Stephan G. Rickard's letter to President Obama

Stephan G. Rickard of Cape Girardeau, retired after more than 30 years in the collection division of the Internal Revenue Service, wrote a letter to President Obama earlier this year that touched on several key issues of national importance.

President Barack Obama The White House 1600 Pennsylvania Ave. Washington, D.C. 20500

Dear Mr. President:

You have been elected President in a difficult period in our history. Many issues and problems need to be addressed; the last administrations have not done so and now "the great postponement" is over. I am an apolitical middle-of-the-road independent pragmatist and for me and other millions, it seems each party has been more interested in blaming the other for unaddressed problems for short-term political gain than in solving the them. This must end. Ideology is standing in the way of necessary solutions. We can no longer afford for Pogo's dictum to be true.

HEALTH CARE

The most pressing issue is health care. Unless this is reformed there is no real hope. In 1993 the Clinton administration proposed a major reform that went nowhere. Deservedly so. While I am in favor of a single payer plan, the Clinton administration never addressed the major issue. Why does the United States spend so much on health care in comparison with other countries and where does the money go? It does not buy us longer life spans or even improved health. I will state large amounts of spending will not offset poor health habits; lack of physical activity, obesity and others.

The table below illustrates the problem.

SEE TABLE

These figures can be extrapolated in spending per capita; the United States spent $6,413 per capita in 2007 while Sweden, the next highest of the above referenced countries spent $3,613. If the U. S. had spent what Sweden did per capita, $634.9 billion would have been saved. (Same source.)

This bloated spending is crowding out other government programs and squeezing employees' paychecks. Until it can be accurately determined where the extra spending is in the U.S. health care system, any attempt at reform will be doomed to failure. Successful reform will address this extra spending.

The McKinsey Global Institute, a research arm of the highly regarded consulting company, has published a new study of the U.S. health care system. It stated the administrative costs of the U.S. system are only 7 percent of the total spending. How does that compare to single payer plans in other countries? Still there may be significant savings. Do doctors do extra tests to protect themselves against possible malpractice lawsuits? How much does this cost? Do high malpractice insurance premiums add to health care costs here and if so how much? Is the income of doctors in this country significantly higher than in other countries? Are there too many specialists doing too much expensive care, much of which could be obviated by earlier intervention? The McKinsey study found CT scans in 2005 were 72 percent higher per thousand population in the U.S. than Germany and reimbursement rates were four times higher. Knee replacements were 90 percent higher than in the other above referenced countries. (SourceNewsweek magazine, January 19, 2009, page 39.) Are hospitals in this country over developed as too many try to be capable of handling virtually any procedure. (I remember an article in Washington Monthly magazine in the middle 1980's about how much Medicare could save by having all heart bypass operation done at the Texas Heart Institute in Houston, where the cost was 40 percent less than national average and the fatality rate was only 25 percent of national average. The estimated savings included transportation for two and paying for a room for the spouse and was in the multimillions.)

Reform will be difficult. Health care providers have no interest in limiting spending. The population appears not to since most patients do not pay the medical bill themselves. Most current programs appear to be designed to conceal the true cost from the patient. A mass movement must be developed to actually take steps to contain and then reduce this cost.

We are at the point in our history where all Americans must be forced to face unpleasant questions. I also believe a national problem has developed affecting our ability to devise solutions to our problems and I saw it for the last 20 years. I spent 33 1/2 years with the collection division of the Internal Revenue Service, now retired. I only dealt with businesses in financial difficulty and invariably I was told by the owners/officers they were looking for the ONE corrective action that would turn everything around. I would have to tell them there was not one but a series of smaller corrections that added together would make a significant difference. Looking for the "one" wastes time as it does not exist. This same concept applies to national problems also.

(Anecdotal evidence -- In 1996 my wife Caryl and I were vacationing in the Lake Ontario region. Our first morning in Ottawa we boarded a Gray Line tour bus. Two men and a woman sat down behind us and I could tell from their accents they were Australian. We began talking and the two men were members of the House of Representatives from Victoria. One said they were meeting with members of Parliament the next day to discuss health care cost containment measures and then proceeding to Washington, D.C. to meet with members of the House to discuss the same issues. One put it 'we don't want to catch the American disease of out of control health spending.')

Our current system is geared toward treatment, not prevention. A small step, failing to get a single payer plan might be for health insurers to change the deductible portion of their plans. Instead of having the first $250 or $500 per year be the responsibility of the insured, the first $250 spent per calendar year would be covered by insurance, the next $500 or so would not be. This would allow each insured person to have a complete physical each year (currently many do not) with more opportunity for early intervention.

I believe a national goal should be established to reduce health care spending to 11 percent of GDP by 2015. Accomplishing this will also reduce the long term financing problems with Medicare and Medicaid.

