Obama's Present to Space Settlement

Recently, President Obama met with the NASA Administrator to set the direction for the human space program. The results have not been officially announced, but it is widely reported that NASA will

• not finish development of a government launcher to get astronauts to the International Space Station but, instead, purchase launch services from the private sector,
  
• develop a new heavy-lift launcher (a vehicle capable to carrying large heavy things into orbit), and
  
• send astronauts to Near Earth Objects, among other places.
  

This is all pretty mainstream space 'exploration' stuff. But.

In Paths to Space Settlement I argue that there are three things we should do to bring space settlement closer to reality:

• Space tourism.
  
• Space solar power.
  
• Planetary defense from NEOs.
  

Now consider this question: what are the most important things that government could do to promote these goals?

• More than anything else, space solar power needs a heavy lift launcher to deliver huge satellites to orbit where they can gather energy for Earth.
  
• More than anything else, space tourism needs a privately owned and operated launcher to take people into orbit, which is where the International Space Station is. Bigelow Aerospace has orbited two sub-sized test vehicles and is preparing to launch the Earth's first space hotel, but there is no private vehicle to take people there. Government vehicles, of course, should not be jetting wealthy tourists around!
  
• More than anything else, people need to pay attention to Near Earth Objects to make sure one doesn't hit us. There's nothing like sending astronauts somewhere to get attention.
  

In other words, probably without meaning to, President Obama is preparing to set America on course to do almost exactly what is needed for space settlement.

Merry Christmas!

Health Care Phase II

If the Democrats can hold together, something resembling the current health care bills in the Senate and House will probably pass in the near future. However, from the liberal point of view, these bills have major problems. There are two ways to approach this: give up, hand the Republicans a major victory and probably control of Congress in 2010, or take what we can get and immediately start with the following mantra: "Medicare for All."

The simplest way to get what we want is to allow anyone to buy into Medicare or the federal private insurance pool at cost. This gives people the additional choice of government or private insurance with the federal government's bargaining power. What's not to like?

The law on the verge of passing provides protection from the worst insurance practices and subsidies for those who cannot afford insurance. It also mandates that preventative care is provided. All that is needed is a simple bill letting people in on what the government already does.

However, if the present bill fails, we're toast. As any good engineer knows, better is the enemy of good enough, which brings me to a great if completely tangental story.

Many years ago a former astronaut was put in charge of building a new public library. Unlike many government projects, the library was completed a few weeks ahead of schedule and slightly under budget. A newspaper reporter interviewed the astronaut and asked him how he did it. He replied "I bought a big fancy desk and put it in my office. Every day I put on a suit and tie and sat behind the desk. Every time someone came into the office with a bright idea about how to make the library better I said no."

Health reform Phase I is within our grasp. Phase II is easy to sell: why shouldn't everyone have what seniors have and like?

Don't blow it. Support the current health care bill, with all its many warts and flaws.

Better than the 'Public Option'?

Instead of making our insanely complex health care system even more complicated by adding a 'Public Option,' why not just let everyone buy into Medicare or the private health care plans for federal workers at cost?

This would give us everything the 'Public Option' is supposed to do with less cost, less complexity, and without creating a new government program. Admission would probably need to be phased in so these systems don't have to absorb 30 million people in a single year (30,000,000 / 365 = 82 thousand people a day. That's a lot). Those buying in get the cost advantage of the federal government's bargaining power, and since the buy in is at cost there is no increase in federal debt.

It's simple. It's straightforward. It should work pretty well. Let's do it.

Afghanistan

During the presidential campaign last year, Candidate Obama said he would focus attention and resources on the war in Afghanistan against the Taliban and al Qaeda. President Obama has certainly delivered on that. After months of deliberation and study, in a major speech last week he presented his plan:

1. Send an additional 30,000 American troops to Afghanistan within six months, this is above and beyond the 20,000 he already sent. That triples the troop levels from the day he took office. In addition, NATO has pledged an additional 7,000 troops.
   
2. Redouble the civilian effort, which is key to winning counter insurgencies; with a thinly veiled threat to work with local governments and leaders if the central government doesn't shape up. The central government, lead by Hamid Karzai, recent winner of a fraudulent election, is rife with corruption and incompetence. This is a major problem as the primary objective of counter insurgency warfare is to legitimize the government in the eyes of the people.
   
3. Work with Pakistan to stabilize that country and squeeze the Taliban and al Qaeda from both sides of the border. The Taliban came within a hundred kilometers of the Pakistan capital earlier this year, but the Pakistani army has pushed them back since. While the Pakistani army and intelligence service created the Taliban and supported them, there has been a falling out recently. The Taliban has bombed a number of army and intelligence facilities, including a recent attack that killed military officers and their children in a mosque. Similarly, while Pakistani public opinion has long opposed supporting the U.S. in the region, a spate of bombing has caused public opinion to shift significantly in our favor. It is critical to continue this trend.
   
4. Begin withdrawing U.S. troops in 18 months. What many have not noticed is that he said begin withdrawing U.S. troops, not remove all of them. There is no timeline to do more than begin to withdraw.
   

