I compiled my thoughts on the primary challenges the United States faces in the coming decade, and ways to overcome them, here: http://www.hackneys.com/docs/facingthefuture.pdf

The primary focus in this collection is on domestic challenges, although some geopolitical issues are addressed.

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First, in a story in MSN Money: http://articles.moneycentral.msn.com/SavingandDebt/FindDealsOnline/big-discounts-on-little-pleasures.aspx

Second, in a story on FoxNews: http://www.foxnews.com/leisure/2010/04/16/rv-travel-beginners/

The Fox story included a link to our Travel web site, www.HackneysTravel.com, which was nice of them to include. I haven’t checked the traffic levels on the site yet to see if they spiked or not.

The challenge is to be aware of the upsides of the United States without becoming defiantly hostile to any discussion of specific shortcomings or ways the U.S. could improve, or, conversely, becoming so immersed and versed in America’s downsides as to become blind to the unique positive capabilities, characteristics and opportunities the U.S. offers.

When you live in the United States, it often seems as if the U.S. is either all bad or all good depending on which political party is in power and which talk radio station, screaming cable channel or hyper-partisan web site or publication you are feeding into your head at the moment.

In addition, the United States has a long cultural history of and peculiar cultural affection for jeremiads, mournful and often bitter lamentations about the state of society and government. If you spend any time exposing yourself to discussion or media concerning public or foreign policy, it won’t be long before you come across one form of jeremiad or another predicting the imminent doom of the country, accompanied by a long list of complaints and depressing statistics. However, as they say about paranoia, just because a jeremiad shouts that the sky is falling doesn’t mean it isn’t true. The challenge is to sort out the real threats from the partisan fueled hyperbole and opponent bashing.

Faced with so much hyper-partisan ideology and agenda-advancing content, it can be difficult to establish and maintain an assessment of where the country actually is relative to the rest of the world, much less where it needs to go.

Here are some objective facts to help achieve that goal.

Upsides:

• The U.S. leads the world in innovation, which provides incalculable benefits for everyone else on the planet. The modern world is filled with technology that was invented in the United States, from the personal computer to the laser. In addition to general technology, it is estimated that 8 out of 10 inventions and advancements in medicine and health care in the last 50 years originated in the United States. Just as American general technology innovations are used to drive productivity growth worldwide, American health care inventions and advancements are used by every country on earth to improve the health care of their citizens.

At the same time they are reaping the benefits of increased productivity and reduced costs, those countries have not needed to invest in the education, science, facilities, supporting infrastructure, tax credits and research and development that brought about those advances. In effect, the United States subsidizes the entire world by funding the invention and development of new technologies that are used worldwide to advance societies and increase productivity.

In addition to technologies, life saving drugs developed in the United States are often sold here for many times higher prices than elsewhere. We pay higher prices for those drugs to pay the pharmaceutical companies for the $500 million to more than $1 billion dollars required to discover, develop and bring a new drug to market. Other countries get those drugs for low prices, essentially getting all the research and development required to develop new drugs for free. The same is true for medical devices, such as diagnostic imaging, and medical procedures. In these ways, the U.S. effectively subsidizes health care for the entire globe. Consequently, other countries, especially the European Union, have enjoyed relatively low societal costs of health care relative to the United States.

• The U.S. leads the world in military spending, by a huge margin, spending nearly eight times as much as the next closest country, China. The U.S. spends nearly half of the world’s total military spending at 45 percent. The upside of all of this spending is that it has guaranteed peace and security for countries from Europe to the oil producing Gulf states in the Middle East. The latter, maintaining stability in the Middle East, is often used as a negative example of American intervention, but the fact remains that nearly every oil importing nation in the world relies on Middle Eastern oil, and those oil dependant nations include most of America’s harshest critics on this score.

The inherent threat of America’s military muscle has enabled it to settle disputes between upstart nations, rogue regimes, regional enemies and global powers. Perhaps most significantly, it provided a shield that allowed multiple generations of Canadians and Europeans to grow and prosper within an artificial bubble that has never known conflict or war.  This enabled Canada and Western Europe to build their nations while spending a tiny portion of their budgets on their military forces.

In the case of Europe, the money they would have otherwise spent keeping the Russians at bay went instead to building very generous welfare states, including cradle to grave benefits. As such, it is impossible to compare those societies, which have rebuilt or grown within the bubble of America’s security shield, to the United States, especially in terms of social benefits and economic structure. Those European economies that have profited from the protection of the United States have never been required to have an economy that could fully support themselves, they have all been subsidized by American military spending. That American military spending not only negated the need for those nations to buy a viable and effective domestic military, but also subsidized the local economies through direct injection of billions of dollars via American bases, contracts and procurement. The colloquial version of this reality is the paraphrase of Margaret Thatcher’s comment on socialism, “The problem with socialism is that eventually you run out of other people’s money.” In this case, the other people’s money has been and continues to be provided by America’s free market capitalist economy, a system often roundly derided by the very Europeans who have been profiting from its subsidies for generations.

