STARTING DOWN THE PATH

There is an old saying among philosophers: not to philosophize is to philosophize. To put that another way, whenever you do any serious thinking, you have to start somewhere. All thinking presumes some basic premises based upon which the thinker is able to draw conclusions from his or her observations. Some people examine the premises upon which their thinking is based, and some just make conclusions uncritically, based upon principles that they have somehow assumed. If you are to do critical thinking, and this site is dedicated to the very notion of critical thinking, then you have to start by examining those premises. The end, as the Roman poet Manilius said, hangs from the beginning. The founding principles, what I prefer to call the enspiriting core, are the key, the since qua non, to understanding, and critiquing, any body of thought.

It is to the credit of the authors of The Path to Prosperity (The Path) that, at the very beginning of the document, they set forth the principles upon which they base their entire program: “The budget resolution for Fiscal Year 2012 intends to recommit the nation fully to the timeless principles of American government enshrined in the U. S. Constitution — liberty, limited government, and equality under the rule of law. It seeks to guide policy by those principles,freeing the nation from the crushing burden of debt that is now threatening its future.” Any attempt to understand the merits of The Path has to start by analyzing the meaning of these words and critiquing their accuracy. I wish here merely to raise some questions about this straightforward statement of The Path’s enspiriting core.

I wonder, first of all: where did these “timeless principles” come from? The document says that they are “enshrined in the U.S. Constitution.” There are at least two problems with that statement. The first is that, by the very terms of the Constitution itself, nothing contained therein is timeless, since absolutely everything in it, including presumably the very name “Constitution” may be amended by Congress subject to ratification by the states. The second, and far more serious, problem is that the enspiriting core of the American form of government, the timeless truths that form the basis of the American ideal, are found, not in the Constitution, but rather in the Declaration of Independence: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness.” By saying that these truths are self-evident, the founders are boldly stating that one cannot think differently, that one cannot look at the world without recognizing that every human being, simply by virtue of the status of being human, has rights that cannot be compromised or ignored.

So, I wonder, second of all: Is The Path’s announced enspiriting core, if not drawn from the Declaration of Independence, at least compatible with the core of the American ideal stated in the Declaration of Independence? The Path’s statement does list both liberty and equality as features of it grounding principles. The problem is twofold. First of all, neither document defines either the word “liberty” or the word “equality.” Second, The Path announces “limited government” as a “timeless principle”, but, whether or not it actually is, it is nowhere listed in the Declaration. Aside from philosophical essays and insurance policies, terms are rarely explicitly defined, and we are therefore commonly left to infer the definition of terms from context and common usage. Allow me to make a few suggestions along those lines.

There are two radically different ways to look at the word “liberty.” The first is to define it personally. In that sense, liberty is an announcement of my own lack of restraint. For instance, one might say that liberty means that I am free to do whatever I wish provided that my exercise of that liberty does not unduly violate another person’s lack of restraint. This is what I call the negative concept of freedom. The fundamental idea of lack of restraint is negative, and the limits of that liberty are simply inferred from my assertion of my own right to that lack of restraint. If I have this liberty, then I recognize the same right in others purely by inference from my own right, or else I voluntarily limit my lack of restraint on the calculation that failure to do so would lead to unacceptable conflict. This kiind of calculation was best presented by the British empiricist Thomas Hobbes, and goes by the general term “social contract.”

The second way to define liberty is to recognize an inherent right in every human being to pursue his or her own fundamental needs. This is the positive concept of freedom, positve primarily because it rests on the recognition of an affirmative quality that we recognize in others independent of our own needs or rights. Another way of describing the difference between these two definitions is to say that the first is grounded in the self, the ego, and may therefore be called “ego-centric”, while the second is grounded in one’s recognition of an inherent right in another person, and we can therefore refer to that definition as “other-centric” or “ec-centric.”

There is no doubt that the term “liberty” as used in the Declaration of Independence is other-centric. Not only is that the plain sense of the language in the Declaration. It is also consistent with the philosophy from which the authors drew, namely that of John Locke. Therefore we can comfortably conclude that the enspiriting core of the American ideal is an unconditional commitment to the inherent rights of each and every human being. The core of the American ideal is a commitment, not to lack of restraint, but to the responsibility of all humans, each for the other.

Whether the enspiriting core of The Path is consistent with that of the Declaration of Independence is, for me, problematic, and it is problematic precisely because of the inclusion of the reference to limited government as a “timeless principle.” First of all, it is not by any means either timeless or self-evident, even within the American system. There is, after all, a provision in American political jurisprudence for assumption by the government of substantial, and even at times total, power, as for instance with the declaration of martial law and the suspension of habeas corpus. Secondly, it is hard to declare that limited government is a self-evident principle when there are many rationally acceptable forms of government such as the various socialist democracies that have existed in Europe and elsewhere. One may argue that these forms of government are less effective in the long run than a more limited form of government, but that is a pragmatic question, and therefore is nothing like a self-evident “timeless principle.”