Obama had, basically, three options to choose from:

1. Withdraw more-or-less immediately. We tried that in 1989 after the Soviets were defeated. It led to the conquest of Afghanistan by the Taliban, who harbored al Qaeda, who attacked America on 9/11 leveling the World Trade Center, severely damaging the Pentagon, and killing 3,000 Americans on U.S. soil. It is little wonder he did not take this path. It's been tried, and it failed.
   
2. Continue on with minimal resources (troops and money). This was the policy of the Bush administration, which lead to a resurgence of the Taliban and a real threat to the Pakistani nuclear stockpile. Again, it's easy to see why this approach was not taken. It didn't work.
   
3. Treat Afghanistan/Pakistan as the critical point. Basic Warfare 101 says that to win one should apply "overwhelming force at the critical point." In counter-insurgency warfare firepower is not decisive, so overwhelming force requires more than just the military. For example, it should be noted that Afghanistan has been at war almost continuously for 30 years. Most of the military age men have fought much or all of their lives. Many fight for whomever currently offers them the best chance to survive and provide for their family. Simply paying Afghani government soldiers more than their Taliban counterparts would probably do more than any number of American soldiers, at far less cost. That this wasn't done long ago is a disgrace to the American war effort.
   

Clearly, Obama has taken the last option -- treat Afghanistan and neighboring Pakistan as the critical point in the struggle with al Qaeda.

The obvious question to ask is: "if the Soviets couldn't pacify Afghanistan from right next door, why do we think we can do so from half a world away?" This is particularly important as the defeat of the Red Army in Afghanistan was a major contribution to the total collapse of the Soviet Union a few years later. Note the recent near-collapse of the American financial system and the massive increase in debt that could easily, if not reversed, send us off a cliff. Fortunately, there are some important differences between the Soviet and American efforts:

1. The Soviets did not apply classic counter insurgency principles, but parts of the American military applied them successfully in Iraq (see here for a discussion of the U.S. military's approach to counter insurgency warfare). In particular, the Afghan commander (McChrystal) and his boss, the CentCom commander (Patreaus) are major proponents of this approach, which works. The appalling fact is that, despite bringing Iraq back from the brink over the last couple of years using these classic techniques, they have not been applied in Afghanistan until now. One can only wonder why.
   
2. The Soviets almost certainly intended to permanently occupy Afghanistan, which was not popular, to put it very mildly, with the locals. President Obama made it crystal clear that America has absolutely no intention of keeping US forces in Afghanistan over the long term. It is crucial that this message be successfully communicated to the Afghan people. One seldom-discussed reason we avoided disaster in Iraq is that the Democrats won the 2006 Congressional elections on an anti-Iraq war platform. I'm fairly confident Iraqi insurgent leaders looked at those results, realized the Americans would be leaving, and chose not to get chewed up by American firepower trying to get us to do what we would now do anyway: leave. The Sunni insurgents made an alliance with us and the Mahdi Army stood down almost completely. Violence in Iraq has plummeted.
   
3. The Soviets faced an insurgency supported by a billion-dollar-a-year supply network funneling weapons and materials through Pakistan. This network, set up by a collaboration between the Reagan administration, Democratic Congressman Charlie Wilson (see "Charlie Wilson's War" on DVD or read the book), and the Saudis was a key element in the Red Army's defeat, particularly the shoulder-fired Stinger missiles which ended Soviet air power freedom of action at low altitude. While the Taliban and al Qaeda have bases in Pakistan, this support is a tiny fraction of what the anti-Soviet forces received and it is under attack from American drones and Pakistani forces.
   

This does not mean America will succeed in Afghanistan. It does mean we have a fighting chance. Obama is very smart, he understands Islam and that part of the world far better than any previous president, he just might succeed. He has asked for 18 months to show that he can pull it off. We should give it to him.

Is SSP Competitive with Nuclear?

Maybe.

Peter Sage, in a talk [part one]at the TED conference and elsewhere, points out that nuclear power plants take 5-10 years and cost $4-10 billion to build, from $300 million to as much as $6 billion to decommission [ref], and $4-6 billion for fuel and operation. This does not include waste disposal. We've been building nuclear power plants for 50 years and this industry has received untold billions of dollars in government subsidies.

Now consider that

• Japan recently announced a $21 billion/20 year program to build a 1 GW space solar power (SSP, aka SBSP) system. The dollar figure is a target, not an estimate.
  
• After two years of analysis and a couple million dollars, Space Energy Inc. believes it can build a 1GW SSP system for $16 billion.
  
• Perhaps more important, PG&E -- a major California utility -- announced a deal with Solaren Corp. to begin purchasing 200 MW of space solar power around 2016 -- seven years from now.
  

It appears that the most expensive nuclear plants are expected to cost about as much as the least expensive SSP systems. As many incorrectly believe that SSP is a thousand times more expensive than current systems, this is a revelation.

There are a couple of issues to consider in this comparison:

• Nuclear power plant costs are well known.
  
• SSP costs are estimates, and estimates of new space system costs are usually low.
  
• Nuclear power plants can pay for fuel and decommissioning out of revenues.
  
• Almost all of the costs of SSP are upfront and must be financed.
  

However, with nuclear power plants we have fifty years of experience telling us costs are not likely to drop very much. The SSP estimates are for the first system, and costs will almost certainly drop a great deal for the second and even more for subsequent systems. Furthermore, SSP has received very little government help, perhaps $80 million over 30 years. Nuclear received, for example, $13 billion in loan guarantees just a few years ago, and fusion research receives roughly $400 million in Department of Energy funding a year.