The United States also is a leading nation in the world on multiple additional objective measures:

• Universities, 1^st in the world with 18 of the top 25 and 31 of the top 100 ranked institutions. In the top 100, the U.S. ranks ahead of (2) United Kingdom (UK) with 18 in the top 100, (3) Australia with 8, (4) Canada with 4 and (5) China with 3.
• Top 500 businesses, 1^st in the world with 140 of the world’s top 500 companies, leading (2) Japan with 68, (3) France with 40, (4) Germany with 39, (5) China with 37, (6) United Kingdom (UK) with 26, (7) Switzerland with 15, (8) Canada with 14, (9) South Korea with 14 and (10) Netherlands with 12, including the world’s largest company, Royal Dutch Shell.
• Top 100 software companies, 1^st in the world, with 74 of the top 100 companies, leading (2) Japan with 8, (3) France with 4, (4) United Kingdom (UK) with 4, and (5) Germany with 3.
• Internet hosts (a computer connected directly to the internet), 1^st in the world with 338 million, leading (2) Japan with 47 million, (3) Germany with 24 million, (4) Italy with 22 million and (5) Brazil with 16 million.
• Aid to developing countries (official direct aid (ODA)(2008)), 1^st in the world at $25.4 billion, leading (2) Germany at $13 billion, (3) United Kingdom (UK) at $12 billion, (4) France at $10 billion and (5) Japan at $8.3 billion. Note that these numbers do not reflect direct private giving to charity, a category in which the United States leads the world, by far. 
• Kilometers of railroad track, 1^st with 226,427 kilometers ahead of (2) Russia with 87,157, (3) China with 77,834, (4) India with 63,327, (5) Canada with 46,688, (6) Germany with 41,896, (7) Australia with 37,855, (8) Argentina with 31,409, (9) France with 29,213 and (10) Brazil with 28,857. Note that the railway systems of India, Argentina and Brazil were largely built during their colonial period with widely varying levels, often very low, of investment in maintenance since.
• Airports (airports or airfields recognizable from the air, may be paved or unpaved), 1^st with 15,095, leading (2) Brazil with 4,000, (3) Mexico with 1,744, (4) Canada with 1,388, (5) Russia with 1,216, (6) Argentina with 1,130, (7) Colombia with 992 and (8) Bolivia with 952. Note that Mexico, Colombia and Bolivia are heavily involved with the production and shipment of illegal drugs, thus leading to a very high density of airfields relative to their population and geographic size.
• Roadways (kilometers of paved and unpaved roads), 1^st with 6,465,799 kilometers, leading (2) China with 3,583,715, (3) India with 3,316,452, (4) Brazil with 1,751,868, (5) Japan with 1,203,777 and (6) Canada with 1,042,300. Note that many roads in the developing world, such as India and Brazil, are not what most Americans would term a road. Also note that Japan’s roadways represent an extraordinary amount for such a limited geographic area, highlighting the hyper-developed nature of that country.
• Market value of publicly traded shares (price per share multiplied by the total number of outstanding shares, cumulated over all companies listed on the particular exchange on December 31 of the noted year), 1^st at $19.95 trillion dollars (2007), leading (2) European Union at $15.57 (2008), (3) China at $6.23 (2007), (4) Japan at $4.45 (2007), (5) United Kingdom (UK) at $3.86 (2007), (6) France at $2.77 (2007), (7) Canada at $2.19 (2007), (8) Germany at $2.11 (2007), (9) India at $1.82 (2007) and (10) Spain at $1.80 (2007).
• Gross Domestic Product (GDP), purchasing power parity basis(PPP), 2^nd  with $14.26 trillion dollars, trailing (1) European Union at $14.52 and leading (3) China at $8.77, (4) Japan at $4.14, (5) India at $ 3.55, (6) Germany at $ 2.81, (7) United Kingdom (UK) at $2.17, (8) France at $2.11, (9) Russia at $2.10 and (10) Brazil at $2.02.
• Fixed telephone lines, 2^nd with 150,000,000, trailing (1) China with 365,600,000 and leading (3) Germany with 51,500,000.
• Imports (exchange rate basis), 2^nd with $1,445 billion dollars, trailing (1) European Union with $1,690 and leading (3) Germany with $1,022, (4) China with $ 922, (5) France with $ 532 and (6) Japan with $490.
• Movies produced annually, 2^nd with 611, trailing (1) India with 946 and leading (3) Japan with 310, (4) China with 212 and (5) France with 203.
• Annual household Income (purchasing power parity (PPP) adjusted), 2^nd at $50,233, trailing (1) Switzerland at $60,288 and leading (3) Canada at $44,000, (4) New Zealand at $41,000, (5) United Kingdom (UK) at $39,000 and (6) Australia at $38,000. Note that this metric can be difficult to compare as the value of various social programs may or may not be included in the source data for each country.
• Mobile (cell) phones, 3^rd with 270,000,000, trailing (1) China with 634,000,000, (2) India with 427,300,000 and leading (4) Russia with 187,500,000, (5) Brazil with 150,641,000, (6) Indonesia with 140,578,000 and (7) Japan with 110,395,000. 
• Oil production, 3^rd at 8,514,000 barrels per day (bbl/day) (an oil barrel is 42 U.S. gallons or 159 liters), trailing (2) Russia at 9,810,000 and (1) Saudi Arabia at 10,780,000. The U.S. leads (4) Iran at 4,174,000 and (5) China at 3,795,000, (6) Canada at 3,350,000 and (7) Mexico at 3,186,000. The total North American oil production of Canada, Mexico and the United States is 15,050,000 bbl/day, although due to very low re-investment in equipment and exploration by their state owned and operated oil monopoly, Mexico’s production has dropped dramatically in the last few years and will continue to dwindle until significant investments are made.
• Exports (exchange rate basis), 4^th with $995 billion dollars, trailing (1) European Union with $1,952, (2) China with $1,194, (3) Germany with $1,187 and leading (5) Japan with $516 and (6) France with $ 457.
• Steel production (2009), 4^th with 58.142 million metric tons, leading (5) India at 56.608 and trailing (3) Russia at 59.940, (2) Japan at 87.534 and (1) China at 567.842. In 2009, China produced 47 percent of the world’s steel.
• GDP per capita, (PPP basis), 10^th at $46,400. In this ranking the U.S. trails, (1) Liechtenstein $ 122,100, (2) Qatar $ 121,400, (3) Luxembourg $ 77,600, (4) Bermuda $ 69,900, (5) Norway $ 59,300, (6) Jersey $ 57,000, (7) Kuwait $ 55,800, (8) Singapore $ 50,300, and (9) Brunei $ 50,100. Note that aside from the U.S., all of these countries except the city-state of Singapore are either oil producers, tax havens or off-shore banking centers often used to launder money for criminal activities and tax evasion. In the sense of normal nation-state economies, the U.S. leads this ranking.

