bloodthirsty and ruthless. But it was also coldly calculated to take advantage of Al Jazeera’s pre-disposition to slant their coverage in favor of anything that is anti-Israeli. Hamas may not realize it but they are becoming more and more like the western world that they hate. They are manipulating the press and using it to achieve their political goals. It doesn’t get any more western than that.

Trustworthy President Good Candidate for Line Item Veto

So far it looks like Barack Obama is getting off to exactly the type of a start he promised the American public when he was campaigning. His chosen cabinet is a mixture of Democrats and Republicans who collectively form a body that Obama will be able to rely upon for quality advice about almost anything. Like many Americans I have my reservations about some of his choices for cabinet posts, but it is clear that Obama wants a cross section of ideas coming at him from his advisors.

Contrary to previous newly elected presidents he began working on his plans and programs immediately after the election results came in. It is uplifting to see this at a time when the nation is experiencing such a multitude of problems. Even more refreshing is the sense that Obama is a sincere, honest public servant who has what is best for the nation at heart. Although he hasn’t taken office yet he appears to be working harder as his term approaches than it looked like Bush had worked in the entire time he was president. To be honest, we must admit that this is an illusion. Obama is maintaining a much higher profile than Bush ever attempted. This doesn’t mean Bush didn’t work, but it does reflect Obama’s intent of transparency.

It will be a nice change to have a president who discloses how things get done, especially after having had for the last eight years someone who relied so heavily upon secrecy. This is actually a simple difference in how they operate, but it produces a tremendous amount of trust—and the American public desperately needs to be able to trust its leader today. In fact, having a leader we can trust is the only way some of the things we need to do will get done.

One thing that would greatly help our system would be the line item veto. With this one tool a President can prevent countless pork from being shoe-horned into law by taking a piggy back ride on some bill that doesn’t have anything to do with what that pork issue is about. The line item veto could be just the scalpel the President needs to cut extraneous issues from new law proposals. It would also allow the President to sign into law any bill that makes perfect sense for America which he would normally have to veto because of some non-related rider that has been tacked onto the bill.

Without the line item veto any political party can set the president up to fail by attaching pork barrel projects or extraneous financing issues to a bill that the President had fostered and would normally sign into law, but would be forced to veto because of the riders on the bill. It would also increase the President’s power in government. No congressional body in the past has been willing to pass the line item veto into law because they were afraid he would use it. It is the “let’s regulate ourselves by granting someone more power over us” gambit. But if it were passed, the line item veto would be good for the country.

Before the line item veto can come into play we would have to have a trustworthy President. Not merely a President that America can trust, but one that both parties will trust beyond the party line platforms. We have had them before but it has been a long time. And the cold war of palace politics that our system’s design was supposed to prevent has become so ingrained in each party’s makeup that Senators and Congressmen/Congresswomen have been reduced to little more than warriors for their parties. This takes up so much of their time that they can hardly get any constructive work done.

Part of the change that Obama talked about while campaigning was to change the very nature of how things get done. It takes way too long to get a bill passed now because of backroom deal- making and horse trading for votes for this and that. This amounts to logrolling at its best, or worst, as the case may be. Most economists will tell that you can always trust congress to do the wrong thing. This is why Keynesian economics hasn’t worked well in the past. When it was a good idea for the government to spend money to stimulate the economy, it has always taken so long in committee for congress to produce spending measures that by the time the spending hits the economy, the economic cycle had turned and the need for the injection of money into the system had disappeared. Therefore the spending wound up feeding inflation instead of countering the recession.

In the hands of a conscientious President the line item veto could go a long way toward streamlining this process so that the original intent of the economic stimulus package could be realized. It is still a long shot but if anyone can get the line item veto, it is probably Obama. It will be interesting to see what’s happening with the economy as Obama’s presidency proceeds.

Our Broken Healthcare System

America’s Healthcare system is perhaps the most corrupt and broken of all advanced societies. Universities and business are allowed to patent the results of research even if that research has been funded by the U.S. Government. This was made possible by the Bayh-Dole act of 1980. Prior to this, all government funded research results were owned by the government and thus part of the public domain. It was available to anyone. Little by little our health care has been delivered directly into the hands of corporations. The only problem with this is that corporations run for profit, and that drives up the cost. And like all corporations, those in the health care industry spend lots of money to insure their profitability.