When considering building new energy plants, SSP looks, very roughly -- say a factor of two or three, about as good as nuclear power from a strictly financial point of view. However, SSP

• is a new technology with huge growth potential.
  
• involves no fuel, much less radioactive fuel.
  
• produces no operational wastes.
  
• is all but invulnerable to terrorist attack.
  
• is generally environmentally far more friendly than nuclear.
  

SSP has received almost no government assistance. It could use government research and development, help allocating frequencies for power transmission, help getting land for ground antenna, and perhaps even a prize system.

If you think SSP deserves more government help, email Steven Chu, the head of the Department of Energy, at The.Secretary@hq.doe.gov and let him know.

Bottom line: SSP may be, very roughly, competitive with nuclear for new energy plants now.

A Sensible Space Program

NASA's human space flight program budget for 2010 is about $10 billion (see NASA budget). The Obama administration asked a commission to look at what could be done within that budget, and the Augustine report came out with a number of options. However, only two of those options can, apparently, be accomplished for $10 billion/year -- neither of which does more than operate the International Space Station (ISS) and build a new launcher with no funded missions. No human trips to the Moon, asteroids, Mars, or anywhere else in the next decade or two. The commission then listed a number of possibilities that could be accomplished for $13 billion/year. Unfortunately, we're going bankrupt and really shouldn't increase non-essential spending.

If the human space flight program can't do much for $10 billion a year, then maybe it's time to look elsewhere for space development. We are just finishing the ISS at a total cost of something like $100 billion, so it would be silly to throw it away. Fortunately, the ISS 'only' costs about $2 billion/year, plus money to pay the Russians or American private companies to fly astronauts and equipment to and fro once the space shuttle is retired next year, say another $1 billion/year. Well utilized, the ISS could potentially produce useful biomedical research (there is at least one medication derived from ISS research that is starting trials), materials research, and technology test beds such as the recently cancelled space solar power demonstration project.

If the ISS costs $3 billion per year to operate, that leaves $7 billion/year for something else. The commission tells us this isn't enough to send a very small number of people to the Moon or Mars, so we should either reduce government expenditures or find something useful that $7 billion could do. I have proposed a $21 billion prize program to develop space solar power. This program is guaranteed to deliver at least 21 space power satellites or our money back. If successful, three years of money to not send a small number of people beyond Earth orbit may get space solar power up and running. This would have a revolutionary impact on energy and climate change problems as space solar power is very clean and available in gigantic quantities for the next few billion years.

Which do you think would benefit America, or for that matter, the world, more?

Finally, here's the kicker. A major reason NASA can't put people on the Moon or Mars with $10 billion a year is that transportation (launch) from Earth to orbit is expensive, several thousand dollars per pound. Launch is expensive because there aren't very many, fewer than 100 per year. Consider what a car would cost if the whole planet took only 100 car rides per year, total. If space solar power were successful, it would create a profitable market for many thousands of launches per year and the price would come down -- then NASA could put people on the Moon and Mars for much less than $10 billion per year.

So you don't even have to choose, you just have to be optimistic and believe that we can do pretty much anything the laws of physics allow if we really want to. America has the most capable aerospace industry in the world, some of the most dynamic entrepreneurs, and a desire for energy and a clean environment. With space solar power we have a shot, not a certainty, but a shot, at drastically reducing carbon emissions, becoming a major energy exporter, and a few years later putting people on the Moon and Mars. We just need to put $21 billion in escrow for a few years and pay it out if someone delivers on the dream. If they don't we get our money back.

Now that's a deal.

Changing My Mind on Health Care

Before reading "The Healing of America" by T.R. Reid I had come to the reluctant conclusion that single-payer health care was the only way to go. Employer-based health care seemed absurd since if you really get sick, you can't work and lose your job -- and your health care.

Reid's book convinced me that employer-based health care can work, and can work very well. This is the case because it works very well in Germany, Switzerland, France and Japan. Everybody is covered, no one is denied treatment, it costs much less than in the U.S., the outcomes are very good, and people don't go bankrupt over medical bills.

Reid has a bad shoulder. He went to England, Germany, France, Switzerland, Japan, Canada and India to treat his shoulder and compare the local health care systems (he also went to an American doctor). All these countries (except India) spend less than America, have better outcomes, and cover everyone. However, their systems are quite different. In England the government owns everything and nobody pays a dime, like our Veterans Administration. In Canada the government pays for everything, but the private sector performs the service like our Medicare and Medicaid. India is an out-of-pocket place, like Americans without insurance. Germany, France, Switzerland, and Japan have employer-based systems like most Americans. While the foreign employer-based systems have significant differences, they are all much different from ours in that:

Basic insurance is a non-profit business. In some systems insurance companies can offer supplementary coverage for a profit, but the purpose of the basic insurance business is to pay for health care, not make a profit.

The industry is heavily regulated. The price of most or all procedures is usually fixed in negotiations with the government each year. Insurance companies cannot deny coverage or refuse payment for procedures.

Costs are transparent. For example, on the wall of every French medical facility there is a list of the procedures they perform, the cost, and how much the government will reimburse. In Germany, every doctor has access to a single database with all the procedures and their prices.