In addition to these objective measures, the United States leads the developed world in diversity, integration of immigrants, and opportunity for upward mobility. The U.S. is among the world leaders in creativity, discovery and innovation as measured by patents, Nobel Prizes and other recognitions of scientific and creative achievement. Perhaps the most telling measure of all is that the United States leads the world in aspiration. More people perceive the United States as the best place to live than anywhere else on the planet. More people want to come to the United States to realize their dreams of prosperity and advancement for themselves and their families than anywhere else in the world.

But as we know, all is not sweetness and light in America. The United States has shortcomings, downfalls and persistent unresolved issues. Among them are:

Downsides:

• Oil consumption, 1^st at 19,500,000 barrels per day (bbl/day) (an oil barrel is 42 U.S. gallons or 159 liters), leading (2) European Union at 14,440,000 bbl/day, (3) China at 7,999,000, (4) Japan at 4,785,000, (5) India at 2,940,000 and (6) Russia at 2,800,000. Of these nations, only Russia produces enough oil to meet its current domestic needs. Both China and India are experiencing high growth rates in net oil imports. China and India’s foreign oil dependency will be 61 percent and 85 percent respectively in 2010, meaning China will depend on foreign oil imports for 61 percent of their oil needs while India will depend on foreign imports for 85 percent of their needs. Due to limited domestic oil resources, both percentages are expected to rise as their respective economies continue to grow. By 2030 India will pass Japan to become the fourth largest consumer of oil.
• Science knowledge by 15 year olds (2006), 21^st at 489, trailing (20) Iceland at 491, (19) France at 495, (18) Denmark at 496, (17) Poland at 498 and leading (22) Slovakia at 488, (23) Spain at 488 and (24) Norway at 487. The top scoring country was (1) Finland at 563 trailed by (2) Canada at 534.
• In percentage of citizens living below the poverty line, the U.S. ranks 22^nd at 12 percent, trailing (21) Syria at 11.9 percent and leading (23) Slovenia at 12.9 percent. Among developed nations, the U.S. trails (20) Germany at 11 percent, (18) Canada at 10.8 percent, (17) Netherlands at 10.5 percent, (8) Ireland at 7 percent, (6) France at 6.2 percent and (5) Austria at 5.9 percent. Note that many countries use different methodologies to establish the poverty level, so these statistics are not viewed as necessarily reliable or “apples to apples” comparisons, especially by global organizations such as the United Nations and the World Bank. In addition, some countries statistics are viewed as unreliable and unrealistic, especially in the developing world.
• Infant mortality rate (deaths per 1,000 live births), 6.22, ranking 44^th, trailing (43) Northern Mariana Islands at 6.00 and (42) Cuba at 5.82 and leading (45) Faroe Islands at 6.32 and (46) Croatia at 6.37. The next highest ranking developed nation above the U.S. is Italy, at 5.51. Singapore holds the best ranking, 1^st, at 2.31 and Sweden is 3^rd with 2.75. Note that the infant mortality rate in some countries is skewed lower (better) due to forced abortions of suspected flawed fetuses, such as in Cuba.
• Life expectancy at birth, 78.11 years, ranking 49^th behind (48) Portugal at 78.21 among developed nations. The leader is (1) Macau at 84.36 years with (3) Japan holding the top developed nation spot at 82.12 years.
• Education expenditures as a percent of GDP, tied with Jamaica and Belize at 5.3 percent with a ranking 57^th, trailing (54) Ghana, (53) South Africa and (52) Austria at 5.4 percent. (16) Iceland leads the developed nations at 7.6 percent followed by (20) Norway at 7.4 percent.
• Public debt as a percentage of GDP (PPP basis), 64^th at 39.70 percent, leading (65) Dominican Republic at 41.50 percent and trailing (63) Yemen at 39.60 percent. The last spot is held by (129) Zimbabwe at 304.3 percent, with the worst developed nations trailing at (128) Japan at 192.10 percent, (123) Italy 115.20 percent, (122) Greece 108.10 percent, (120) Iceland 100.60 percent, (119) Belgium 99.00 percent, (114) France 79.70 percent and (113) Germany 77.20 percent. Note that the purpose of the purchasing power parity (PPP) adjustment is to create a common unit of comparison between economies of different value. The public debt as a portion of GDP represented here is valid for some comparisons between disparate economies, but it is not related to the direct, unadjusted ratio of U.S. public debt to GDP commonly used in U.S. government departments, congress or the media.

