US Fiscal Irresponsibility Will Lead to Bankruptcy

WASHINGTON – The Democrats in Congress and Republican
President Donald Trump agree practically on nothing. Therefore, it is
impossible to think of any major piece of legislation that can be passed between
now and November 2020, when Americans will go the polls to pick a new President
and a new Congress, and new political majorities may be formed.

Sharply divided government

Since the
Democratic control the House of Representatives, while the Republicans control
the Senate and the White House, and considering the increasingly toxic
political climate that makes compromise impossible, we have not just a divided
government. We have a sharply divided government. So, do not hold your breath.
No significant legislative changes between now and the next presidential and
congressional elections in November 2020.

The spending deal

That said, there
is a huge exception –and a very shameful one—in this political stalemate. And
that is federal spending. Very recently, and very quietly, Republicans and
Democrats hammered a major spending deal. There was no fight. No public posturing
to defend this plan and attack the other side spending priorities. No

Very quietly
the two arch enemies came rather quickly to a spending agreement. How so?
Because they decided to increase spending across the board. Essentially, the Republicans
got some more money for Defense. The Democrats got a bit of this and that in
other areas of non-defense discretionary spending.

Larger deficits

In case you
were wondering, these increases will not be offset by spending cuts in other
areas. This means that a large and growing US Federal Budget deficit, for
decades now a structural feature of our public finances, will become much bigger
much sooner than expected. Think of a $ 1 trillion billion deficit, (that is 1
thousand billion), year after year, unless something rather drastic is done.

This is a
colossal figure. In simple language, this means that Uncle Sam every year
spends more money –a lot more– than it takes in via tax revenues. In principle,
overspending could be justifiable; but only when the government goes into
overdrive with extraordinary fiscal stimulus in order to counter a major
recession, like the most dreadful one we had beginning in 2008. Borrowing money
could also make sense if the funds are to be invested in important capital
projects, (new highways, ports or airports, for instance), that would improve our
national infrastructure networks this way benefiting the economy. But we are
not doing any of this. Indeed, this is not money borrowed for stimulus or for
financing needed infrastructure. This is mostly money to be used to finance
current spending. In other words, as a nation, we are living beyond our means, while
we obviously think that we can keep our lifestyle by borrowing the difference –indefinitely.

Everybody knows

By the way,
everybody in Washington who is even remotely familiar with federal spending
trends knows this. But the fact is that nobody seems to care. The sad and
worrisome conclusion is that chronic overspending is now accepted by most Washington
policy makers –both left and right– as the normal way to run the government of
America, a major modern country which used to be run according to established
principles of fiscal balance. Namely: in the long run you should not spend more
money than you can raise through taxation. By the same token, if you have
accumulated a large public debt, you must change tax and spending patterns in
order to return to a healthy balance.

The roots of the US deficit and debt

Now, as to
the actual roots of this systemic overspending, obviously they are not in the
deal just struck by the two political parties. This recent deal just made a bad
situation a lot worse.

The roots of
US overspending are in the incremental but steady growth of large entitlement
program that cannot possibly be funded as they are currently structured, unless
taxes will be substantially increased and/or benefits reduced. 

No, US
overspending is not in “fraud, waste and abuse”. It is not about too much
foreign aid, as many believe. It is mostly rooted in our big federal entitlement
programs. Social Security, Medicare Food Stamps and other minor programs,
absorb about 2/3 (yes, that is a lot more than half!) of the US total federal
budget, currently at $ 4.7 trillion (again: a trillion is 1,000 billion).

Good programs designed in a different

The problem
about these programs aimed at providing for our senior citizens is that they
were designed in another era, (Social Security goes back to FDR in the 1930s,
Medicare goes back to the 1960s when Johnson was president).

That was a
different America, with completely different demographics. The way the system
works, the payroll taxes paid by current workers and their employers go
directly to fund the benefits for the retirees. The problem is that the US
population is slowly shrinking, which means fewer active people supporting a
larger number of retirees, while health care costs for seniors are increasing.

Kicking the can down the road

This trend of
the growing cost of entitlements, year after year, is not news. This has been
going on for decades. But lawmakers and presidents of both parties simply
ignored the problem, in large measure because they believe you cannot tell the
truth to the American voters. Even talking about serious reforms that would
modify or potentially decrease benefits to retirees is deemed to be political
suicide in Washington.

The Debt Commission recommendations went

For example,
back in 2010, then President Barack Obama created a bipartisan commission to
review federal spending and make recommendations. It became known as “The Debt
Commission”.  The two co-chairmen were Erskine
Bowles (Democrat) and Alan Simpson (Republican). These two elder statesmen took
the job very seriously, without any partisan animosities. This was no Washington
wishy-washy anodyne process marked by generalities and obfuscations. Indeed, their
59-page report was entitled “The
Moment of Truth”.
It included actionable plans to reform entitlements,
while also raising taxes; so that these key programs providing needed benefits to
millions of American retirees would remain solvent and available to all
beneficiaries, now and in the future, without bankrupting the federal

Well, nothing,
absolutely nothing, happened after the report was issued. President Obama, just
like all the other presidents before him, did not want to kill his chances of
re-election in 2012 by becoming “The
president who killed Social Security”.
So, notwithstanding the serious work
done by these two elder statesmen whom I consider true American patriots, no
action to reform entitlements, defense spending and raise some taxes was
undertaken under president Obama.

And, by the
way, no action whatsoever under President Trump. Trump fully understands that
his base of mostly blue-collar white workers are precisely the people who need
these programs aimed at retirees the most.

How else could we save money?

Well, if we
cannot reform costly entitlements, what else could be done to restrain public
spending, this way reducing the deficits, and down the line slowing down the
monstrous growth of the US national debt? Well, not much. “Oh come on, many would scream. We could cut start by cutting our
gigantic defense budget!”
Sure we could. But it would not solve our
structural fiscal imbalance.

And by the
way, believe or not, US defense spending is now close to a historic low. Yes,
while we spend more than $ 700 billion on the Pentagon, this large figure is
only 3% of GDP. During the Cold War the US routinely spent close to 10% on the

While it may
be possible to spend less or at least more wisely on defense, contrary to
popular opinion, most of the Pentagon budget is not devoted to procuring new super
expensive, unnecessary weapons. Most of the money goes to salaries (we must pay
for an all-volunteer force) and operations and maintenance, which includes all
that is needed to keep a large force ready: training, housing, food,
deployments, fuel, and a lot more.

While we can
have a sensible discussion about better ways to spend defense dollars, let’s
keep in mind that even if we abolished the Defense Department altogether, (an
unlikely scenario), Uncle Sam would still run an annual federal budget deficit.

Well, what
about other areas of spending? Not much there: transportation, energy,
agriculture, commerce, and so on, claim very little money. Again, even if we
abolished the Departments of Education or Energy, we would still run a large deficit.
By the same token, cutting 10% or 15% here and there would impair basic functions
without saving much money.

And do not
forget another line item that keeps growing and cannot be cut: that is the interest
on the existing national debt, now about 10% of total federal spending. To put
it in perspective, this enormous number is about half of all defense spending.

Not on the verge of bankruptcy

To put all
this in perspective, America right now is not –I repeat is not—on the verge of bankruptcy. Investors and foreign
governments still buy our Treasury Bonds. They believe that America will be
able to meet all its financial obligations.

Still, unless
federal spending is seriously reformed –and by that I mean mostly a serious
revision of our key entitlement programs, via a bipartisan agreement– we are
definitely headed towards bankruptcy.

More money for everybody

If not today,
pretty soon something drastic will have to be done. Either we cut spending, (remember:
the fat target is entitlement reform), or we raise taxes, or a combination of
both. But, right now, we are going in exactly the opposite direction. With no
public debate, and in a completely irresponsible fashion, our national leaders,
in both parties, one year before the elections have decided that they want to
tell voters that the free money party is still on. “Cheer up everybody! More spending, therefore more goodies for
everyone: Mid-West farmers and Boeing”.

Deficits do not matter?

One last
note. While our elected leaders act myopically to pursue the immediate goals of
currying favors with the voters ahead of a major national election, at least some
academics have come up with the theory that –guess what— in America federal deficits
do not matter. When you have a country like the US that can borrow in its own
currency, assuming tame inflation, large deficits just do not matter.

According to
this new “theory” America can keep
borrowing –essentially forever. There are no limits. Apparently, our growing
national debt (the cumulative result of chronic annual deficits) does not have
to be paid back. Got that?

I would say
that if this preposterous idea is accepted as a sound foundation for managing
our public finances, then we truly deserve to go bankrupt.

Why America is a Unique Country – Part 2

WASHINGTON – Thomas Jefferson and the other Founding Fathers of America sincerely believed that “Life, Liberty and the Pursuit of Happiness” were and are indeed self-evident and unalienable rights, given to each human being by a Supreme Being. These attributes, “attached” to each person from birth, were described as Natural Rights, and therefore something that no government could legitimately take away from any and all the individuals who collectively constitute The People.