If you lose your job, the government usually picks up the employer part of the premiums.

Insurance coverage is mandatory for everyone.

Administration is simple. In France, everyone has a smart card that all providers have equipment to read. In Germany there is a single database with all patient records.

There were some interesting parts to the systems. For example,

In France, you pay for medical procedures in full at the time of the service. Your insurance company must reimburse you by the end of the month.

In Germany, the insurance premium is 15% of salary, paid in part by your employer (or the government).

In Germany the wealthiest citizens are not required to have medical insurance. The reasoning is that they can afford whatever it costs regardless.

In Germany, everyone can choose from over 200 different insurance companies.

Switzerland had a U.S.-like system until the early 90's, when America rejected health care reform. Switzerland had the same problems we have now: many without coverage, skyrocketing costs, companies denying coverage, etc. Unlike America, Switzerland introduced compulsory coverage and forced the insurance companies to offer basic, well-defined coverage without profit. It works very well.

With Reid's book in mind the current health care reform movement in America has a glaring flaw: all the other employer-based systems require non-profit basic health insurance, heavily regulate prices and procedures covered, transparency and simple administration. Maybe what's coming out of Congress will work, I certainly hope so. However, experience overseas suggests that we are leaving out key components of what is known to work well.

Oh, Reid tells us one other thing. The American health care system is the laughing stock of the world. Whenever anyone criticizes the German, English, Canadian, or other system, the standard response is: our system has problems, but it's not nearly as bad as in America.

America's Economy Fails the Average Man

According to Time magazine, October 26 issue, in 2008 the median male income was $46,367 but in 1972 his income was $46,956 (adjusting for inflation). In 36 years of economic development the net gain for the average Joe was negative! All of the increase in average family income came from women entering the workforce.

What's happening, of course, is that all the economic gains of the last three to four decades have accrued to the wealthiest people in this country (as a group). I believe there is a simple reason: the wealthy and powerful control the accounting system, the systems that decide who gets what. Not surprisingly, they direct all the gains to themselves -- a point Ron Paul made during the last election.

What is surprising is that the rest of America is putting up with it. The accounting system is, after all, the creation of our collective mind. Why keep a system that doesn't benefit most people? Ron Paul and I disagree about a lot, but this one thing he's got right. We need to take control of the accounting system and insure that the economic gains this country has made and is making are shared by all working people, not just a few fat cats.

The Nobel Peace Prize for President Obama

What the prize says is that the world now believes that America is a force for peace, in stark contrast to the way we have been viewed since the invasion of Iraq. As the struggle with al Qaeda is, above all, a struggle for perceived moral superiority (see the US Army Marine Corp Counterinsurgency Field Manual), this is very good news indeed -- regardless of whether President Obama 'deserved' the award or not.

Medicare is Government Health Care

Medicare is a single-payer, government health care program. This simple fact, if known, would likely cool the jets of most of the angry anti-health care reform shouters at town hall meetings.

Many of the shouters are obviously on Medicare, but they don't seem to know that they are in a single-payer government health care system. At one of the town halls there was a sign saying "Keep the government out of my Medicare!" At another, the congresswoman asked for a show of hands: "Who's on Medicare?" Half the audience raises their hand. "Who's happy with it?" most hands stay up. "Who wants government health care?" most of the hands go down. "Do you know that Medicare is a government program?" Booing -- they don't believe it! They are dead wrong. We need to repeat one simple fact -- Medicare is government health care -- over and over and over and over until it penetrates their consciousness. This will take time.

A couple years ago I had a knock-down-drag-out argument with three of my conservative neighbors trying to convince them that members of the U.S. Navy were government employees. It didn't matter that their commander is the U.S. President. It didn't matter that weapons are bought and paychecks are cut from federal tax dollars by the U.S. Treasury. It didn't matter that the "U.S." in U.S. Navy stands for the United States Government. I couldn't convince them. In their minds government employees are lazy incompetents, but members of the military are brave, hyper-competent defenders of freedom -- how could they also be government employees? But they are.

If you don't have the critical facts right, you will come to the wrong conclusions and make poor decisions. The fact is that a huge number of Americans are on single-payer government health care programs. Those over 65 and the disabled are on Medicare. The poor are on Medicaid. These are both private-provider-government-payment, but many Americans are on government-owned healthcare: namely, the military are taken care of by doctors on a government salary and veterans can get care at government owned clinics and hospitals. For the most part, Americans in single-payer government health programs get pretty good care.

Why not the rest of us?

Health Care Falsehood

A recent Wall Street Journal article claimed that "comparative effectiveness research," an important part of keeping medical costs down, is code for letting old folks die rather than treating them. In addition, many on the conservative right are claiming that government health care will result in seniors being left to die rather than receive treatment.

These are both false.

First, "comparative effectiveness research" simply means comparing the effectiveness of two or more treatments for the same condition. The drug companies hate this, and for good reason. It's quite possible that independent research along these lines will discover that the drug they just spent a half billion dollars developing is no more effective than aspirin. To get FDA approval a drug needs to be reasonably safe and more effective than a sugar pill. No test comparing effectiveness with existing treatments is required. While the drug companies save a lot of lives and relieve a lot of suffering, if cheap treatments are better than expensive treatments they'll just have to deal with it.