The only conclusion I can draw from The Path’s insertion of limited government as a fundamental principle is that its usage is rhetorical rather than rational, political rather than philosophical. In other words, The Path’s announcement of its principles is political propoganda, written to sell something rather than reason to it. If that is true, then likely the “liberty” being touted by its authors is their own liberty, and their conception of human rights is ego-centric, and, as such, essentially inconsistent with the enspiriting core of the American ideal.

This is not to say that the economic program presented by The Path does not have merit. In fact, it makes no comment at all on the merits of that program. I am simply concluding here that The Path’s announced fundamental principles are not consistent with the American ideal. In subsequent essays, I will examine the details of the plan, and I will critique those details by use of the self-evident principles that constitute the enspiriting core of the American ideal.

The Republican Path to Prosperity

Republicans in general, and presumptive Republican presidential nominee Mitt Romney in particular, have endorsed an economic program generally attributed to Wisconsin Congressman Paul Ryan and entitled, “The Path to Prosperity,” hereinafter referred to as “the Path.” In the next few weeks, I will be doing a logical analysis of various parts of this document. I write here only to make one observation about a key element about which the document remains mysteriously silent. In the meantime, I strongly recommend that you read the whole document. You may skip the first ten pages, which are primarily a political statement about the Republicans’ opposition to President Obama.

The fundamental premise of The Path is the indisputable assertion that the United States is heavily in debt and needs to reduce that debt. The general structure of the solution offered by The Path is to reduce spending, increase revenue and stimulate the growth of businesses and, therefore, jobs. In these general outlines, The Path follows an inescapable logic. To balance one’s budget, one has only two options: reduce spending and increase income. Stimulating the growth of business is presumably a means of increasing income, since more business and more jobs would mean more income and therefore more tax revenue, not to mention less reliance on public funding and therefore a reduction in spending.

There is, however, an apparent anomoly in The Path regarding the increase of income. The Path actually proposes to reduce taxes, suggesting that the maximum tax margin be reduced from its present 33 percent to 25 percent. This would presumably be in addition to other tax reductions presently being proposed by Republicans, such as the pending bill to further reduce taxes on hedge fund and private equity managers by an additional twenty percent. The Path argues that this further tax reduction on the income of what turns out to be the highest incomes, primarily people making in excess of one million dollars a year, is justified as a part of the program to stimulate the growth of business, and that the resultant reduction in tax revenue would be more than made up for by eliminating what The Path refers to as “income tax loopholes.”

Herein lies the mystery. The Path, and apparently all of its supporters, refuses to reveal what “tax loopholes” it proposes to close. There are some obvious candidates for the title of “tax loophole”, the elimination of which would create a great deal of new income for the government. There is, for instance, the Foreign Investment Tax Credit. This little-mentioned provision of the tax law allows multinational corporations to hide gigantic profits offshore without being taxed. So, for instance, Exxon Mobil used it to shelter 56 billion dollars in profits, and GE was able to shelter a whopping 62 billion dollars. (See Richard Blake, “Repear the Foreign Investment Tax Credit,” Denver City Buzz Examiner, June 19, 2009.) Then there are the hedge fund tax deductions, the corporate restructureing tax deductions (used by venture capital and private investment funds) and, of course, the historically low capital gains tax, 97% of the benefits of which went last year to people earning more than one million dollars a year. (See Leo Burman, “Mitt Romney’s Teachable Moment in Capital Gains,” Forbes Magazine, January 18, 2012.)

Are these the “tax loopholes” that the Republicans would close to increase tax income and reduce the debt? On that subject, the document and its proponents remain silent. The fact that Republicans are proposing to increase tax deductions to hedge fund managers suggests that these are not the “tax loopholes” they are thinking of. However, a recent editorial in The Milwaukee Journal Sentinel may give some insights into what “tax loopholes” would be on the chopping block. The editorial, entitled “The Buffett Rule is a Gimmick,” suggested that the Republican program, presumably The Path, is a far more reasonable approach. The article goes on to say that the “tax loopholes” that would be closed would be such things as the deduction for dependents and the deduction for medical insurance and expense. What is remarkable about the ones mentioned by the Journa/Sentinel is that they are all deductions used primarily by people with incomes under $250,000 per year. If this is true, if The Path is proposing to close these loopholes, then the result will be that effective tax rates will go down for the wealthy and will go significantly up for those that are not wealthy.