Man is a rational creature

The Founders also subscribed to the belief, very popular in that Age of Reason, that human beings, while sometimes possessed by passions that may obfuscate clear judgment, are fundamentally rational creatures who most of the time reason and think rationally, especially so when their judgement is improved by proper scientific learning.

Therefore, it is expected that in general human beings will think and behave rationally on most issues, including matters of governance and public policy. Based on their optimistic view of human nature, the Founders also shared the belief that most human beings would be good, ethical, tolerant and just citizens and office holders, most of the time.

Self-government is impossible if people are ruled by emotions

Yes, passions at times would interfere with proper rational analysis and right action –some of the time. But, according to the beliefs of America’s Founders, emotions and factionalism, while recognized as threats to good governance, would not rule human thinking and behavior most of the time.

This is really important. According to America’s Founders, human beings are mostly good. And it is this basic human feature –deeply rooted in the foundations of the Enlightenment political philosophy embraced by the Founders — that makes successful self-government possible.

Indeed, the Founders fully acknowledged that if human beings were constantly ruled by uncontrollable emotions and irrational ideas it would be impossible for them to create and preserve a viable republican self-government. The institutions aimed at protecting freedom, however well crafted, would be easily destroyed by the uncontrolled passions of irrational people.

Optimistic view of human nature, with some cautionary notes

So, all in all, the prevailing view of human nature at the time was mostly optimistic. Self-government would be possible because most people most of the time would behave rationally. There were however some cautionary notes. How do we protect the republic from the dangers created by occasional but potentially serious irrational behavior? 

The “remedy” was in establishing separate constitutional powers competing with one another, a system of “checks and balances”. This would make government more complicated, as it required agreement among different centers of power. But it would also make concentration of power and therefore tyranny unlikely, this way allowing the People to enjoy their Freedoms, granted to them by Natural Law.

So here is the antidote to human irrationality. The US Constitution of 1787 explicitly divides power among the President, the Congress or the Judiciary. According to the Founders, divided powers would make government prevarication unlikely, this way safeguarding liberty by preventing concentration of power, and therefore unjust government coercion.

The Western Frontier 

Beyond this revolutionary constitution aimed at preserving Liberty, America had the unique added feature of an open Western Frontier. Thanks to the Louisiana Purchase of 1803, a $15 million deal between the U.S. and France engineered by President Thomas Jefferson, America almost doubled its territory, (at about four cents an acre, an incredibly good deal). Without firing a single shot, thanks to the Louisiana Purchase, America had acquired vast, mostly unexplored territories henceforth available to new, adventurous and gutsy settlers.

The open Western Frontier created an almost magic appeal for many early Americans. In their view, America was not just a great nation founded on Freedom. It was actually an ever-expanding Free Republic which offered what no European state could ever offer: almost free land for all who wanted to go West, settle there, and claim a piece of it. Old settlers and new immigrants alike could have a real chance to make their way West, legally claim virgin land as their own, and become legitimate property owners by using their own virtues of courage, stamina, and spirit of adventure.

Plenty of land

Think about it. Where else in Europe could the children of landless peasants dream of owning the land they worked on that since time immemorial had been the uncontested property of the rapacious aristocracy? Short of a revolution that would destroy the entire political and economic order, (this happened with the French Revolution of 1789; but the Old Order eventually prevailed), this was an impossible dream. But here in America this dream of owning land was quite possible, and fully legal. Difficult and arduous, of course, but nonetheless possible.

Hence the almost irresistible appeal of a Wild American West that simply needed hard working new settlers who would turn the uncultivated prairie into beautiful and productive farm land.

Adventure for the common man

And here it is important to observe how the American Frontier evoked similar deep strands existing within some old European traditions. While unevenly spread, the drive to travel, explore and settle new lands is an old European theme.

For example, centuries before the Christian Era, sailing across the Mediterranean on rather primitive ships, the ancient Greeks colonized Sicily and parts of Southern Italy. And, as we know, classical Greek literature gave us the Odyssey, the incredible tale of a hero’s adventurous journey back to his native island, after a long war in a distant land.

And in later centuries, we have countless European travelers and navigators, from Marco Polo to Columbus, from Vespucci to Vasco da Gama and Magellan. These are the people who discovered new continents and brought back exotic riches and specimens of unknown plants and animals.

This vast heritage of journeys and explorations was in large measure transformed by legends, inaccuracies and fantastic exaggerations. But it kept alive an underlying European yearning for new places, usually imagined as better than the old ones.

The Frontier

Well, the American Western Frontier made the prospect of discovery and adventure possible and available not just to uncommon heroes and skilled navigators, but to the common folks. Driven by the vision of “conquering” the new virgin lands, ordinary people, with no special skills or prior experience, were motivated to embark in the incredible adventure of discovery, eventually claiming new lands for themselves and their families in the American Western Territories.

The caravans of covered wagons that traveled West were driven by ordinary people often with little education and rudimentary skills. These were not captains and admirals bankrolled by kings or rich merchants. They were common people animated by the hope to find good land and settle there, this way achieving the highest aspiration of landless farmers. And it is in large part for this reason that the push West by countless pioneers has become legend. This way, the drive to the American West became a glorified Everyman’s Odyssey.

American uniqueness

So, there you have it. Here is the exhilarating picture of America. There is this New State, founded by a Sovereign, Free People who created strong institutions of Self-Government, whose main purpose was and is to protect Individual Freedoms. On top of that, this New Blessed Land was luckily removed from backward Europe and its constant wars. Thanks to the American Constitution and the Bill of Rights, in this New Blessed Land people, including all newcomers, can be and are free.

And, to top it all off, people who arrived from Europe almost penniless, with some effort could figure out a way to be outfitted and travel towards the seemingly infinite West, where they would find plenty of land that they could claim as their own, according to clear laws and statutes.

Yes, this attractive picture is in large measure myth. Most likely, reality was much harsher and unforgiving for tens of thousands of ill-equipped, naive immigrants. Nonethless, the myth of a Good America became the established narrative. And this positive narrative sustained the American Republic in its early decades.

Freedom and land

Whatever the exaggerations about what America could offer, for the common man and woman for sure no other country in Europe could match such an attractive prospect. By the standards of the time, America was indeed exceptional: Freedom and Land for all well-meaning, hard-working people.

Over time, this country became successful not because of its size, resources and open land –Brazil and Russia also have size, resources and open land– but because it was founded by people who shared the firm determination to affirm a constitutional arrangement that would uphold and preserve the God-given individual liberties of its citizens.

Protection of Individual Freedom is the core principle at the foundation of America, and its most precious gift to new settlers. Over time, vast prosperity was created by millions of free people who engaged in diverse productive activities, being reassured that their government would protect their endeavors, and not hinder them.

Why America is a unique country – Part 1

America is a truly unique country. But not for the most commonly held reasons: “Come to America ,so that you will have a great chance to make money and be rich”. In truth, throughout the world America is viewed (sometimes with envy, sometimes with contempt) mostly as a country of great economic opportunity for those who are willing to push forward with determination, grit, passion and sometimes heartless aggression. America is the Promised Land where making money, advancing one’s social position, and building a better future for oneself is easier than elsewhere.

The other side of the coin is that America is viewed as the country where only money and material achievement are worthwhile goals, pursued singlehandedly by most people, sometimes in a heartless and unscrupulous (and at times even illegal) manner. According to many critics, because of this narrow focus on getting rich, the Americans have created a materialistic and somewhat decadent, soulless society. Some of this, both the positives and negatives, may be true.

But this is not what America, at its core, is about.    

It is all about Freedom

Indeed, both admirers and critics of America get it wrong. They focus on outcomes –material success—and neglect to appreciate and understand what inspires people to engage in activities. In other words, they do not understand the deep drivers leading to prosperity.

The truth is that material success in America is possible because all citizens know that, thanks to the protection of individual rights guaranteed by the US Constitution, they are truly free citizens.

And individual freedom, of course, includes economic freedom, that is freedom to engage in profit-oriented enterprises. When motivated people engage in enterprises without the constant fear of arbitrary obstacles placed on their way by a tyrannical, unaccountable government, economic success, while certainly not guaranteed, is more likely.

So, here is the thing about America. The fundamental idea at the foundation of the United States of America was not and is not “Come here to America to Make Money”. The main idea was and continues to be “Come here to America to be Free”. From this perspective, prosperity (again, possible, aspired to, but not guaranteed) is a welcome outcome of a life in which the individual, being free from state-imposed coercion, has the luxury to focus his/her efforts on the pursuit of his/her passions.

“In America you have a better chance to prosper because you are truly free to pursue your own dreams. You are free because you enjoy the protection of basic Individual Rights provided by the US Constitution. As the US Government protects your Freedoms, in America you do not have to worry about a rapacious, arbitrary government interfering with your affairs, or punitive regulations and taxes that will ultimately suffocate your enterprise”.