Claiming that government health care is meant to kill seniors is truly bizarre. Why? Because seniors are already on government health care: it's called medicare. Medicare gives us a clue as to why the attack on health care reform is so vociferous: medicare has a 3% administrative overhead; meaning that about 97% of medicare costs are for doctors, nurses, drugs, hospitals and so on and only 3% goes to paper pushers. The private insurance companies have a roughly 25% administrative overhead.

That 22% difference in overhead means that someone, somewhere is getting roughly $220 billion dollars a year (1) not for treating patients, but for unnecessary administrating. Nobody gives up that kind of money without a fight, and the insurance companies are currently spending $1.3 million per day to stop health care reform, or at least slow it down. Sure the present system costs a fortune and doesn't deliver very good results, but some folks are making boatloads of money.

Not only are the anti-reform lobbyists doing the usual stuff, but one started the 'deather' rumor that a reformed health care system would kill seniors. They have also organized masses of hecklers at congressional town halls to shout down proponents of sensible reform. This is serious money and those receiving all these wasted dollars seem to be willing to do anything to keep it going into their pockets.

Those receiving that $220 billion a year recently won a great victory -- they delayed reform for a month while Congress goes on recess. That means at least $18 billion more in their pocket, more if they can delay a few more months. The whole $220 billion a year if they can stop it.

Don't forget who's paying those billions of dollars of unnecessary overhead: you are. Let your representatives in Congress know that the current health care system is the most expensive in the world, helps drive one million Americans a year into bankruptcy, plays a roll in 18,000 deaths a year of people who can't afford treatment, and -- worst of all -- doesn't deliver a healthy America.

NOTES

(1) This is a rough figure. Assuming $2 trillion total medical costs, 50% paid by the government, 22% of the private part works out to $220 billion.

Profit and Medicine

The profit motive has been, to a great degree, responsible for lifting billions of people out of poverty and into middle-class life. Yet America, with the most profit-driven health care system in the world, spends far more than any other country and outcomes, by standard measures such as longevity and infant mortality, are among the worst in the industrialized world. Why?

The profit motive leads to over-all increases in wealth only when combined with the right kind of markets. Otherwise, it simply lines the pockets of the well-to-do and powerful at the expense of everyone else. Such markets were first described by Adam Smith in his much cited but seldom read "Wealth of Nations." The conditions necessary for the profit motive to work well are:

1. All parties can walk away from any deal. This is often accomplished by having many providers and consumers, none of whom can control the market.
   
2. All parties are well informed.
   
3. Transactions have only minor negative effects on third parties. For example, if I buy a gallon of gas from Exxon, Exxon gets the dollar and I get to drive around, we win, but you (the unlucky third party) have to breath the fumes and get no benefit.

My hypothesis is that the profit motive doesn't work well in health care because all three of these conditions are seriously violated, at least in our system. In addition, health care has special properties that generate high levels of effort without the profit motive.

The first condition is violated in any medical emergency. You cannot walk away from a hospital in the middle of a heart attack because the one ten miles away is cheaper. If there is a patent on the drug you need for survival you must pay whatever the drug company wants to charge. The bottom line is that the medical field is not a single Adam Smithian market, it is a large collection of markets and many of them are monopolies. In monopolies, the profit motive does not have the good properties of Adam Smith's markets.

The second condition is violated in the medical insurance market. Try to get a list of the drugs your insurance company covers. You can't. Not only won't they give you a complete list, the list changes all the time both in coverage and cost. This makes comparative shopping essentially impossible, negating the advantages of the free market. Worse, many people discover, to their horror, that their insurance company can find a way not to cover them when they get sick. The companies have doctors on the payroll dedicated to denying coverage. In some cases they even have quotas (10% is popular) and get prizes for denying more coverage than their peers.

The third condition is violated by the basic structure of the market. Patients and doctors agree on treatment, and therefore cost, while the insurance companies have to pay up if they can't find a way to deny coverage; which is the case for most conditions.

There are also some pathological dynamics in the drug market, among others. The best, least expensive health care would be created by drug research that targeted vaccines and complete cures for serious, expensive diseases. However, the most money is made by drugs that can be used for pleasure (e.g., viagra or prozac) or that control -- but do not cure -- chronic conditions. For example, there are three standard drugs for multiple sclerosis (MS), each costing about $1,000 per month. None of these drugs cure MS or even reduce disability. They do reduce attacks and help people stay employed and insured. Meanwhile research into MS focuses almost entirely on a 50 year old failed attempt to disable bits of the immune system, an approach which generates a lot of revenue but has failed to cure; while research into mylin regeneration, which has some possibility of a cure, is almost ignored.

This is not because the drug companies are evil. On the contrary, they relieve human suffering on a huge scale. But when it comes time to decide where to put research and development dollars, they have a fiduciary responsibility to their stock holders to make money. Often that means choosing to develop a drug that the patient will have to take forever at great expense over a vaccine that only requires one dose per customer; remembering that either effort may fail completely and it will, at best cost, hundreds of millions of dollars to bring either drug to market. The net result is plenty of viagra and prozac, and no vaccine for malaria. Actually, the amazing thing is that the drug companies do occasionally develop vaccines even though they make little money.