This proposal has a logic to it. After all, there are far more people making less than a million dollars a year than there are making more. Increasing taxes on the less than wealthy will result in a greater increase in tax revenue. Taking a thousand dollars from each middle income taxpayer will generate more income for the governent than taking a million dollars from each millionaire taxpayer. But is it fair? And, fair or not, why don’t the proponents of The Path come out and tell the people whether this is, in fact, their intention? The answer to that last question is easy. This is an election year, and there are far more middle income voters than there are millionaire voters. Telliing the average voter that they intend to solve the country’s financial woes off the backs of the middle and lower income classes would very likely lose the election for the candidates who endorse The Path. So, from a purely political viewpoint, their silence is perfectly understandable.

It is the first question that is the more difficult one. Is it really fair, is it really within the scope of the American ideal, to increase the retained wealth of the already wealthy and to levy the lion’s share of the present American debt burden on the backs of the middle and lower income people who have already been brutalized by this severe, and ultimately avoidable, economic recession? Each must answer this on his or her own. For me, it not only seems unfair. It seems, in the end, doomed to failure. The American way of life depends on the average person in America feeling that he or she has at least a decent chance at financial security. Increasing that average person’s burden could shake that feeling, and that way lies, if not madness, then at least danger.

THE COST OF HEALTH CARE: AN IMMODEST PROPOSAL

The issue of health care in the United States is presently a political football, and, because it is seen as a useful political tool, current discuuion of the topic, if one can call them that, bear little resemblance to reasoned discourse. If one were able to put politics aside and view the subject on a rational basis, two things about health care in the United States would appear inescapably true. The first is that we do, in fact, have a system of universal health care in the United States. Some way or other, if you get sick enough, you will get medical treatment of some sort. The second inescapable truth is that, for our Byzantine and hole-riddled health care system, we pay far more than any other developed nation in the world.

From these two inescapable truths, there comes one inescapable conclusion. The real core issue in health care is not whether we should have a system of universal health care coverage. We have that, willy nilly. To twist the old saw about philosophy, not to have a system of universal health care is to have a system of universal health care. The real core issue is how to make one’s systme of health care cost efficient. The need for health care is universal, like air and water. There is no question as to whether we should pay for it. We will pay for it, are paying for it, whether or not we do so in a rational manner. The only subject open for rational discussion is how we might provide adequate health csre in the most cost-efficient fashion.

When one approaches the subject of health care in the United States in this reasoned fashion, an odd paradox appears. One of the problems with the cost of health care in the United States is that, rather than too little insurance, we have too much. A large segment of the population is covered by a multiplicity of policies for medical expense. To illustrate, suppose that a truck driver gets injured in a multi-vehicle accident while in the course of his employment. He likely has medical insurance to cover his medical bills. He also has coverage for these bills through worker’s compensation insurance. He also has a medical pay provision in his truck insurance to pay the bills. Each of the other vehicles also has a medical pay provision to cover the same bills, and each of the vehicles’ liability insurance coverage has exposure for the bills. If the truck driver’s injuries are sufficiently severe, he might also end up with coverage from Medicare and/or Medicaed.

Each one of these various policies was underwritten with the potential for the truck driver’s bills in mind, and therefore coverage for this one set of bills was redundantly charged in the premium of each of these policies. There is, however, a far greater expense that arises from these redundancies. Each of these insurers, aware of the likelihood of other available coverage, have place in its policy a provision excluding payment where other coverage is available and allowing it to recover any payments it made if it is determined that another coverage is applicable. This is generally referred to as a subrogation clause. So, for instance, if the truckdriver has his bills paid by his medical insurance, that company may puruse the worker’s compensation insurer for reimbursement. If the accident is determined to be the fault of one of the other drivers, then the worker’s compensation carrier can pursue the liability insurer of that other driver. Each one of these insurers has an entire subrogation department dedicated to the pursuit of this kind of reimbursement.

The utter wastefulness of such a system may be illustrated by a simple thought experiment. Imagine that there were only two insurers in the entire world. Imagine that the two insurers were of identical size and ability. They each carried the same lines of coverage. They each had the same number and type of clients, and they each had the same number and kinds of claims. They each had subrogation departments of identical quality and diligence, and they each achieved the same success in pursuing their subrogation rights. What would be the net result of their efforts? Zero. Each would extract from the other the same amounts in subrogation. However, each would also pay for the entire machinery of its subrogation department, and each would suffer the expense of responding to, and defending against, the subrogation efforts of the other. So each would undergo the expense of a large bureaucracy that, in the end, produced absolutely nothing.

That, in net effect, is what is happening in the insurance industry in the United States today. Multiple policies are charging premiums calculated upon exposure for the same medical bills, and the claims on each of these policies are referred to a subrogation department where efforts are made to obtain reimbursement from some other policy, the issuer of which is, in its turn, handing the matter over too its own subrogation department. By and large, these multiple efforts work, in the end, to cancel each other out, leaving only the substantial cost of each of the subrogation departments.