Indeed, it was this single fundamental principle –achieving and securing Freedom for all Americans—that inspired the Revolutionary War of 1776 and subsequently the creation of the US political institutions whose primary purpose is the protection of Individual Liberty. After the Constitution of 1787 established the institutions aimed at securing and protecting political and personal Freedoms, millions of Americans, old settlers and new settlers, could peacefully unleash their personal creativity without any fear of interference by the state, confiscatory taxes or other impediments to private sector economic activities so common in Europe at that time.

Freedom to do

So, having secured “Freedom from Tyranny”, the Americans could unleash their collective “Freedom to Do”, freeing up individual creativity, (if it was and is exercised within the boundaries of the Law). And, as we know, creativity often turned into innovation and entrepreneurship. Over time, entrepreneurship and the pursuit of commercially viable innovation made millions of Americans into successful professionals, inventors and business owners. 

In a word, in America, widespread prosperity is the welcome consequence of constitutionally guaranteed Individual Freedoms. Individual Freedom is at the foundation of economic success. America became rich not because becoming rich was the declared goal; but because it upheld and protected the Freedom of its citizens.

The European intellectual roots of the American political culture

How did America come to embrace this unique notion whereby government’s primary purpose is not to get on with public administration and “get things done” but to protect individual liberties? The answer is in the enthusiastic embrace by the intellectual elites in the British Colonies in North America of the ideas elaborated by European political philosophers who belong to the intellectual current known as the “Enlightenment”.

Indeed, the XVIII Century is generally known as the “Age of Light”. Yes, this was the age of the “Enlightenment”. Locke, Montesquieu, Voltaire, d’Alembert and Diderot are among the mostly French and British thinkers and authors of that prolific era.

The Enlightenment started with a renewed and vigorous focus on science, the rigorous observation of nature, experiments and emphasis on physics, mathematics and geometry. Many educated people, especially in France and Britain, over time developed the firm belief that the Universe surrounding human beings is a beautiful, harmonious whole designed by a Benign Creator, according to clear mathematical principles.

From this perspective, while much about the Universe was still unknown, everything was deemed to be knowable. Provided consistent effort and a keen desire to educate oneself about the proper ways to open the secrets of the natural world, eventually everything would become clear.

This is the meaning of “Enlightenment”, literally a process leading to expanding the light of knowledge. In turn, this approach would bring the light of science-based knowledge into the world –for the benefit of all human beings. Hence the emphasis on engaging in new scientific endeavors, described in many new books aimed at the general public, and education. Most fundamentally, via education, all people, including the common man of modest means, would become enlightened. 

Rational Man

According to most of the thinkers of the Enlightenment, rationality and reason –the essential organizing principles of the physical universe– are also essential human features. If men often behave irrationally, this is due to ignorance, lack of education, or bad teachings that instill superstitions, false ideas, and bigotry.

But for all these ills there was an excellent remedy: proper, science-based education. Education inspired by rigorous science would offer precious, scientific knowledge to all human beings, this way strengthening man’s natural foundations of reasoned thinking, rationality and even handed tolerance vis a vis other humans. 

Relying on these strong philosophical foundations, the European thinkers created new –and truly revolutionary– notions about the proper foundations of a political society, including the concept of the Natural Rights of Man, while elaborating the construct of a new type of rational, organized state populated and governed mostly by reasonable, “enlightened” men. This new political society would be based on voluntary arrangements agreed to by free people –a “Social Contract” — aimed at setting up just and accountable governments.    

Well, needless to say, given the prevailing reality of mostly medieval states ruled by absolute monarchs, there was almost no chance to see any of this come to fruition within Europe.

The American elites embraced the Enlightenment

It was instead in the New World, in the British Colonies of North America, that these truly revolutionary European ideas about science, learning, knowledge, Natural Rights, Individual Freedom and self-Government found a truly dedicated audience. And therefore, a truly fertile ground.

The middle class elites of the New World seemed to be animated by a spontaneous yearning for science and learning. Many early Americans had received just some or little formal education. Still, they were keen students and avid readers of the great works of the European thinkers of the Enlightenment.

Eventually, these self-taught American Colonists came to believe that, once free of the yoke imposed on them by the oppressive and unjust British Monarchy, in this New World they could give life to a new society ruled justly through a well balanced self-government, just as theorized by their favorite Enlightenment philosophers. 

And it worked. These ideas inspired the first clashes with the British authorities and eventually the Declaration of Independence of 1776 and the ultimately successful Revolutionary War which led to the end of British rule. With the notable ghastly exception of the long and bloody Civil War –a conflict between the supposedly universal principles of freedom and equality and the horrendous practice of slavery in the South– America seems to present an almost linear picture of the happy evolution of a free society that became prosperous because the citizens could freely engage in productive, money-making enterprises.

A beacon of light across the Atlantic

And this mostly benign picture, of course, inspired millions of unhappy Europeans. While there were many drivers behind the migratory waves of Europeans into America –and the pursuit of better economic opportunity was definitely a major factor–  the notion of leaving behind misery and poverty caused by political oppression, while embracing a New World ruled by benign laws that protect individual freedom, was definitely a powerful magnet which motivated millions to sail from Europe and its rather miserable conditions to America –never to come back.

And there is more. Owing to its geographic position, this New Blessed Land was conveniently separated by a vast Atlantic Ocean from the constant fracas caused by quarrelsome European states.

Indeed, this New Republic was situated in a pristine New World. It had no enemy states at its borders. (Of course, we should not forget how the American settlers over many decades essentially destroyed the Native American Nations that were pushed away by the colonists from the lands they had inhabited for centuries. The “Indians” were eventually confined into small reservations with few if any opportunities).

Which is to say that America became something like a controlled laboratory experiment. It could grow and develop without the constant worries of threats to its national security and the need to go to war to preserve it.

End of Part 1

Why Mass Shootings? Heavy Political Rhetoric, Psychopaths, and too many Weapons

WASHINGTON – The El Paso slaughter stunned America. It is human nature that when something completely out of the ordinary happens –an immense tragedy in this case—everybody wants to know “why”. And this case the simple “why” seems to be that the young man who went to the Walmart to kill as many Hispanics as he could did so because of his White Supremacist convictions. Apparently, he strongly believes that Latinos and Hispanics are alien enemies, and therefore they must be eliminated.

The hate crime narrative

Putting all
this together, this mass murder episode becomes yet another tragic episode of
violence motivated by racist hatred –another hate crime. And who is fueling
racist hatred in America these days? But, of course, as we all know, it is the
President himself, Donald Trump. Therefore, it is all finally clear.

And here is
the media-sponsored “official” narrative
that explains the roots of the tragedy and the event itself. President Trump,
with his abrasive and openly anti-immigrant and anti-Latino rhetoric, provided
cover to all those who share his beliefs and are also willing to act to enforce
his vision of a White America finally restored to its appropriate position of

Not a good explanation

Of course,
there is a small amount of truth in this “explanation”.
National leaders should never set a bad example by over using inflammatory
language. It is very bad when they publicly and repeatedly disparage ethnic
minorities or any other segment of our society, fingering them as bad,
inferior, criminal or what have you. These messages, coming straight from the
top, are false; and they may give bad ideas to somebody.

Some psychopaths may act

That said, it
takes a psychopath to follow up with a mass shooting of complete strangers
based on the notion that “The President himself
declared that this people are bad news. The clean-up has to start somewhere,
and I may as well do my part”.
If anybody interpreted Trump’s offensive
language against Latinos as a license to get an automatic weapon and start
killing people, it means that they are mentally deranged.

Our national problem

And here is our national conundrum. Sadly, we do have an inflamed political climate –-and no doubt the President has contributed to raising the temperature. But we also have too many non diagnosed psychopaths, or at least mentally disturbed people, many of whom have unhindered access to lethal weapons.

Not to sound too simplistic, here is the thing. When you have extreme ideas that pass for normal political discourse, crazy people who may act on them, and literally millions of legal weapons in circulation, then we cannot be too surprised when one unhinged person does something really horrible. Yes, as the El Paso carnage shows us, just one person armed with a powerful weapon can create an immense human tragedy.

No easy solutions

Fixing all
this will be incredibly complicated. Changing the tone of the national
political debate is difficult enough; but not impossible. Far more complicated
is the effort to identify and place legally binding restrictions on mentally
disturbed people. Finally, limiting access to weapons will be even more
complicated, given the almost religious belief held by millions of Americans in
the absolute right to buy and carry weapons supposedly provided by the Second
Amendment to the US Constitution.

So, here is
the list. Here are the key ingredients for tragedies such as El Paso:  1) crazy ideas that demonize segments of our
society; 2) at least some deranged individuals willing to act to implement them;
3) and plenty of weapons available.

As a society,
we must face the magnitude of the problems confronting us. While it may take a
long time, we must change all this. The penalty for inaction will be more such tragedies. 