It has taken a long time, but I'm coming to the conclusion that health care is one of those areas where the free market and the profit motive doesn't work. Other areas include firefighting, police work, and recruiting soldiers willing to die. Besides the theoretical arguments there is the unquestionable fact that America has the closest approximation of a free market in health care, doesn't get very good outcomes, and pays far more than anyone else.

Eliminating for-profit companies doesn't necessarily mean a single payer system, although countries like Canada and England with single payer have better outcomes than America for less money (1). There are a number of other non-profit models that might be explored. For example, France, with one of the best health care systems in the world measured by outcomes, is not a simple single payer system. I've been told it's employer based with the government paying for certain expensive diseases, such as cancer.

Eliminating the profit in many fields would also eliminate the motivation that sustains extra-ordinary effort by participants. Health care is unusual in that people will work very, very hard because they love to make sick people well. When Jonas Salk developed the polio vaccine he refused to patent it. His reward was the knowledge that he cured the sick -- not unlike Jesus himself but on a much larger scale. Health care for profit has been tried. It hasn't worked very well. We need a new approach.

Notes

(1) When confronted by single payer systems that work better and cost less than our system, it's common to claim that Canadians and Brits have to wait all the time and that socialized medicine means dealing with bureaucrats not doctors. The studies I've seen suggest that Canadians and Brits don't wait any more than Americans do; I've certainly spent many hours in the emergency room and getting an appointment with my family physician takes about six weeks. Furthermore, Americans and their doctors spend a great deal of time dealing with insurance company bureaucrats. The doctors hate it, and I feel the same. One example: we used to have Health Net. My wife has MS and takes Avonex, a standard treatment. When we were on Health Net, they initially refused to cover Avonex every year for five or six years running. Every year we went to the doctors, got letters from specialists, and tried to point out to Health Net that they ended out approving the drug year after year, but only after the annual bureaucratic battle. This charade ended when we finally changed employers and insurance companies.

Dangerous Debt

According to the Schwab Investing Insights, June 2009, the $10 trillion the government owes has an average maturity of 4.7 years. That means, on average, that the government must refinance $2.12 trillion in debt every year -- in addition to borrowing $1 trillion or more in new debt ($1.8 trillion this year!). This means that the US federal government must borrow, on average, over $3 trillion per year.

This is a recipie for disaster.

The End of the Space Age?

The recent collision between an Iridium satellite and a dead Russian satellite created at least a thousand pieces of space debris. On that day, there were 151 more probable in orbit collisions. There is a real possibility of a slow motion chain reaction, where each collision begets several addition collisions until LEO (Low Earth Orbit) is unusable. LEO operations are already more expensive because of space debris. There is a real possibility that, if left unchecked, space debris could put an end to commercial exploitation of, at least, LEO.

If you thought that environmental concerns could be left on Earth, you were wrong.

Data: http://uk.reuters.com/article/UKNews1/idUKTRE51C73720090213

Where We Are

The Democrats control both Congress and the White House for the first time since 1994. This follows Republican rule of the White House since 2001 and Republican control of Congress for most of that period. I believe that the Republican defeats in the last two elections are, at their core, due to poor governance. Today, America is economically, financially and militarily weaker than we were eight years ago and our standing in the world is substantially reduced. Not only is America weaker, but our enemies are stronger, in part due to oil revenues and nuclear weapon development.

The Democrats now have a chance to govern. In two years we will have a chance to judge Congress, and in four, Obama. When that time comes, I intend to look at this post to see how they've done. To first order, I believe that good governance should result in definite signs that things are turning around in two years, and some real gains in four. To make that judgement, here's my assessment of where we are right now. If you see anything wrong or missing, please let me know and, if I agree, I'll make changes.

Economy

The federal government is $10 trillion in debt.

The projected deficit for fiscal 2009 is $1.2 trillion (not counting the stimulus package).

The economy is losing half a million jobs a month, a total of three million in the last year.

Total debt, government, commercial, and personal, is about $53 trillion.

The Dow Jones is around 8,000, down from around 14,000 a year earlier.

The S&P 500 is around 800, down from around 1,400 a year earlier.

The top 5% of tax returns contained over 36% of the nation's income (2006 data).

The bottom 50% of tax returns showed a per-return, inflation adjusted increase of less than 1% between 2000 and 2006.

Home foreclosure filings in January 2009 totaled 274,399 [Reuters].

Major financial institutions have failed completely, others avoided failure only with massive government subsidies, and many more are on the brink of collapse.

Two of the three major American car manufacturers require massive government subsidies to avoid bankruptcy.

The official unemployment rate is 7.6%.

U.S. GDP has been down every quarter for about a year. It was down 6.8% in the last quarter of 2008.

Foreign Affairs

Iraq is, relatively, peaceful and arguably democratic.

The ruling parties in Iraq have very close ties with Iran. Iran also has very close ties with rulers in the Kurdish areas.

America has approximately 150,000 uniformed forces and 190,000 'contractors' (aka mercenaries) in Iraq.

The Taliban have the initiative in Afghanistan and are making major gains.

The Taliban have repeatedly cut NATO supply routes through Pakistan; in one case destroying hundreds of trucks filled with supplies. In another, destroying a hundred foot long bridge. NATO is being forced to develop alternative supply routes.