You need to be in this sytem to realize how wildly inefficent it is. Whole law firms exist solely to pursue suborgation claims. There are people, many, many people, who do nothing but make phone calls all day long to identify and pursue subrogation claims, and that means that there are many, many people who have to answer those calls. There is likely no way to quantify the cost of these efforts, but it is safe to say that all of it is very expensive and, as is evident, all of it is, in the end, an utter waste of time and money.

In all modesty, I suggest a simple solution. First, we need to install a reasoned program of universal health care coverage. The details of its structure and funding are subject to rational debate, and politics will likely play a central role in shaping the details. The point is that the universal health care that we have is in dire need of revision on a rational basis. Universal health care is inevitable. Cost efficiency is possible only if we reconstruct the system along rational lines. My own preference is to run it like a utility. We all seem somehow to pay for water and electricity. So divide the country by a grid, and sell of the segments to the highest bidding provider or insurer. Give the highest bidder a monopoly in the areas they purchase, and put a public service vommission in place to control profits.

Then — outlaw subrogation. Remove medical expense as an item of recovery in all litigation. Since all medical expense is paid, it is not to be considered an item of loss. So, for instance, medical expense cannot be claimed as an element of award in personal injury claims, medical malpractice claims, products liability claims or premises liability claims. This should result in a drastic reduction in the cost of malpractice insurance for doctors and for products liability insurance for manufacturers. In worker’s compensation, it is estimated that about 60% of the moeny paid for work injuries goes for medical expense. Therefore, if subrogation is outlawed, all employers should experience a very substantial reduction in the cost of worker’s compensation insurance. Not only that, but the cost of running an insurance company should be greatly reduced, since the entire subrogation department would be eliminated. There would, in other words, be across-the-board savings to individuals, professionals and cocmpanies that would remove an appreciable part of their costs and make them more competitive in the global market.

There is likely some way to quantify the extent of savings that would be realized by eliminating subrogation, but at the very least it would reduce the country’s entire real cost of medical care by ten percent. If one accepts the estimate that medical expense in America is over a trillion dollars per year, that would mean a saving of one hundred billion dollars or more. This is a saving that is not just reasonable. It is dictated by reason, and, if we ran our country on the principles of reason, it would be easily done. Until we install something like a reasoned universal health plan, however, we will continue to carry this worthless and expensive burden.

What makes America American

We who created this bogsite did so because we found that there was no place among the various media for rational discussion. Reasoned discourse in politics has been replaced by ideological rants, sold to the public by the rules of propoganda. Chief among these rules is that the truth of what you say is irrelevant; the entire object of discourse is to sell the listener on a particular course of action. If, to get you to vote for a Republican candidate, I can make you think that President Obama is a Muslim, I will do so regardless of the fact that it has been conclusively established that he is not. The same pattern follows for arguments about the economy, the environment, social welfare, health care and a host of other subjects.

What has been lost in all of this is the fundamental principle that unites us as Americans. The founding ideal of our country is found in the Declaration of Independence: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights …” This is the enspiriting core of the American ideal, and it is the litmus test for those who are either American or are in agreement with the American spirit. If you are American, you agree with these ideals, and all the rest of our discussions have only to do with our varying opinions on the best means to most fully implement those ideals. The most radical rightwinger and the most radical leftwinger, then, differentiate themselves, not at all by ideals, but rather by the means to best effect those ideals in practice.

The real core question, however, is: what exactly does that statement of the American ideal mean? Here is where the core discussion needs to take place. It is possible to interpret the ideal, that all human beings have certain unalienable rights, to mean that the most important thing is my own private and individual freedom to do whatever I want, and government is best operated by leaving me alone to do whatever I want. I put it to you, however, that the true meaning of this ideal is, on its face, precisely the opposite of that view. If I hold that every human being has certain unalienable rights, then I am really stating that I have a core obligation to respect and further the rights of each and every other human being on the planet. So, rather than being the announcement of pure personal license, the American ideal is the recognition of, and commitment to, the rights of all human beings.

It is this ideal that all the world admires. It is this ideal that preumably stirs us to spread democracy throughout the world. The American ideal is not about me. It is about you. The American ideal is not about freedom but about obligation, responsibility. The American ideal is not about garnering great wealth but encouraging and creating the opportunity for all human beings to live and to live in peace. The American ideal is not a declaration of my rights; it is a commitment to your rights.

It put it that, if one interprets the American ideal in this fashion, most current political rhetoric will be instantly seen for the shame that it is, for propoganda used solely to promote someone’s personal agenda. Be that as it may, before we can evaluate that rhetoric, we need first to debate the meaning of the ideal.