Overleveraged America has no Plan B

WASHINGTON – Is America once again at the edge of some catastrophic event that will cause economic misery? Not by a long shot, most would argue. The economy, although a bit slower in the second quarter of 2019, is till chugging along, with a respectable 2.1 GDP growth. Unemployment at 3.7% is still at its historic lows, while jobs creation (about 165,000 a month this year) is quite substantial. So, where is the problem? The problem is too much debt.

Too much debt

It is well known that credit is the fuel of capitalism. And this is why a modern, well functioning financial sector is so critical for growth. Savvy bankers and venture capitalist most of the time will allocate capital to deserving established or new enterprises. This properly targeted new credit (or investments) will foster the growth of healthy companies or new ventures, often creating more innovation, new jobs, and eventually broader prosperity.

Corporate debt

And yet, if we look at the $ 9 trillion of US corporate debt, much of this massive burden is not about new investments. Some of it at least is about cheap capital used to buy back stocks, in order to prop their value. Which is to say that at least some of the impressive stock market buoyancy is an optic illusion. It is made possible by historically low interest rates that allow corporation to obtain cheap credit used not for investment in technology and expansion, but for financial manipulation.

Consumers are overleveraged

And what about US consumers? Their financial health and optimism about their economic and financial circumstances are absolutely critical, since private consumption in America, at 70% of GDP, is by far the most significant factor affecting economic growth.  

Well, here
is another mixed bag. As noted above, the economy is growing, new jobs keep
being added, and unemployment is extremely low. Still, things are not great for
the American middle class. Millions of relatively young people carry an
extraordinarily high student debt load. Combined with car loans, other consumer
debt and child care expenses for those who have children we have a picture of
individuals or families that can barely survive, even on relatively good income
(above $ 100,000 or more for a couple).

Millions of new young professionals simply cannot afford to buy a house because the existing debt they have to pay off prevents them from saving enough for a down payment, let alone adding monthly mortgage payments to the long list of existing obligations.

More federal debt

The Federal Government is playing a negative role in all this. Democrats and Republicans who these days agree on almost nothing, very quietly just passed a new spending bill that increases defense and other discretionary spending, without even a word on the need to seriously consider reforming the major entitlement programs (Social Security, Medicare and Medicaid are the big ones) that slowly but surely increase –every year—federal spending. The net result of this political accord is more federal spending, higher deficits and more debt, at a faster clip than forecasted even a year ago.

Debt, debt everywhere

So, here is
the picture. Corporations are high into debt. The American consumers,
especially the younger workers, even those with above average income, carry an
enormous debt burden that is made tolerable only by extremely low interest
rates. The Federal Government, both parties having forgotten any concerns about
fiscal responsibility, is piling up new debt at a fast clip –while a growing economy
is at full employment.

To top it
all off, the US Federal Reserve just cut interest rates, this way signaling that
the happy era of ultra-cheap credit will continue, who knows for how long.

All is well?

At the
moment, none of this concerns anybody. If asked, policy-makers will tell you
that things have rarely been so good for the US economy. On the surface this is
true. But we have to pray that nothing will happen.

If for some
reason we have a re-ignition of inflation that may force the Federal Reserve to
raise interest rates and therefore increase the cost of borrowing throughout
the economy, this whole thing may collapse.

Cascading effects

consumers can no longer pay existing debts and buy new things at the same time,
there will be a contraction in spending that will immediately reverberate
throughout the economy. Lower demand means lowers sales, and therefore job cuts.

Think of
the millions who can barely make it today, while having a good or at least
decent job. Imagine their predicament if they lose that job! They will default
on all their loans. Their cars will be repossessed. As a consequence, much of
their consumer loans and credit card debt will have to be written off, with
considerable losses for the banks that extended it. And this means a major

Doomsday scenario

Look, may be none of this will ever happen, and this doomsday scenario will remain fiction. Still, I am truly concerned when America –the largest economy on earth– has essentially no margin, no cushion. All the key players: corporations, consumers, the Federal Government and the Federal Reserve are overextended.

when a recession hits, the Federal Government increases spending in an attempt
to inject liquidity and stabilize the jobs market.

But today
Washington is about to go back to $ 1 trillion deficits, justifiable only when
America was trying to emerge from the devastating financial crisis of 2008. It
will be hard to increase federal spending when deficits are already so high.

Again, let’s
pray that nothing bad will happen. But prayer is hardly the most sophisticated
contingency plan for a $ 20 trillion plus overleveraged economy.

Overcoming Racial Prejudice in America

WASHINGTON – “I have a
dream that my four little children will one day live in a nation where they
will not be judged by the color of their skin but by the content of their

This sentence spoken by the Rev. Martin Luther King Jr. on
August 28, 1963, during the much celebrated March on Washington, was and to
this day remains the best guiding principle that should help the American
society deal with and finally go beyond its legacy of racism.

Indeed, the only way to finally “resolve” the painfully
complicated race issue in America is to finally become a truly color blind
society. The day in which anybody’s race (and also gender, socio-economic
background, faith, and more) becomes totally irrelevant in evaluating a person’s
abilities and morality, then and only then we shall be able to say that America
managed to overcome this horribly divisive race problem. 

Still striving

However, reaching this essential goal is realistically very
difficult. Like it or not, consciously or unconsciously we are all prisoners of
cultural stereotypes that we acquired over the years. These stereotypes color
our perceptions and unfortunately our opinions.

However, as difficult as this colorblindness goal may be, this
is the only way to arrive at the healthy conclusion that all human beings are
essentially equal, and should be treated as equals. Of course that does not
mean that we are all the same. We differ in terms of qualities, abilities,
preferences and moral traits. But our judgment on these traits should not be
clouded by our prejudices based on lingering racial stereotypes.

That said, we know that as a society we did not try hard enough to become genuinely color blind. We tried instead with other remedies aimed at fast tracking needed equality where there used to be none. Of course, we had to begin with the landmark civil and voting rights legislation of the 1960s. They were essential milestones. The new laws positively affirmed the equality of all, while explicitly making all segregation measures illegal.

Affirmative action

But then we added affirmative action: essentially set asides and
quotas reserved for minorities, so that African Americans could more easily
access opportunities from which up to that point they had been excluded –purely
on account of race.

In principle it seemed only fair to give a bit of a head start
to millions of African Americans who, although nominally US citizens, in
practice had been totally excluded from most opportunities when it came to education,
housing, quality health care, certain jobs, government contracts, and more. If
we look back at the policy goals, affirmative action legislation was intended
as a tool that would give a chance to those who had been historically
discriminated against. Quotas were aimed at insuring that at least some Blacks
and other minorities could make it within a reasonably short period of time. Quotas
were about providing access. Fair enough.


Still, the unintended consequence of affirmative action seems to
be in the institutionalization of minority status that automatically entitles a
person, purely on account of race, to preferential treatment. And as
affirmative action programs became entrenched, they naturally created a
constituency that saw them not just as a temporary measure to help redress
decades of undeniable injustice; but as permanent programs.

The unintended consequence of all this is that in order to
justify special quotas for injured minorities today the proponents must
argue that the old race-based injustice lingers on. In fact they argue that, decades
after the end of legally sanctioned segregation, racial bias is still a permanent
feature of the American society. Therefore, given this reality, affirmative
action programs, viewed as measures to mitigate the ugly impact of ongoing racial
discrimination, have to be kept –in perpetuity.

When it is good to be a minority

In other words, even today, a reasonably well-educated Black
person has every interest in preserving his/her “Black identity” in order
to benefit from a system that, in the name of overcoming past injustice, allows
him or her to have an extra advantage in the competition for limited
places in a good university, or in bids for government contracts that establish
quotas for minority owned businesses. 

Which is to say that, paradoxically, in an affirmative
action context, being Black or other Minority in many instances may be in
fact an asset rather than a liability. But this realization of the advantages
of racial minority status also justifies continuing belief in the old
assumptions that justified the creation of affirmative action programs in the
first place: “I deserve special treatment today. This is a totally legitimate
way to redress past and present discrimination. Affirmative action is the
appropriate remedial tool to counter the deleterious impact of
lingering racial prejudice”. 

Reinforcing racial identity

Which is to say that the remedies included in affirmative
action legislation, even if sincerely aimed (at the time) at kick starting
the creation of a level playing field, created a new culture of entitlement.
These programs in reality encouraged “Minorities” to think of
themselves not as citizens like everybody else but as a
perpetually aggrieved group. And this is because it is this status and
only this status of discriminated against minority –therefore entitled to
redress– that allows them to claim special treatment when it
comes to competing for a place in college, getting a job, or being awarded
certain types of government contracts.

Racial prejudice still exists

That said, it is only fair to admit that racial prejudice
is still alive and well in America. Unfortunately, even today, some African Americans
are denied jobs, credit, low interest mortgages, and a lot more simply because
they are Black, and therefore assumed to be “untrustworthy, lazy,
unproductive”, and what not. Of course, none of this is done overtly,
because it would be illegal to do so. But it happens nonetheless.