Major news stories say Kyrgyzstan will close the Manas air base used to support and supply NATO forces in Afghanistan.

The Taliban control substantial and growing swaths of territory in Afghanistan and Pakistan.

The Taliban leadership lives more-or-less openly in Quetta.

The Taliban just cut a deal with local government leaders to impose Sharia on the Swat in exchange for a cease fire.

The Taliban just launched a successful attack in Kabul, the capital of Afghanistan.

Basically, the Taliban are kicking our butts. These are the guys that harbored al Qaeda at the time of the 9/11 attack. They are still close allies.

The Isrealis and Hamas just ended three weeks of major fighting.

Particularly prior to Obama's election, much of the world viewed America as a country that tortures people, invades others, and pursues a largely go-it-alone, my-way-or-the-highway foreign policy. Many perceive America as a bully.

America has suffered major Islamic extremist terrorist attacks in the first few months of the last two presidential administrations. That would make us due for one now.

North Korea tested their first nuclear weapon in 2006.

North Korea conducted a number of long range missile tests, including multiple simultaneous launches (important for defeating missile defense).

Iran has made major strides in developing the technology and infrastructure to support development of nuclear tipped missiles.

Governing Operations

The Republican and Democratic parties are bitterly divided and partisan; so much so that two Republican senators refused an invitation to watch the Super Bowl at the White House and an economic stimulus package passed with only three Republican votes in Congress. Nearly all economists, left, right and center, agree a large stimulus is needed to avert economic catastrophe.

Government is generally viewed as grossly incompetent.

U.S. intelligence services regularly spy on American citizens, in America, communicating with others in America, without a warrant.

The U.S. government operates a network of out-of-country prisons specifically intended to evade the rule of law. Guantanamo being the crown jewel of the network.

Medical

In 2008 there were almost 46 million Americans without health insurance. RWJF. America is the only industrialized country without nearly universal health care insurance.

The World Health Organization (WHO), in 2000, ranked the U.S. health care system as the highest in cost, first in responsiveness, 37th in overall performance, and 72nd by overall level of health (among 191 member nations included in the study).

The Stimulus Package and the Crash

Stimulus

Almost all economists will tell you we need some sort of stimulus to have a chance of getting out of the amazing economic mess we find ourselves in. The biggest controversy on the stimulus is the Republican plan to use tax cuts, and only tax cuts, as opposed to the combination of spending and tax cuts that Obama proposes. Our economy was greatly shaped by the two big tax cuts of the early 2000s and there was a $160 billion tax cut last year to stimulate the economy. We are in this mess anyway. This suggests that pure tax cuts will not be effective. It seems time to change direction.

Crash

In a previous post (It's the Debt, Stupid) I identified excessive debt as a root cause of our economic problems, and briefly noted that excessive compensation to people not doing a particularly good job may also be at fault. There is some support for this view in "The Great Crash 1929" by John Kenneth Galbraith. On page 177 he identifies excessive concentration of wealth, 1/3 of all income going to the top 5%, as a primary cause of the Great Depression. He notes that people living paycheck-to-paycheck will reliably spend all their money, whereas wealthier individuals can stop buying luxuries and investing whenever they choose; thereby creating a big drop in demand. This is, among other things, exactly what happened in the Great Depression; in part because this group lost a great deal of money in the crash. Here's the scary part, take a look at the income data at Summary of Federal Individual Income Tax Data 1980-2006. In particular, examine Table 5, Adjusted Gross Income Shares, 1980-2006. There you will see that in 1980 the top 5% of earners took in 8.46% of all personal income. By 2006 this had risen to 36.66% -- well over 1/3, the level partly responsible for the Great Depression.

This concentration of wealth confirms a prediction I heard way back in 1979. That year I read a book called "Global Reach" about the rise of transnational corporations driven solely by profit. Although it was meticulously researched, I didn't buy most of their argument. However, I remember their prediction: that America would begin to resemble a banana republic: heavily in debt, militaristic, questionable elections, and, most important for our purposes, characterized by a few very wealthy people surrounded by a sea of poor folks. A very real trend in this direction is clear from the tax data.

No one really knows what will or won't get us out of this fix short term, but long term I think we need to substantially reduce debt and flatten incomes. During one of the primary debates, Ron Paul tried to made the case that our accounting system is out of whack, excessively rewarding a small fraction of the population at the expense of everyone else; based not on productivity, but rather who controlled the accounting system. There's very little that Ron Paul and I agree on, but this is one of them.

Israel and Gaza

Israel and Hamas are fighting in Gaza, again. Countless articles, editorials, and blog posts are discussing this fight, most focused on the tactical picture: what is happening today, who's to blame, who should be condemned, etc. I'd like to step back and look at the strategic picture.

In 1948, Jews and Arabs started shooting and bombing each other in Palestine/Israel. The UN, motivated by the nearly successful German attempt to kill all the Jews in Europe, had granted the Jews small bits of territory in British-administered Palestine and called the new country Israel. Although the British had controlled Palestine since 1919 and the Turks controlled it for a few centuries before that, the mostly Muslim Arabs that lived there quite reasonably considered it their land. They saw no reason that the sins of the mostly Christian Germans should be paid for with their land. The Jews, having lived for thousands of years in territory controlled by others, being severely repressed and eventually nearly wiped out, were determined to control their own country. The differences were irreconcilable so there was nothing to do but fight it out.