On a non-PPP basis, the non-partisan Congressional Budget Office (CBO) projects that under the current proposed budget, debt held by the American public would grow from $7.5 trillion (53 percent of GDP) at the end of 2009 to $20.3 trillion (90 percent of GDP) at the end of 2020. As a result, net interest would more than quadruple between 2010 and 2020 in nominal dollars (without an adjustment for inflation). Net interest payments on the public debt would expand from 1.4 percent of GDP in 2010 to 4.1 percent in 2020.

• In income distribution, a measure of the degree of inequality in the distribution of family income in a country (using the Gini Index, a United Nations (UN) metric, best = 0, worst = 100) the U.S. ranks 92^nd at 45.0, trailing (91) Cameroon at 44.6 and leading (93) Uruguay at 45.2. The U.S. trails, by relatively modest margins, communist or recently communist countries, countries that would, at least in theory, be closest to to the ideal score of zero by government and social structure design. Those current or recent communist countries include (81) Russia at 42.3, (79) China at 41.5 and (57) Vietnam at 37.0. Among non-communist developed economies, the U.S. trails (61) Japan at 38.1, (43) United Kingdom (UK) at 34.0, (37) France at 32.7, (35) Canada at 32.1 and (12) Germany at 27.0. Sweden leads the world at 23.0. Note that these results show that the goal of universal social equality that is the basis of communism has not been achieved by any country that uses or has used that political system. The closest to that ideal has been achieved by the democratic socialist countries of Western Europe, all of which have enjoyed subsidies from the U.S. in the form of technological innovation, health care innovation (drugs, products and procedures) and military protection.
• In gross fixed investment as a percentage of GDP, the measure of total business spending on fixed assets, such as factories, machinery, equipment, dwellings, and inventories of raw materials, which provide the basis for future production, the U.S. ranks 144^th at 12.50 percent. Rapidly growing economies rank highly, such as (3) China at 42.60 percent. More mature economies come in lower, such as the (98) European Union at 19.70 percent.
• Aid to developing countries as a percentage of GDP (PPP) (Official Development Assistance (ODA)), dead last, 22^nd at 0.18 percent. The U.S. trails (21) Greece at 0.19 percent, (20) Japan at 0.20 percent and (19) Italy at 0.23 percent. (1) Sweden leads at 1.35 percent, trailed by (2) Norway at 1.32 percent and (3) Denmark at 1.29 percent. Note that these figures are official government ODA aid only and do not include direct private contributions to charity, of which the U.S. leads the world at $307.6 billion in 2008. Adding allocations of private charity donations targeted to international aid to U.S. government ODA yields a ranking for the U.S. of 17^th at 0.33 percent, leading (18) New Zealand at 0.30 percent and trailing (16) Canada at 0.36 percent.
• For weights and measures, the United States ranks dead last. The U.S. is the last meaningful economy to integrate with the way the world weighs and measures things using the easy to teach, easy to lean and easy to use metric system. The United States is one of three countries that have not officially adopted and implemented the metric system, the other two being Burma (Myanmar) and Liberia, two countries whose combined GDP is less than Delaware’s. More than six billion people use the metric system for weights and measures. The citizens and companies of the United States operate at an ongoing disadvantage of familiarity and extra costs required to comply with the global standard.