Quotas fuel prejudice

However, it is also true that affirmative action provisions
(today they blend into “diversity” requirements) aimed at overcoming the
consequences of old, groundless prejudice tend to reinforce rather
than melt the racial divide. Blacks see them as necessary redress for past
discrimination and present bias. But in so doing they keep thinking of
themselves as a perpetually discriminated against “Black Minority”, rather than
US citizens, as everybody else.

Many whites, in turn, see affirmative action as special favors
bestowed for political reasons on otherwise undeserving people. To the
extent that Whites believe that Blacks get jobs they do not really deserve only
because of quotas, this helps reinforce rather than dilute racial

“I am an American”

How do we get out of this unproductive
way to frame the problem of prejudice and constructive ways to overcome it? It
is only by doing our best to follow Martin Luther King’s advice. Look at the person; not at their race.

In a talk
show featuring several conservative Blacks, (admittedly a small minority
within the larger minority), it was refreshing to hear that most of the
participants rejected the “African American” label for themselves. “I
am an American”,
they said. “I happen to be Black. But I am an American”.
And so they are.

I call this rejection of (perpetually) aggrieved group an
important step forward. In the end, when both Whites and Blacks will
finally reject race as an issue likely to influence one way or the other any
type of judgement on any individual, we will be able to say that America has
successfully overcome its ugly legacy of slavery and discrimination.

Amazon Will Spend $ 700 Million To Retrain Its Workers

Amazon, the global e-commerce giant, just announced that it is planning to
spend $ 700 million over the next 6 years to retrain about one third of its
630,000 workers (about 275,000 of these are in the US). This is an almost
monumental undertaking. But this is not about philanthropy. This initiative is clearly
motivated by corporate self-interest.

Need to stay ahead

Indeed, looking ahead it is clear that Amazon, a major user/developer of the ultra- sophisticated ICT systems absolutely vital for the management of the millions of daily shipments that represent the core of its colossal e-commerce empire, MUST have the state-of-the-art technical tools. In order to retain its global leadership ranking in e-commerce, this giant must have the best of everything –and that includes top of the line engineers, ICT specialists, warehouse managers and also line workers who understand and can successfully interact with more and more complex and sophisticated equipment.

Amazon fully
realizes that the technologies that will inevitably affect all its systems and
operations and therefore its ability to beat the competition on price, speed
and overall quality of service, are being updated/transformed/disrupted
practically on a daily basis. And this means that the skills of an average
manager or worker at any one its warehouses or distribution centers, while
adequate today, will likely be behind the curve tomorrow. Hence the need to
invest –massively—in the retraining of Amazon’s work force.

Just the beginning

All this
looks smart, forward looking, and anticipatory. Still, we should understand
that this Amazon announcement is barely the beginning of an economy-wide
complex and mostly uncertain process that will have to be extended to almost the
entirety of the US and global work force, unless today’s global leaders –whatever
the sector they operate in– accept that they will be inevitably overtaken by
new companies whose workers and managers will be in full command of tomorrow’s

A hypercompetitive global economy

Today and tomorrow being part of the global economy means and will mean accepting the challenge of operating in a hyper-competitive, turbo-charged global market place. Only the super smart and technology savvy corporations will have a shot at the top ranks.

Competition is an old concept. But the speed of this never ending race is a new phenomenon. And this race will require the adoption of a new psychology on the part of all participants. Everybody, from ultra-paid CEOs down to programmers and factory floor workers will have to embrace a culture of continuous change and constant disruption as the new normal.

Disruption is not new

Let me clarify this. Obviously, technological change and the disruptions that it causes are not new. If we go back to the history of the industrial revolution that began in Great Britain in the early 19th Century, it is mostly a history of disruption, sometimes very dramatic disruption, that caused dislocation and pain before the positive effects in terms of new jobs replacing old ones, higher productivity, better wages and lower cost of improved and more varied goods could be felt by society.

So, nothing new here.
Schumpeter’s definition of capitalism as a process of “creative disruption”,
keenly accurate decades ago, still applies today. Except for one thing: Speed.
And this is clearly a double-edged sword.

Speed is good and bad

Of course, today’s ability to innovate at a rapid clip, with the attendant ability to move quickly from concepts and prototypes to commercially viable applications ready for the market, is a major advantage.

All users, from companies to governments to the average consumer can avail themselves of the latest in technology, software, electronics, pharmaceutical products, banking services, and more, with obvious advantages in terms of greater efficiency, lower cost and improved quality of life.

That said, everybody has to know that retaining a technological edge is not an option. It is a “must have”. Mastery of the most up to date tech is absolutely essential for those companies that want to retain a top ranking or aim to have a decent shot at joining the top ranks in the never ending global competitiveness race.

No exceptions

Let’s be clear. There are no shortcuts. There is no way to stay on top unless you have full command of a powerful innovation/commercialization engine. If you don’t because you fell behind, or because you never got there (think about scores of poor, under resourced struggling countries), then you do not have a chance. You are in the dust, looking at the others forging ahead.

And this brings me back to Amazon and its bold announcement of its large work force retraining program. This one and other similar programs already adopted or soon to be adopted by other companies, if well structured, will have a positive impact on the company and its profits, on the employees themselves, and on millions of customers. Assuming that many other companies will follow Amazon’s lead, hundreds of thousands of workers, may be millions, will learn new skills and most probably will become employable in more challenging jobs that require a higher degree of ICT knowledge and technical sophistication.

Life time learning

But the real issue and challenge here is that for this approach to work as intended, training and retraining must become part of a “life time learning” culture and approach to employment. This culture must be understood and embraced by all or most workers –not just at Amazon, but everywhere.

And here is the thing. All this sounds good. But in reality it is hard, really hard. Human beings are of course intelligent and generally flexible, adaptable and capable of learning new things. However, for millennia, with very few exceptions, (craftsmen, artists, scientists, and very few inventors), a person’s occupation consisted in doing again and again (until they retired) what they learnt as a young person, And this applied even to the few who went to school and/or apprenticeship programs. Even after the onset of industrial revolution, the new factory workers usually learnt and practiced a few, relatively simple manual tasks. Their jobs were about repeating the same operation again and again.

Change was slow

At a different level, the disruptive changes brought about by industrialization took a long time before they could be felt by the broader society. Even after the introduction of major innovations, the old ways survived for a long time.

For instance, the invention of the automobile more than a century ago did not mean that overnight all professions and crafts focused on horses (horse breeding, stable boys, blacksmiths, saddle and stage coach makers), disappeared. It took many decades for the car to affirm itself as the default, cost-effective modality for individual transportation on a large scale. It took Henry Ford, the assembly line and the Model T for cars to be mass produced and finally become affordable. And even that radical transformation took decades. In other words, change, even very disruptive change, used to take a long time. And this time allowed for some kind of transition and adaptation from the old to the new.

A different world

Today, we are literally in a different world. In certain sectors, including most ICT or IT related fields, the notion of the rapid obsolescence of even the most sophisticated innovation is a given. Focus on R & D and related high levels of funding must be a priority at all times. Even a major breakthrough –think of the first Apple iPhone— soon enough is copied, mass produced and eventually commoditized, while an eager public public waits for the next breakthrough.

All this is exciting. But it is also very problematic for the millions and millions of workers who have to embrace this life learning philosophy unless they want to be left behind because they lack the skills of tomorrow.

It is great that a behemoth like Amazon, with more than 630,000 employees worldwide, has the resources, the vision and the internal organization to launch such an ambitious, multi-year retraining program.

Supply chains

But what about everybody else? What about medium sized tech companies in Malaysia, Vietnam, Mexico or Romania? Most of them today do reasonably well as suppliers and vendors to bigger companies. But what if the big company tomorrow needs a completely different set of parts or software? Can the medium size vendors quickly adapt, absorb the new technologies and deliver according to exacting specifications? Inevitably some will not be up to the task.

Efficient production is now based on ever more complex global supply chains. However, for this model to work smoothly everybody has to deliver their product or service according to a plan that will inevitably include the latest innovations. What is some key links of the chain falter because the workers in supplier X do not fully understand what they are supposed to do? This would cause delays or interruptions. And this upsets everything.

The new task of education

My last point is about the mediocre to poor quality of public education, in the US, but also other countries. This absolutely vital life learning approach has to be embedded in young people’s minds from a very early age, so that it becomes a good habit, and not a burden. But I am not sure that we are doing this today. May be this is happening in some elite, top schools. But not in your average American or European public school.

So, here we can see a huge disconnect between the pressing needs of corporations for adaptable workers eager to learn new things on a daily basis and a public education system usually based on imparting some discreet knowledge to students, giving them the misleading impression that this will be enough for their future professional life.

Well, it is
not enough. Hence the need to retool education, both in terms of its content
and in terms of the broader message given to young people: “Remember that school is just stage one of your life learning process
and obligations. If you do not embrace this constant learning approach wholeheartedly,
you will be left behind”.      