STIMULUS PLAN

As proposed the current stimulus plan is found to be wanting. It does not devote enough to infrastructure in my opinion. If we are to send the bill for this to our grandchildren, we A & should leave them more. It should be aimed more at reducing congestion; of people, goods, energy and information. While it is well enough to spend on roads and bridges, much of it should go for repair and maintenance work; it is more labor intensive and no lengthy permitting process is necessary. Corrosion control, sandblasting and painting can be started quickly. The gist of this plan must be value, value and value.

One infrastructure area I have not heard mentioned is water systems. I have read (source unknown) the water systems in the United States daily leak as much water as California uses. This is not only wasteful of inputs but also causes subsidence and sinkhole problems leading to other damages. Replacing leaking joint couplers and pipes can be started relatively quickly through a grant process and will use large amounts of steel made in the U. S. Leaking sewers also cause the same damages as leaking water pipes plus the health issues. Modern technology often makes it possible to reline sewer pipes quickly and at a fraction of the cost of replacing them. It seems these are sometimes ignored as re-lining sewer pipes or sandblasting and repainting a bridge offer no ribbon cutting opportunities.

I think Amtrak made a mistake in the Northeast Corridor, particularly the area from New Haven to Providence, the old New Haven (railroad) shore line. It has been remodeled but still needs some drawbridges replaced. But the problem is the curvature in the track, almost 3600 degrees, the equivalent of 10 full circles. High-speed rail needs to run in almost a straight line. This curvature also made necessary the complex tilting mechanisms on the trains to maintain speed on these curves. I believe, and it is not too late, Amtrak should have built new from Hartford to Providence, an almost straight track. This would have increased speeds and brought Connecticut's largest city into the passenger mix. I estimate this could still be built for about $1.513 plus the upgrade from New Haven to Hartford.

The American Society of Civil Engineers currently gives the U. S. a grade of "D" in infrastructure. It estimates $2.2T needs to be spent in the next 5 years to raise this to a "B." China is spending nearly 9% of GDP on infrastructure, (Time Magazine, July 14, 2008, page 11). The U. S. a little over 2%. We cannot remain competitive unless this deficiency is addressed. Perhaps it is time to bring back the PWA to oversee this infrastructure upgrade.

Another issue that must be addressed is NIMBYism. Permitting processes and approvals have become too lengthy. Small organized groups can no longer be allowed to "veto important national projects through lengthy court proceedings, endless appeals, etc. An example is the noted lack of progress at ground zero in New York due to permitting and bureaucratic infighting.

ENERGY

Any approach to energy policy must be a trifurcated one. Mr. President, you have used the term 'shock and then trance' to describe the past 35 years. Hopefully we are not entering another trance stage with the drop, (temporary I believe) in crude oil prices. We need more domestic production on energy and less use of imports; in the short run this will also help our current accounts balance. Persistent large current account deficits eventually reach a crisis. The usual solution is a currency devaluation in an attempt to boost exports. This would be a partial default to foreign creditors. At the same time we need a longer-term strategy to move all transportation away from petroleum fuels. By 2025 only 20% of the fuel used in transportation should be petroleum based and this is doable.

How to accomplish this? First there is no practical reason for us to not drill for more oil in our own territory including the ANWR. To me opposition to this is based more on ideology than practicality. The last oil spill in the U.S. was 40 years ago and the preventive technology has greatly improved since then. Drilling in the ANWR would use only 2000 acres of the whole area. Also this drilling would create relatively high paying jobs by the thousands as well as increasing income through federal and state severance and royalty taxes. While offshore oil is relatively expensive, compared to onshore oil, an import tax can be placed on imported oil bringing its price more in line with our own production. The price increases would also steer consumers to more energy efficient alternatives. How many middle-eastern skyscrapers do we want to pay for?

The alternatives for transportation are several. First are hybrids and electric cars. These are useful particularly in urban areas where a short-range vehicle is not a problem. There are two other alternatives; each using a fuel the U. S. has in abundance. One is natural gas, ideal for cars and smaller trucks and a nation wide distribution network already exists, except to the ultimate retailer in most cases. This can be encouraged with a lower federal fuel tax on natural gas compared to gasoline, plus the import tax mentioned above.

The other alternative is diesel fuel made from coal. This uses the Fischer-Troppsch method devised in Germany in the 1920's and greatly improved since. Diesel cars consume less fuel per mile than gasoline powered; today over half of the cars sold in central & western Europe are diesel powered. Making our own diesel fuel will provide hundreds of thousands of jobs in mining, transportation and chemical conversion. The FAA and the commercial airline industry are investigating synthetic jet fuel but it already exists. It is used widely in South Africa and is already ICAO (International Civil Aviation Organization) approved and made from coal. Governor Schweitzer of Montana is a great proponent of CTL (coal to liquid) and can furnish more information. The commercial airline uses about 165M barrels of fuel per year, the rail industry about 95M plus the inland and oceangoing maritime industries. If these were converted to CTL, the petroleum savings could be over 350M barrels per year and street and highway use is not considered in these estimates.