The loss of a $125 million dollar NASA mission to Mars because U.S. measurements were incorrectly mixed with global metric measurements is the best  known cost for clinging to the arcane inch / pound system. However, that $125 million dollars is merely the tip of the iceberg. Based on other developed countries’ experiences converting to metric, the U.S. spends an additional $1.28 trillion annually in excess costs to maintain dual measurements in the production of private sector goods and services. That’s $1.28 trillion a year that could otherwise be invested in science, research and development, new life saving drugs, rebuilding the nation’s infrastructure, education, etc. That $1.28 trillion in annual costs does not include additional expenses related to public sector goods and services, such as the duplicative costs to public education in teaching every single pupil in the country two measurement systems.

In addition to these objective comparisons, the United States has its fair share of subjective and relative failings and shortcomings, including, but by no means limited to, cultural insularity, lingering racism, declining academic performance, deteriorating infrastructure, relentless federal deficits, skyrocketing public debt, inadequate financial regulation, massive illegal drug demand, dependence on foreign oil, declining public health, hyper-partisan political polarization and a paralyzed, ineffective government incapable of addressing, much less overcoming, the range of major challenges the country faces.

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In summary, the United States is just like any other human or group of humans. The U.S. has its strengths and weaknesses, just like every other nation. The U.S. is neither as ideal and blameless as its most ardent supporters claim, or as degenerate and malevolent as its most shrill detractors assert.

One of its undeniable strengths is that the nation as a whole has proven again and again to have incredible powers to adapt to changing circumstances and rise to meet common challenges.

The question now is whether the nation, or more specifically, the people of the United States, can recognize the speed and scope of the changes and, even more of a challenge, reach common consensus on how to overcome those challenges.

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 Sources:

• United States Central Intelligence Agency (CIA)
• Congressional Budget Office (CBO)
• National Aeronautics and Space Agency (NASA)
• Organization for Economic Cooperation and Development (OECD)
• Gallup
• Xinhua News Agency
• International Energy Agency
• World Steel Association
• U.S. Metric Association
• USA Giving
• Metrication Matters
• US News and World Report
• Fortune
• CNN
• Internet Movie Database (IMDB)
• Wikipedia

“…our fathers brought forth on this continent a new nation, conceived in liberty, and dedicated to the proposition that all men are created equal.  Now we are … testing whether that nation, or any nation so conceived and so dedicated, can long endure.” – Abraham Lincoln, Gettysburg Address

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The United States of America faces an unprecedented combination of challenges in the coming decade. Bankrupt finances, political extremist and ideologues, government gridlock, a decaying infrastructure, dependence on foreign oil, declining education standards and results, loss of credible information sources, public health and geopolitical decline relative to rising powers all promise to change the very nature of life as we know it. 

Consider the following list of facts, and also consider the implications of these facts, which will all combine in the next ten years.

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This year, in 2010, the United States government will borrow $40 of every $100 it spends. The majority of that debt will be due for payment within five years.

If things continue as they are, in 2020 the United States will have a public debt of $21.5 trillion dollars, up from $12.5 trillion dollars today.

By 2020 the annual federal deficit is projected at $1.3 trillion dollars.

Annual interest payments on the public debt in 2020 are expected to reach $723 billion.

If things continue as they are, the public debt will continue to rise, since the United States cannot afford to pay for the programs it is committed to. Those promises that can’t be paid for, unfunded liabilities primarily in the form of Social Security, Medicare and Medicaid, add up to a minimum of $75 trillion dollars.

The Congressional Budget Office (CBO) calculates that entitlement spending (primarily Social Security, Medicare and Medicaid) will grow from 9 percent of Gross Domestic Product (GDP) today to 20 percent in 2025.

In America, more than 10,000 baby-boomers will become eligible for Social Security and Medicare every day for the next two decades.

If health care costs continue to grow at their historical rates, Medicare and Medicaid will double as a share of spending on Federal programs within the next 30 years.

Unless major policy changes are implemented, in just 10 years the United States will spend almost its entire income, every penny taken in via taxes, fees, duties, etc., just paying for Social Security, Medicare and Medicaid and the interest on the public debt. There will be no money left to pay for the rest of government as we know it—everything from the military to milk standards.

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In February 2010, nationally, 4.58 percent of mortgages, 13.6 percent of high yield bonds and 11.2 percent of credit cards were in default.

In September 2009, United States consumers held $917 billion dollars in credit card debt and $69 billion of it was past due.

One of every three American consumers carry credit card balances up to $10,000.

According to the Federal Reserve Bank, 40 percent of American families spend more than they earn.

Between 2007 and 2009 7.2 millions jobs were lost in the U.S., with 1.6 million lost in construction.

Between 1997 and 2009 six million American jobs were lost in manufacturing.