American Health Care Is a True Monstrosity

WASHINGTON – Among wealthy nations, America holds the dubious record as the country with the highest health care spending as a percentage of national wealth, (18% of GDP), extraordinarily high costs of even standard procedures, and mediocre health outcomes.

Big spenders

Think about it, the next big spenders on health average around 10% of GDP. Related to our $ 20 trillion GDP, American overspending is roughly $ 1.4 trillion. This waste is almost double the entire defense budget.

If Americans were getting vastly superior quality of care for all this extraordinary amount of money spent on health, then you could say that you pay for what you get. But there is no evidence that, on average, Americans are getting superior care.

No serious debate 

And yet, this gigantic cost difference between the US and other wealthy countries is not questioned by health care experts, policy-makers or consumers. It is accepted as a fact of life. “Well, this is what health care costs in America”. In the US all the policy debates are not about trying to understand why we have stratospheric costs. They are only about deciding who pays the bill.

Not much effort, it seems, goes to try and find out the causes of this enormous discrepancy between the US and other rich nations. By and large, lower health care costs in other wealthy countries are superficially explained away as due to low quality, socialized medicine. “In the UK or Canada citizens get lousy service because of low quality, rationed care. No wonder it is cheap”. This is a generic charge that is mostly untrue.

Economist and management consultants cannot get to the bottom of this?  

What is even more extraordinary is that America is the home of thousands of economists and top of the line management consultants who should have the intellectual ability to understand that our high costs are in large measure due to horrible practices and down right perverse economic incentives.

The major flaws

At the cost of oversimplifying the extremely complex, layered US health care system, here are its major flaws. In the US we have an awful mix of private health care providers, without any genuine private sector competition, because services are paid mostly by medical insurance and not by the care recipients. Therefore health care providers do not feel the market pressure that would normally induce all participants in any economic sector to do their very best to offer the highest quality product or service at the lowest price, so that they can stay ahead of the competition. In US health care there is no real “market”. This lack of competition among private sector providers who are into this business to make a profit leads to abnormally high prices. In other words, providers tend to jack up prices well above cost and overall inflation, without any justification.

Perverse economic incentives 

And it gets worse. In the US, self-employed doctors make money only when they can prescribe something to sick people. Therefore, there is absolutely no incentive to teach people “prevention”, that is healthy life style habits, so that they can stay away from the doctors’ office as for as long as possible. Healthy patients bring no money to the providers. this may sound absurd, but in this system doctors want/need many sick people. This is only way they can make a living. From this perspective, the ideal patient is someone with a chronic condition that must be treated but cannot be cured. Patients for life are a wonderful source of guaranteed income.

Well, thanks to extremely bad personal habits when it comes to diet and lack of exercise –just think of the obesity epidemic and all its health consequences–  millions of Americans now need to be treated for chronic ailments such as cardiovascular diseases and type 2 diabetes. While this is not good for the patients, from the standpoint of providers millions of sick Americans are an endless windfall amounting to hundreds of billions of dollars.

Prevention would be a game changer

But here is the thing. Any serious health care professional knows very well that with proper education and guidance, many chronic diseases could be prevented and in most cases reversed. But where is the financial incentive to educate the public? It just does not exist. Doctors do not want to lose their revenue. Ditto for pharmaceutical companies that simply love to have millions of Americans who need their drugs in order to manage (never cure) chronic ailments.

The ugly picture

So, here is the ugly picture. Through their unchecked bad personal habits millions of Americans have developed a host of chronic diseases that require monitoring and treatment at inflated prices. This way causing enormous and but totally preventable expenditures.

Could this trend be reversed? Of course it could be, provided a sustained “wellness education” campaign conducted by the government and all the key providers. can we do this? Of course we can. Think of the sustained efforts carried out for many years aimed at convincing Americans to stop smoking. Millions did so. However, today the medical profession has practically zero incentive in educating the public on ways to stay healthy and prevent disease.

So, there you have it. Tens of millions of Americans in poor health, private sector providers who love this, and a complicated medical insurance system that masks true costs and allows higher and higher prices. And here is a telling illustration of what this perverse system produces.

$ 50,000 for a new knee

A  WSJ front page story (What Does Knee Surgery Cost? Few Know, and That’s a Problem, August 22, 2018) tells us how some health care providers almost casually set extravagantly high prices for procedures which are completely disconnected from actual costs.

“For nearly a decade, Gundersen Health System’s hospital in La Crosse, Wis., boosted the price of knee-replacement surgery an average of 3% a year. By 2016, the average list price was more than $50,000, including the surgeon and anesthesiologist.

Yet even as administrators raised the price, they had no real idea what it cost to perform the surgery—the most common for hospitals in the U.S. outside of those related to childbirth. They set a price using a combination of educated guesswork and a canny assessment of market opportunity.

Prompted by rumblings from Medicare and private insurers over potential changes to payments, Gundersen decided to nail down the numbers. During an 18-month review, an efficiency expert trailed doctors and nurses to record every minute of activity and note instruments, resources and medicines used. The hospital tallied the time nurses spent wheeling around VCR carts, a mismatch of available postsurgery beds, unnecessarily costly bone cement and delays dispatching physical therapists to get patients moving.

The actual cost? $10,550 at most, including the physicians. The list price was five times that amount. [bold added]

Competitive forces are out of whack in health care. Hospitals are often ignorant about their actual costs. Instead, they often increase prices to meet profit targets. Patients, especially those with insurance, often don’t know the price of a procedure and rarely shop around.” 

Massive overcharging, and nobody cares

Got that? Patients and insurance companies are outrageously overcharged, and almost nobody can figure this out. Uninformed patients are clueless and therefore do not fight this outrage.

But how is this possible? In no other economic sector providers could get away with exorbitant over pricing, because competitors with lower prices would fight to get their business. True, however, as noted above, in the US health care system elementary free market economic principles simply do not apply.

The mix of private health care providers bent on maximizing profits, a maze of insurance plans, and health care customers who lack even the most elementary means to assess costs and do any comparison shopping without getting lost have created a monster.

Anybody can see this 

Again, any intelligent observer who cares to look into this ugly picture can see this abomination and immediately grasp that there is an urgent need to teach wellness education in order to minimize overall health care needs and therefore costs , and transform the entire health care delivery system so that physicians are rewarded for keeping people healthy, not for prescribing expensive therapies for preventable diseases.

To be clear, it is obvious that not all health care is about “wellness education” aimed at eradicating or at least minimizing preventable illnesses. There are and there will be many other ailments, including: genetic conditions, cancer, accidents, injuries, epidemics. And they need to be dealt  with.

My point is that when you eliminate life style caused illness and the ridiculous over prescribing affecting almost everything else, we are talking about possible savings in the hundreds of billions of dollars per year.

It will be difficult 

Look, I am not totally naive. I realize that reforming medical care in the US would be an enormous, thankless undertaking. There are just too many stakeholders who have a strong interest in keeping things just the way they are, because this is how they make money.

Still, by not touching the status quo, we keep wasting hundreds of billions of dollars every year in unnecessary therapies and procedures whose costs keep getting inflated beyond any justification, while the average American is trapped in an unhealthy life style.


US Wants To Negotiate With The Taliban

WASHINGTON – US Secretary of Defense James Mattis and Chairman of the Joint Chiefs General Joseph Dunford recently made an unexpected visit to Kabul, Afghanistan in order to meet with Government officials.

Negotiations with the Taliban?

What is surprising is that in the course of this visit Secretary Mattis publicly indicated that now more than ever before there seems to be a concrete possibility to engage the Taliban in serious peace negotiations.

Really? This is a good moment? And based on what? Based on the fact that our side is losing, or at the very least manifestly incapable of winning? I assume that Secretary Mattis is aware of the fact that the Afghan government, after years and years of U.S. funded training of its military and police forces, is receiving huge body blows –practically on a daily basis– from a stronger and clearly emboldened Taliban. Surely Mattis can see that the Taliban is now capable of attacking almost anywhere in the country, very often targeting government facilities within highly protected areas in Kabul itself.

In simple language, the Afghan Government is not only manifestly incapable of beating a now stronger Taliban insurgency, it is also suffering a series of humiliating (and demoralizing) setbacks.

Translation: while the fighting continues, and no decisive “battle” has taken place, victory is nowhere in sight for the Afghan Government we have been supporting for over 15 years, while the other side has redoubled its efforts, giving no sign whatsoever that it is losing its motivation to fight –for as long as it takes.

If our goal is the eventual stabilization of the country, any US security expert understands that this is not happening any time soon. Simply by continuing its campaign of almost daily attacks, the Taliban are making it very difficult, if not impossible, for the Afghan Government to stay in control and run a semi-destroyed country that is still in desperate need of basic services, capital investments, jobs and economic development.

Why negotiations when our side is losing? 

And yet, while in Kabul, the most senior US Defense Department official argues that this most perilous predicament is a really good moment to negotiate with the Taliban. This makes no sense, if our objective is victory.