At the time there were about 50 million Arabs and only 100,000 Jews in Palestine, the Arabs had professional armies, the Jews had a few thousand veterans of World War II. Everyone thought the Arabs would finish the job the Nazi's started, but they were wrong. With help from Czech weapons, the Jews won the 1948 war and even captured significantly more territory than the UN granted them. Since then fighting between Israel and the Arab world has erupted periodically, with big wars in 1956, 1967, and 1973 and countless smaller conflicts.

The basic Arab strategy is to keep the conflict going (1). Israel is 300 miles long and 70 miles wide with a population of a few million. Arabs control all of North Africa and the vast majority of the Middle East with a population measured in hundreds of millions. Arab armies only have to win once and Israel will be destroyed, Israel has won again and again but cannot possibly develop the strength to occupy and control the vast Arab lands. Thus, even though Israel would be very difficult to conquer today, if the Arabs just keep the conflict going, eventually the military balance will change and Arabs will again control Palestine from the river to the sea.

Israel's strategy has been to build a crackerjack military to avoid a defeat leading to extermination and using this army to take territory they don't really need then trade it for peace. They traded the Sinai for peace with Egypt, and there's been no significant fighting for 40 years. They traded parts of the West Bank and Gaza for peace with Jordan and the PLO (2). There has been no fighting with Jordan, but peace with the PLO has not been complete. Israel even tried withdrawing from Lebanon and Gaza without a peace deal, but there is still fighting on both fronts. Nonetheless, the basic strategy is working fairly well. Although the vast majority of the Arab world, plus Iran, is still officially committed to the destruction of Israel and reclaiming the land they feel is rightfully theirs, the only immediate neighbors in that group are Lebanon (including Hezbollah), Syria, and Hamas-controlled Gaza. These have very short, easily defended borders with Israel. Furthermore, many Arab states have indicated they might agree to recognize Israel under various conditions.

There are only two ways for the Arab-Israeli conflict to end: the destruction of Israel, probably including killing or driving most of the Jews out of Palestine, or the Arab world accepting the loss of much of Palestine to Jewish control. Some advocate a democratic secular Palestine neither Jewish nor Muslim, where the rights of all citizens would be respected. One might remember, however, the Weimar Republic in Germany after World War I was a democratic country where the rights of all, including Jews, were respected and Germany had a long history of policy friendly to Jews. Nonetheless, within a couple of decades, the Jews of Europe were nearly wiped out by these same Germans. Jews would be fools indeed to willingly put their survival in the hands of others. If the Arabs want all of Palestine, they will have to fight for it.

There is a story that gets to the core of the Palestine/Israel situation. I don't know if it's true, but it's a good story nonetheless. One night shortly after the 1948 war a pregnant Jew in a kibbutz near the Egyptian border was killed. The tracks of the killers lead directly to an Arab village on the Egyptian side. A young Israeli officer was told to take his men to the village and a lot of Arabs were killed. A few days later there were outraged articles in newspapers around the world condemning Israeli atrocities in the village. The officer, distraught, went to David Ben-Gurion, the first Israeli prime minister. To the officer's surprise, Ben-Gurion was happy with the newspaper coverage. The officer asked why. Ben-Gurion said that for thousands of years killing Jews had been easy, safe, and painless; and the primary purpose of Israel was to make Jew-killing difficult, dangerous, and painful. The newspapers were helping spread the word.

That's what's going on in Gaza today. Hamas considers itself a religious organization (3) with a duty to destroy Israel, which they are too weak to do at present. To keep the fight going, Hamas launches rockets into Israel, occasionally killing a Jew or two. Israel is making that activity difficult, dangerous, and painful in hopes that, like Egypt, Jordan, and the PLO before it, Hamas and the rest of the Arab world will eventually give up trying to destroy Israel. That will end the Arab-Israeli conflict.

NOTES

(1) This is why the 750,000 Palestinian refugees created in the 1948 war were never resettled anywhere in the vast Arab lands and millions of their descendants now live in crowded refugee camps. A few years earlier, in 1945 at the end of World War II, there were millions of refugees in Europe, all of whom have long since been resettled. Indeed, about 600,000 Jews were expelled from Arab lands in 1948 and fled to Israel, all of which have also long since been resettled even in tiny Israel. By refusing to resettle the Palestinian refugees, the Arab elite have cultivated a large population who, quite understandably, hate Israel. This helps immensely to keep the fight going.

(2) It should be said that all of these governments, Egypt, Jordan, and the Palestinian Authority, are fragile. They are all dictatorial, corrupt, or both and could be replaced by governments actively hostile to Israel. For example, Hamas won the last Palestinian Authority legislative election.

(3) This is important to understanding Hamas. For example, the ideal Muslim is the prophet Muhammad, and good Muslims often emulate his life. Muhammad was, among other things, a very successful warrior. At one point Muhammad made a ten year truce with his enemies. The people asked him why. He said that at the moment the enemy was too strong to defeat, but he could use the truce to build up his strength and defeat them, which is exactly what happened a few years later. This is why Israel is reluctant to negotiate a truce with Hamas.