In February 2010 the U.S. lost 36,000 jobs and the national total unemployment rate, which includes discouraged workers and people forced to hold part-time jobs, hit 16.8 percent.

Even as the unemployment rate climbed toward 10 percent, three million U.S. jobs went unfulfilled in 2008 because the U.S. workforce lacked necessary skills.

Nearly one in three American workers will be over 50 by 2012.

More than 26 percent, or one in four, of the nation’s bridges are either structurally deficient or functionally obsolete.

Worn-out water systems leak away 20 gallons of fresh water per day for every American, more than 6 billion gallons of water per day is wasted.

The average dam in the United States is 50 years old.

The cost of bringing the nation’s infrastructure up to adequacy is estimated at $2.2 trillion over the next five years, or twice as much as is now budgeted by all levels of government.

Sixty-eight percent of members of the National Academy of Public Administration surveyed said that the U.S. government was “less likely to successfully execute projects than at any time in the past.”

The United States ranks last of 40 nations in the rate of change in innovation capacity over the last decade.

Rate of Change of Innovation Capacity Prior Decade

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It can cost $1 billion more to build, equip, and operate a factory in the United States than it does outside the U.S., with 70 percent of the cost difference accounted for by lower taxes, and 90 percent of the cost difference explained by government policies (including grants and tax credits), not wages.

Out of 104 nations, in 2009 the U.S. ranked 27th in health, 19th in safety and security, 16th in governance and 7th in education.

In 2008 68 percent of men and 72 percent of women were overweight or obese in America. 

Since 1980, the prevalence of obesity has tripled among school-age children and adolescents.

More than three in ten American children are overweight or obese.

Health effects of obesity include high blood pressure; diabetes; heart disease; joint problems, including osteoarthritis; sleep apnea and respiratory problems; cancer; metabolic syndrome; and psychosocial effects. Most of these conditions are chronic and can more than double the lifetime cost of health care compared to a non-obese citizen.

Most, if not all, of the mid- and long-term cost projections for U.S. health care do not accurately reflect the increased chronic condition costs of America’s overweight and obese population.

Life expectancy in America is below the average for 30 advanced countries measured by the OECD, and the obesity rate in America is the worst among those 30 countries, by far.

If left unchanged, by 2017 U.S. health care spending is projected to reach $4.3 trillion dollars and comprise 19.5 percent of GDP. That means by 2017 $20 out of every $100 dollars spent in the United States will be on health care.

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The U.S. spends more as a percentage of GDP and per capita for health care than any other developed nation while nearly half, 45 percent, of all American patients do not receive the care they have been recommended. In addition, outcomes, quality of care and life expectancy all score lower in the U.S. than the rest of the developed world.

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In August 2008, U.S. steelmakers accounted for only 5 percent of global steel output compared to 49 percent for Chinese steelmakers.

U.S. military spending represented 46 percent of $1.46 trillion global military spending in 2008, compared with 5.8 percent for China, the United Kingdom and France at 4.5 percent and Russia at 4 percent.

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American oil imports since 1981 have nearly doubled, up by 96 percent. 1981 was two years after the second oil crisis that severely affected the U.S. economy and led to repeated calls for energy independence.

The United States currently sends more than $1 billion dollars per day overseas to buy foreign oil.

There are 15,000 registered lobbyists in America who spent $3.5 billion dollars influencing elected officials in 2009.

Including money spent for grassroots organizing, coalition-building, advertising and advocacy on the internet with the $3.5 billion spent on lobbying, the total spent in 2009 on purchasing influence in Washington was about $9 billion dollars.

In 2008, the U.S. had 37 universities in the top 100 and 58 in the top 200. In 2009, that dropped to 32 and 54, respectively.

55 percent of U.S. PhD engineering students are foreign born, along with 45 percent of graduate physicists working in the U.S.

More than 30 percent of American Nobel Prize winners in medicine and physiology between 1901 and 2005 were foreign born.

More than two thirds of Americans are unable to identify DNA as the key to heredity.

Nine out of ten Americans do not understand radiation and what it can do to the body.

One in five American adults is convinced that the sun revolves around the earth.

Among adult Americans, between 1989 and 2007 Americans knowledge of current events dropped by 8.3 percent.

Among adult Americans, 25 percent cannot name any First Amendment rights and 62 percent cannot name the three branches of the United States government.

Of Americans age 18-24, 74 percent believe English is the primary language spoken by the most people in the world; 48 percent cannot locate the state of Mississippi on a U.S. map; 47 percent cannot locate India on a map of Asia; 75 percent cannot locate Israel on a map of the Middle East; 70 percent cannot locate North Korea on a map of Asia; 60 percent cannot locate Iraq on a map and 33 percent cannot locate the direction “northwest.”

Overall, about 67 percent of American high school seniors read below the proficient level.

Fewer than half of Americans over age 13 read a book in the last year.

Romance novels are the largest share of the American book market.

One in seven American adults cannot read. That equates to 14 percent or 32 million U.S. adults who are illiterate.