Indeed, if we want to negotiate good terms for our side, then we open a dialogue with the enemy when we are winning, not when we can hardly hold on to our positions, while under a barrage of almost daily brazen attacks.

This being the case, and since what I just articulated is pretty obvious to all, there is only one explanation I can think of for this sudden optimism about negotiations withe the Taliban expressed by Secretary Mattis.

The war is lost

America has finally realized that the war in Afghanistan has been a long, horribly expensive, and ultimately hopeless endeavor. The “Vietnamization strategy” for Afghanistan whereby American forces, while stopping ground combat operations, would still provide critical assistance to the war effort through the training of Afghan forces and by providing significant air support, eventually leading to victory, turned out to be a naive fantasy.

After 17 years it is time to say it: “This is not working”. I repeat: “This is not working”. 

Cut your losses 

This being the case, once you have digested this simple (if unpleasant) reality, the time comes when you want to get out of a hopeless situation. And therefore you publicly say that this is a good moment “to negotiate”, knowing full well that the other side will interpret this for what it is: a virtual capitulation. Taliban Internal Memo: “The Americans are finally leaving. We won”.

Good bye 

Well, if you sit in the Afghan Government, you cannot avoid reading the proverbial writing on the wall: “Dear Afghan friends, what we really mean by saying that this is the right  time for engaging in negotiations with the Taliban is that soon enough you will be on your own in this fight. We are done here. Belatedly, we decided to cut our losses. Good luck to you, and good-bye”.

The New Immigrants And America’s Future Identity

WASHINGTON – We now know that the Australian government is openly concerned that unless it can manage its immigration policies properly, there is a serious risk that Australia may soon lose its political and cultural identity. There is fear that there are now too many new economic immigrants who, while living and working in Australia, do not fully understand and embrace the core values that bind Australia together. If this were indeed the case, the country will soon lose its identity and become something else.

Non assimilated immigrants 

On the face of it, this stance does not seem to be motivated by anti-immigrant prejudice, or xenophobic hysteria. Rather, it seems to be driven by a genuine concern that all new comers to Australia, even if initially motivated mostly by economic reasons when they decided to become immigrants, along the way have also embraced Australia’s national values.

If this is not so, non assimilated economic immigrants may contribute to the progressive fragmentation of the Australian society. This is valid concern in a country largely composed of recent immigrants.

America is also a country of immigrants 

If we switch over to the U.S., the current immigration debates, well-meaning in some aspects, emotional and acrimonious in others, are somewhat similar. America is also a country of immigrants. However, there is a significant qualitative distinction between earlier waves of migration to America, mostly from Europe, and the current wave composed mostly of individuals immigrating to the U.S. from Mexico, Central and South America. Most of the old immigrants wanted to become Americans as soon as possible.

In contrast, the new immigrants are usually happy to be here. But they do not feel the same urgency/pressure to quickly assimilate. given this, just like the Australians, we would like to be reassured that there is a way whereby the new immigrants can and will be successfully assimilated into the main stream of American culture and society, just like millions of others before them.

Is the American core still intact?

In other words, as a society, we should be able to feel confident that new waves of immigration will not weaken America’s core values as enshrined in the U.S. Constitution. America’s core values are relatively simple, yet of fundamental importance. But we cannot assume that every new American truly understands them and will live by them.

Simply stated, America is a country based on popular sovereignty in which the government has been established to preserve individual freedom and serve the People, where accountability is a duty, and the protection of all basic individual freedoms is the main obligation of all public institutions, while a properly functioning system of checks and balances prevents abuses and protects minorities. Sounds really simple.

But it is not at all simple. Understanding the deep meaning and broad implications of these relatively elementary principles requires deep reflection, and in most cases the rejection of other models in which the state is sovereign and the citizen a subject.

No pressure to assimilate

But why can’t we be sure that these American principles are properly embraced by the new immigrants? Very simple. Fundamental changes have occurred in the immigration process in the last 20 to 30 years. Absorbing core values was an integral part of the assimilation process, mostly because new immigrants wanted to be part of the mainstream.

But here is the thing. Assimilation as we understood it until a few decades ago may not be happening anymore. New immigrants are no longer automatically “blended”, this way quickly becoming Americans.The US has already become a multi-ethnic, multi-cultural and multi-lingual society, with distinctive ethnic enclaves within which people preserve the language, culture and belief systems of their country of origin.

And this happened in large measure because there is no longer any strong incentive nor pressure to assimilate and be assimilated. It is a fact that in the U.S. many states or regions within them now are predominantly Hispanic or Latino, and Spanish-speaking. Other ethnic enclaves also exist; but the communities from south of the border are by far the largest.

No pressure to embrace American core values

Let me be absolutely clear. These relatively new Americans are mostly industrious, good people. Still, if we cannot be sure that these new immigrants, after they came here, fully embraced the American political culture and its underlying values, overtime this will lead to a significant –in fact structural– transformation of the America we know today.

And since America developed and grew in what it is today because its diverse citizens subscribed to a certain set of constitutional principles, it is important to check as to whether most citizens still share those beliefs. And if some do not, we have a real problem.

There is no more a “melting pot”

The main –and probably irreversible– change when it comes to the difference between old and new immigration, is that the old “melting pot” metaphor used to describe America no longer applies. Up to the 1960s the “melting pot” was a fair representation of the willingness and ability of the American society to receive, absorb and homogenize large waves of diverse immigrants, this way turning them rather quickly into “true Americans” .

All this no longer applies. The US ceased to be this mostly Anglo-Saxon “cultural blender” that overtime absorbed, digested, homogenized and integrated millions of other immigrants coming from different backgrounds.

Old immigrants under pressure to become assimilated 

How did this happen? Here is the thing. The  reason why the “melting pot ”  metaphor no longer applies is about the fundamental difference between the immigration experience of the Europeans who came to America a hundred years ago and the experience of the Latinos who come today. The qualitative distinction is that most of the older immigrants –in particular the Europeans– came to the U.S. with a keen awareness, explicit or implicit, that by immigrating into the U.S. they had also permanently severed their ties to their countries of origin.

Sure, in many cases they would retain, at least the immigrant generation, a specific identity within the American ethnic mosaic. But most of them were absolutely bent on “becoming Americans”, as soon as possible. Rightly or wrongly, fast assimilation was deemed to be the ticket into the American mainstream. With assimilation came acceptance; and therefore more economic and social opportunities, for the new immigrants and certainly for their children growing up in America. 

Superficial differences remained

Looking among newcomers to America a century ago, one could have easily recognized Polish Americans as different from Italian Americans. But, by and large, whatever the different countries of origin, physical appearance and accents, there was a unifying trait that most new immigrants shared.

Indeed, those who came to the U.S. and stayed here had made a total commitment to becoming Americans, and to place any residual tie or connection with their country of origin: linguistic, cultural or culinary, on a much lower tier.

Old ties soon dissolved 

Furthermore, in many if not most cases, the new immigrants were unable or unwilling to preserve their linguistic identity and pass it on to the following generations. Many of them were often semi-literate or illiterate within their own cultures. Thus they did not have the tools to preserve linguistic and cultural complexities that they did not fully master.

Therefore, the kaleidoscope of exotic last names that still today dots the American landscape has value mostly for the ethnographers and historians who can spot and identify Norwegian, Irish, Greek, Russian, Polish, Portuguese, or German origins.

Immigrants intermarried

However, if we fast forward to today, the individuals who bear those last names –the descendants of the original immigrants– with a few exceptions, usually can barely tell you that their great grand parents came from somewhere in Ireland or Germany. Besides, mixed marriages among different immigrants blurred the picture even further. The Italians intermarried with the Irish and their offspring later on with other descendants of other nationals. A third or fourth generation American today can easily be part German, Swedish, Scottish, Russian and Greek. Therefore, for him or her it is almost impossible to determine a meaningful national or cultural origin, let alone have strong feelings of belonging to it.

Immigrants today stay connected 

Well, today it is different, very different. And the basic difference between these old waves of immigrants and the Latino waves rests largely on geographic proximity to the countries of origin, and the consequent easy travel back and forth, relatively higher standards of living, and the availability of low cost or zero cost communication tools that keep the old ties alive and relevant. This level of communication between new immigrants and their country of origin was simply unimaginable a century ago.

A hundred years ago, most European immigrants by and large came on a one way third class ticket on overcrowded steamers. Once they had landed, and after they had been processed at Ellis Island, they were psychologically and materially committed to a fast track to integration in order to increase their chances of improving their lot vis-a-vis the other Americans. In most cases, going back to the country of origin was out of the question. Immigration to America was final. Thus, embracing this new world, in all its aspects, including its political culture and values, was absolutely necessary in order to have a chance to succeed in it.