Much has been done to harvest wind energy, especially on the Great Plains. But according to NOAA of the Commerce Department, the best wind area is the U. S. is not the Great Plains, but the Atlantic coast from the Maine-New Brunswick border south to Georgia. This has higher more consistent wind speeds. It is also closer to end users reducing investment in crosscountry transmission lines and the resulting energy loss in transmission. (A proposed wind farm between Massachusetts and Nantucket Island is one of the vital projects tied up in the permitting process for five years.) Off shore windmills are more expensive, (one estimate is 40%) but can also be larger and more efficient and use noisier two bladed propellers instead of three reducing costs somewhat. Long Island Sound would be an ideal place for large wind farm development as the water is relatively shallow, end users are close and Long Island would furnish some protection from possible hurricanes. It should be possible to organize a government corporation, (Off-Shore Power Authority?) like the TVA and sell the power to utility companies. Use of larger turbines, 2.5MW to 5.0MW ultimately would be more economical. If successful, then sell the corporation in the future.

The third leg in energy is conservation, to establish a national goal of a 20% reduction in BTU use per capita by 2025. Historically the U. S. is a nation built on cheap energy and cheap land, reflected in our urban design. This conservation can be accomplished in many ways. One is national insulation standards, by geographic regions for new construction. Another would be to quit subsidizing "mcmansions" through the tax code.

I believe mortgage interest deductions should be limited to $20K per calendar year. More recycling should be done, especially of aluminum products. A government sponsored program to further increase electric motor efficiency by 20% would pay large dividends in reduced energy consumption. There are many other measures too numerous to mention

SOCIAL SECURITY

There is no real fix for this unless Congress takes it off autopilot. Until 1975, the Congress had to vote on the amount of the raise each year. This is again a requirement if anything is to be done about reining in uncontrollable entitlement spending. In the interest of brevity, I shall limit myself to one suggestion. Percentage raises are often defended as a way to help the lower income elderly but it helps the higher income much more. Flat dollar raises would help the lower income recipients more. According to the 2007 report of the Social Security Trustees, the OASDI fund paid out $584.9B in benefits to 48.953M recipients. Lets assume a 4% raise for 2008 or an increase of $23.396B, (the number of recipients is to remain the same for this example); the recipient receiving $600 per month will receive a $24.00 raise, one receiving $1400 will receive a $56.00 raise. If a flat dollar raise of $30.00 per month to each recipient was done, the lower income recipient would have a 5% increase, the higher income a 2.1% increase. It would also reduce the total increase from $23.396B to $17.623B and this savings is there each year in the future.

Social Security is called the third-rail of American Politics but it does not have to be. It can be called leadership or good marketing but I believe changes are vital and doable. Our grandchildren's future depends on it.

OBSOLETE POLICIES

Some government policies seem to take on a life of their own. They remain in existence because it has always been that way. But it does not have to be so.

For years I have been wondering why we keep so many troops in South Korea. We are told it is to protect South Korea from North Korea. Yet South Korea spends less of its GDP on defense than the U.S., 4% of GDP for the U.S. and 2.5% for South Korea. (Data from "Pocket World in Figures" 2007 figures published by the Economist magazine.) The same source states North Korea's population is 22.5M with a GDP of $40B and South Korea's Population is 47.8M with a GDP of $787.8B. It seems South Korea is quite capable of providing for its own defense in conventional warfare. The U. S. can continue to provide a nuclear umbrella from afar.

The embargo against Cuba has been in effect for 49 years and has not had the desired result. There is no reason to believe it will. Cuba has been able to purchase whatever it needs from other suppliers. It appears this policy has been maintained by each party to curry votes in south Florida. Fidel Castro has also benefited from it by proving to the Cuban people they are standing up as "David" to the northern "Goliath." A common characteristic of totalitarian governments is to concentrate their people's attention on an external threat. This focus's attention away from loss of personal freedom and a difficult economy and the blame for internal problems is usually focused on the external threat as the cause. It is time to do away with the Helms-Burton Act and lift any trade & travel restrictions against Cuba. Totalitarian governments have difficulty with openness. Millions of American tourists would help to open Cuba. If Cuba refused this, and with its desperate need for hard currency, it is difficult to see how, the blame would be transferred from the U. S. to the Cuban government. Modern technology has made it impossible for the Cuban government to create a total information vacuum for its citizens.

Believe it or not, I have deleted a number of issues for brevity not addressing solar power, immigration, other energy conservation measures, etc. All of us are hopeful the necessary corrective measures will be taken.

Sincerely yours,

Stephan G. Rickard