In the Los Angeles city school system during 2008-2009, 58 percent of fifth-graders were reading below their grade level and 47 percent could not perform at their grade level in math.

American children aged 2-5 spend about 25 hours watching live television and over 32 hours a week on average in front of the TV screen.

American children aged 6-11 spend about 22 hours watching live television and over 28 hours a week on average in front of the TV screen.

American adults spend an average of 8 hours per day exposed to television, 56 hours per week

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But a list of factoids does not tell the whole story. While possibly illuminating, they lack personal perspective. As such, consider the following series of quotes, and the implications of these quotes, all of which will combine in the coming decade:

“The physical infrastructure of big East Coast cities was mainly built by the 1880s; of the industrial Midwest by World War I; and of the West Coast by 1960. It was advertised to last 50 years, and over-engineered so it might last 100. Now it’s running down. When a pothole swallows an SUV, it’s treated as freak news, but it shows a water system that’s literally collapsing beneath us.” – Stephen Flynn

“After almost a century, the United States no longer has the money. It is gone, and it is not likely to return in the foreseeable future … The American standard of living will decline relative to the rest of the industrialized and industrializing world … The United States will lose power and influence.” – economists J. Bradford DeLong and Stephen Cohen

“America needs a government as good as its people.” – former President Jimmy Carter

“Year by year special-interest groups inevitably take bite after tiny bite out of the total national wealth. They do so through tax breaks, special appropriations, what we now call legislative “earmarks,” and other favors that are all easier to initiate than to cut off. No single nibble is that dramatic or burdensome, but over the decades they threaten to convert any stable democracy into a big, inefficient, favor-ridden state.” – paraphrase of Mancur Olson, author, economist and social scientist

“153 state or federal [elected] positions in California were at stake in the 2004 election. Not a single one changed party.” – Troy Senik, author and former presidential speechwriter

“In terms of size, speed and directional flow, the transfer of global wealth and economic power now under way — roughly from West to East — is without precedent in modern history.” – Thomas Fingar, Chairman of the National Intelligence Council (NIC)

“I don’t think that America’s political system is equal to the tasks before us… Our [system] is great for distributing benefits but has become weak at facing problems. I know the power of American rejuvenation, but if I had to bet, it would be 60–40 that we’re in a cycle of decline.”  – Dick Lamm, former three-term governor of Colorado (Democrat)

“If Washington continues to thumb their nose at the American people, you know, who knows what might come out of that?” – Texas governor Rick Perry (Republican) regarding Texas secession from the United States

“Whenever you have just the furthest left elements of the Democratic party attempting to impose their will on the rest of the country—that’s not going to work too well. For [the Democratic party left,] it may take a political catastrophe of biblical proportions before they get it.” – U.S. Senator Evan Bayh (Democrat, Indiana)

“He was Judas to the Republican Party in the state of Florida and across the country.” – Robin Stublen, co-state coordinator for the Florida Tea Party Patriots, regarding moderate Republican Florida governor Charles “Charlie” Crist

“To those people who are pursuing purity, you’ll become a club not a party. Conservativism is an asset. Blind ideology is not.” – U.S. Senator Lindsey Graham (Republican, South Carolina)

“Our companies and entrepreneurs are matchless in their power to adapt. We lead in many categories the private economy can handle by itself. But where you need any public-private coordination, we’ve become handicapped. I worry that our companies can adapt, but our [political] system can’t.” – Robert Atkinson, director of the Information Technology and Innovation Foundation

“Senior foreign government delegations still frequent the U.S. on technology visits, but they come increasingly infrequently to the U.S. to learn about innovation policy; there’s much more for them to learn in Europe and Asia.” – Greg Tassey, senior economist for the U.S. National Institute of Standards and Technology (NIST)

“We are the United States of Deferred Maintenance. China is the People’s Republic of Deferred Gratification. They save, invest and build. We spend, borrow and patch.” – Thomas Friedman, columnist and author

“The financial crisis is a major geopolitical setback for the United States and Europe… [It will] accelerate trends that are shifting the world’s center of gravity away from the United States.” – Robert Altman, former Deputy Treasury Secretary

“We are willfully making ourselves stupid. When was the last time we faced up to a major national problem? We would do well to focus on the issue of public paralysis.” – Ralph Nader, former third party presidential candidate, consumer activist, author

“This is a phenomenon that goes beyond the military sphere to the political and economic sphere. I think it would be easy for common-sense Americans to draw up a list of big things that would seem to demand concerted effort. Deficits are too big. Health costs are unacceptable. Oil. And yet we have a political system that seems to be constantly consumed with trivial things. We cannot seriously grapple with the big issues. Tactics consume strategy.” – Andrew Bacevich,  West Point graduate and career Army officer who now teaches at Boston University

“Ronald Reagan managed to equate criticism with anti-Americanism, and render unintelligible bad news about America.” – Rick Perlstein, author, historian and journalist