Ties to the country of origin 

The Latinos belonging to this new wave of migration instead do not have the same urgency to assimilate. They come by bus, by car or by air, many of them across the Mexican border. For the most part, (even if we take out the many who do not have legal papers who therefore cannot cross the border back and forth for fear of apprehension), except for the very poor, these immigrants have the opportunity to travel at least occasionally to their country of origin. Some do this rather frequently. Back home in Mexico, El Salvador or Colombia there are many relatives and circles of old friends. US-based immigrants send money back to them. At least some of them plan to make enough money in America, so that they can bring theirs savings back home and live comfortably there.

To think of Polish peasants transplanted in Illinois at the turn of the last century taking an even occasional summer vacation to visit relatives back in the village is preposterous. Except for the extremely successful few who had become really rich in America, hardly anybody ever went back.

Easy to communicate

On top of that, nowadays, even for the relatively poor Latinos, phone and video contact with relatives back home is the norm rather than the exception; while the gigantic remittance flows from the U.S. into Central and South America, indicate continues involvement with families and communities in the countries of origin.

And the retention of the Spanish language as the primary or at least co-equal language is an indication that these immigrants do not have the same urgency to integrate and in some fashion forget about their origins. They see no need for this.

Large immigrant communities retain their identities

The strength of large numbers in most cases may help in shaping attitudes. No need to learn English fast in large communities where the Spanish-speaking Latino population is actually the majority. Indeed, at least in some communities in the U.S. it is possible to have a reasonably “normal” life in terms of semi-decent work opportunity without any need to acquire real English fluency, something that certainly was not the case, even in the most “ethnic” states or regions, at the height of the European immigration waves.

Learning English used to be the ticket to success 

Certainly, even in the past there have been many large ethnic islands within the United States. And it is true that many immigrants could get by in America with little or no English. However, the understanding of all was that English was the only official language of the country and that all official transactions would be conducted in English. No equivalent at that time of the now ubiquitous “press 2 for Spanish”, in any telephone help line, let alone taking driver license tests in languages other than English, or the notion of having officially sanctioned bilingual education.

We know that being an American is not about ethnicity, as demonstrably there is no “American” ethnic group. However, becoming an American is both possible and absolutely necessary, if we want the original American ethos, as enshrined in the U.S. Constitution, to be preserved.

And it all boils down to the voluntary and sincere embrace (“without mental reservation, or purpose of evasion”, as the Oath all citizens have to take says), of a set of constitutional principles and the values that sustain them.

Immigrants had to become Americans

Of course, we know that, even in the past, most immigrants coming to the U.S. were primarily economic immigrants, driven by material needs, rather than by lofty political ideals.

However –and this is a crucial distinction between then and now– whether they liked it or not, the old immigrants were “forced”  by circumstances to buy into the prevailing Anglo-Saxon political culture and become sooner than later “homogenized Americans”, thus quickly shedding the legacy of their origins and embracing America and its core values, at least in most cases. As indicated above, at that time, America was a genuine melting pot. Today, it is a completely different story. No more a melting pot.

Civics exams do not make citizens 

True enough, the rule today is that before being naturalized, that is legally accepted into the American society and polity, all applicants must take and pass a test of basic knowledge of the U.S. Constitution.

This is not a bad idea. But since this is the only test, it is a truly low bar. So low, in fact, that it is insignificant. Demonstrating decent knowledge about how many Justices sit on the U.S. Supreme Court is important, but hardly conclusive evidence that the would-be US citizen understands –and most importantly agrees with– the principles of the American Constitution when it comes to the preservation of individual liberties, popular sovereignty, limited government, or the purpose of effective checks and balances, let alone the values that should sustain these core principles.

No real differences among the descendents of earlier immigrants 

When political leaders today affirm that the strength of America lies in the diverse backgrounds of the diverse immigrant population that somehow enriches all of us, they are talking nonsense. They should know that when we talk about Americans of European descent, today this “diversity” is in fact so superficial that its is in fact insignificant. They know that the descendants of those Italian, Swedish, Portuguese, German, Russian and Greek immigrants are now indistinguishable from one another.

Indeed, while some of them may have retained some superficial traces of their distinctiveness, (Italian Americans may have dark hair, Scandinavian Americans have blonde hair), at this is point they are all homogenized Americans. Kohl, Lantos, Giuliani, Voinovich, Kerry, Tenet, Dukakis, Rubio, Pompeo, just to stay within the sphere of people involved in public policy, are all “ethnic” names. Yet, all these are Americans –with a capital A.

Latin immigration is different 

However, ten years from now, will we say the same about the Mercado, Martinez, Ortiz, Lopez and Rodriguez who will be the Mayors, Senators, Governors and eventually national leaders of America? The critical difference between the old and the new immigrants is that many Latinos did not and do not have the same pressure to integrate and quickly become “homogenized Americans”.

Both old and new immigrants appreciated then and appreciate now the opportunity to have a better life in the USA. However, to the extent that the new immigrants (most of them from Central and Latin America) can easily maintain an active connection with their countries of origin, (something that those who came along with the previous immigration waves simply could not do), they do not seem to have the same urgency to totally and quickly transform themselves into “Anglo”.

Embracing America and its values 

If, while preserving the old family and cultural ties, all or at least most of them would voluntarily choose to truly and fully embrace the values of their adopted country, this would be a genuine achievement of good multiculturalism.

Let me be clear, this is not about “forcing” people to abandon their cultures, their language and their roots. There is absolutely nothing wrong in retaining and cultivating one’s culture and language of origin, as long as there is also a genuine embrace of American values up to the point that they become the key reference.

But, here is the thing. The old immigrants willingly or unwillingly were “sucked into America”.

As for today’s immigrants, realistically most of them will not spend sleepless nights poring over the Federalist Papers or other tomes on Jefferson or the U.S. Constitution in order to critically understand and fully appreciate America’s core values and how they were incorporated into the Constitution.

But here is the thing. Without the perception that in order to have a normal life in America they need to embrace the values of this society, most new immigrants will simply tend to their own private affairs. And, in the pursuit of their own interests, they will be guided by the principles that they acquired in their formative years.

America is not just the place you found work 

If this is so, regarding these new waves of immigrants, we cannot rest assured that their value systems and beliefs are or will be the same as those that are prevalent among other Americans, simply because their backgrounds are different and their learning and socialization took place in a different context, while the urgency to embrace American values is simply not there.

And herein is the challenge. America has worked reasonably well so far because a recognizable political culture has been preserved and passed on to new generations and millions of new immigrants over more than two hundred years through a fairly successful homogenization process that caused total outsiders –millions of immigrants from different countries– to become integrated into the American mainstream rather painlessly and in a relatively short time.

More than just language 

The substantial recent inflow of millions of people from nearby Mexico, Central and South America who bring with them not just another language but also different values and who see neither the obligation nor the need to fully understand and subscribe to the American political culture will bring about substantial qualitative changes. These changes will provoke new debates about what is it that we mean by “being an American”.

Once again, let me be clear. I am not even remotely suggesting that all these new Latin immigrants are disloyal or suspect people. I am simply suggesting that most of them are fundamentally economic immigrants who –unlike the European economic immigrants who landed here more than a century ago– are not under any pressure to understand, absorb and fully embrace American values.

Many Americans do not know much about their history and values

True, the notion that all the descendants of the old European waves have an unflinching, clear understanding as to what are the American values that they theoretically subscribe to is highly questionable. Indeed, many do not. But, at least in general, they cannot look at political or cultural alternatives that derive from other perspectives that coexist in their cultural and personal universe.

That said, if anything, the lukewarm appreciation about the distinctiveness of American political culture and values among many descendants of older immigrants complicates the problem, as it does not present to the new immigrants a really clear picture of the value system that they should absorb in order to become “real” Americans.

America is a political society shaped by shared values 

We all know that America is a rather unique country, in as much as those who are here today cannot point to a shared ethnic, religious or cultural identity. America is not a Nation-State in the European sense. America is a community of people coming from a variety of countries who freely decided to subscribe to a set of values which became the unifying principles of this republic.

Americans are Americans because they share a political culture. Until not too long ago, the implicit assumption was that all of those who are here genuinely understand it and willfully embrace it.

This political culture has been the intangible yet ultra strong magic glue that kept this complex machinery of the American society together. Going forward, we have to face the fact that this glue may not be as strong a bonding agent as it used to be.

A new era 

And we have to face this fact now. Indeed, for the first time in our complex history, we have a large chunk of new immigrants who may very well live here as law-abiding, productive citizens; but who are under no pressure to truly join in by sincerely embracing our political culture.

Again, let me stress that this does not automatically make these new immigrants disloyal or dangerous citizens. But it makes them different.

Just like the previous waves of immigration into America, these are predominantly economic immigrants. However, unlike the immigrants of old, these relatively recent immigrants did not and will not go through the “political and cultural indoctrination”, benign or “forced”, willfully accepted or “suffered” by millions of others before them. The old blender that homogenized everybody and made them into “true Americans” is no longer working.

The new immigrants are different. Their large and growing numbers will affect the culture and the values of the broader society in which they live, and eventually they will radically transform it –its value systems and core beliefs. How this transformation will change America and us all is impossible to predict.

But America will never be the same.