Health insurance companies and HMOs have full time employees whose only job is to find a way to either deny claims for legitimate and needed care or try to get the money back from those who got the care or operation. Doctors are employed by those same insurance companies for the sole purpose of finding a way to deny claims. The more claim denials they produce, the higher their bonuses are. On May 30, 1996, Dr. Linda Pino testified before congress that as an employee for Humana she denied coverage for a necessary operation that caused a man’s death—and she did not get into any trouble for this act. In fact she was fast tracked to higher income and more responsibility. Insurance companies make money by not covering us and by denying coverage to us, not by providing the protection we thought we had. Because health insurance companies and HMOs have made so much money they now have such deep pockets that doctors and hospitals have been free to charge more, so costs soar.



It is not just the insurance companies. Not only are we scrutinized when we enter a hospital for proof of insurance then prioritized for treatment (or not) based upon our coverage, hospitals are now refusing to provide necessary treatments to patients if the cost of those treatments is greater than what the patient's health insurance will cover. As health costs increase this problem gets worse. As long as our health care is in the hands of corporations we will face this problem. Managers and CEOs of hospitals and insurance companies are no different than leaders of any other type of corporation. They must answer to a board of directors and show significant profits if they wish to keep their position. In fact they must show progressively increasing profit levels and must continuously come up with new and creative revenue streams or they will be replaced by someone who can. As long as profit is part of our healthcare system rising medical costs will continue to outpace inflation.

The problem is even more complex. The FDA has managed to get enacted into law that only a drug can cure disease. If you are a physician and you find that a change in diet combined with exercise can cure a particular disease, you cannot make that claim to the public no matter how many double blind studies you have conducted to find out whether or not your treatment will work. If you do make such a claim you will in all likelihood be sued by the FDA for making this claim. After all, making such a claim is illegal.

Is that how the FDA is protecting our interests? Before a new drug hits the market for consumers it must first be tested and approved by the FDA. Does this new drug have to be tested against the old drug currently being used for the same illness, disease or symptom? Surprisingly it doesn’t. The test only has to prove that the new drug is better than a placebo, which by definition is a fake. So the new drug simply must prove to be better than nothing at all. Any doctor will tell you that this is a very low standard. So now we can add the pharmaceutical companies into the mix. So considering all of these complications it is easy to see some of the reasons why our healthcare system is not working well.

There are those who would argue that without involving private enterprise there would be no impetus to provide progress. They would argue that most progress is a result of competition. In many industries that would be true. But has it proved to be the case in public education? How about with police and fire protection or our military protection? And where do we draw the line? Do we open up our national security to private and competitive armies? How about our police and fire protection? Should we introduce competition into our security infrastructure?

Many people would argue that national health care would be an unrealistic fix to our system. They refer to a national healthcare system as “socialized” medicine. By coining the word “socialized” in their argument they are using the perfect euphemism to fight the onset of national healthcare. What better phrase could they use to provoke national fear of our society evolving toward communism than to call national healthcare socialized medicine? So why isn’t America among the top ten healthiest nations in the world? Why aren’t we even in the top 25? And why is the United States the only remaining western democracy who has yet to absorb healthcare into its infrastructure? I can tell you this. The nation that ranks number one in healthcare for their population does have national healthcare. So does number two and number three.

Would creating a national healthcare system and including it as part of our infrastructure be a perfect solution? Probably not, but it would be better for our collective national health than what we have now. Do the countries that have national healthcare like Canada, France and England have a flawless healthcare system? No they don’t, but at least their citizenry is not falling victim to the never ending push for profits that Americans face. Yes, national health care must be funded from somewhere, and yes, that funding will come from our taxes. But right now many people are paying hundreds of dollars per month on prescriptions alone. Add to that the ever rising cost of health insurance and the diminishing coverage of our policies, coupled with increasing deductibles and growing maximum out of pocket expenses and what is left of the typical paycheck? It is entirely possible that although national healthcare would increase our taxes, it could increase them by less than what we are already paying—for what amounts to less than adequate care.