“Ideologues hold stoutly to a worldview despite being contradicted by what is generally accepted as reality. The offspring of ideology and theology are not always bad but they are always blind. And that is the danger: voters and politicians alike, oblivious to the facts.” – Bill Moyers, journalist, former White House press secretary

“Governing institutions always lag behind the social exigencies of any era; and in periods of rapid change… the gap widens between society’s needs and the institutional capacity to meet those needs.” – paraphrase of Thorstein Veblen, author, sociologist and economist

“Through the country’s history, government has had to function correctly for the private sector to flourish. John Quincy Adams built the lighthouses and the highways. That’s not ‘socialist’ but ‘Whiggish.’ Now we need ports and highways and an educated populace.” – Kevin Starr, author, historian, professor

“America’s ignorance of the outside world is so great as to constitute a threat to national security.” – Strategic Task Force on Education Abroad

“Part of the mind-set of pre-Communist China was the rage and frustration of a great people let down by feckless rulers. Whatever is wrong with today’s Communist leadership, [domestically] it is widely seen as pulling the country nearer to its full potential rather than pushing it away. America is not going to have a Communist revolution nor endure “100 Years of Humiliation,” as Imperial China did. But we could use more anger about the fact that the gap between our potential and our reality is opening up, not closing.” – James Fallows, writer, journalist, former presidential speech writer

“The world has no leadership. The U.S. was the last resort and hope for all the nations. Today, we have lost that hope.” – Lech Walesa, former president of Poland and leader of Poland’s independence movement from the Soviet Union

“Our long-term simulations show that absent policy changes the federal government faces an unsustainable growth in debt. The longer that action to deal with the federal government’s long-term fiscal outlook is delayed, the greater the risk that the eventual changes will be disruptive and destabilizing.” – United States Government Accountability Office (GAO) [emphasis added]

“I am a little worried that by the time we wake up to the crisis we will be in the abyss.” – Paul Otellini, President and CEO, Intel

 *******

As you can see from these facts and quotes, the United States faces a set of challenges that, taken together, arriving simultaneously, threaten the ongoing viability of the country.

Facing a period of extraordinary challenge is nothing new for the United States. The nation has faced challenges before and overcome them.

What makes this next decade unique is that the country faces major existential challenges from multiple sources, all arriving at the same time, at a time when the country is perhaps less equipped to deal with them than at any other point in its history.

Government
Politically, the nation is at a standstill. Its ruling class has proven, through its pervasive corruption and extremist driven gridlock, that it is incapable of effective governance, long ago trading power and personal riches for any sense of civic responsibility and personal integrity. Government is at a standstill, held hostage by fringe ideologues from both ends of the political spectrum.

The underlying political system of exchanging money for influence that the ruling political class has inculcated and nurtured has created an environment universally corrosive to anyone who enters. People who are elected to local, state and national offices may start out well meaning and honest, but they quickly become introduced to the realities of politics in America in which there is only one goal—money.

The United States spends more on buying influence with politicians ($9 billion) than it does for flood control and coastal emergencies ($30 million); mining ($146 million); training law enforcement ($278 million); health care research and quality ($611 million); the forest service ($757 million); military family housing ($1,822 million); technology innovation ($80 million); adult education ($612 million); radioactive waste management ($197 million); elderly housing ($274 million); fighting organized crime ($579 million); veterans employment and training ($262 million); the Peace Corps ($446 million); pipeline and hazardous materials safety ($174 million); financial crimes enforcement ($100 million); veterans cemeteries ($251 million); polluted land assessment and cleanup ($138 million); aeronautics, aerospace and science education ($146 million); science research equipment and facilities ($165 million); small business loans ($169 million); social security fraud and abuse ($106 million) and social innovation ($60 million) combined ($7.403 billion).

Given these priorities of the political class, with the nation spending more on buying politicians than buying government products and services, it is clear who our elected representatives and their parties serve—themselves.

Fewer than half of Americans trust government, more than 80 percent disapprove of the job congress is doing, 83 percent are dissatisfied or angry with government and more than 93 percent believe there is too much partisan fighting between the two ineffective, detached and self-serving political parties. There are loud voices from many quarters, left, right and center, echoing the message that the current political system and its members have proven incapable of governing the country and that the elected representatives of the United States are disconnected from honesty, integrity, ethics, the country and its people.

Tellingly, for the first time in modern history, there are reports from developed nations of concern of “political instability” in the United States.

If we don’t fix government, if we don’t create a system that separates money from politics, if we don’t find people who are honest enough and capable enough to govern, it is game over.

Finances
Financially, the nation is effectively bankrupt. The United States government has spent more money that it earned for 47 out of the last 55 years. Consequently, it is in debt up past its eyeballs; and, worse yet, it is in hock to its major geopolitical rivals, who now control America’s fate. About one in three dollars of U.S. foreign debt is held by China, drug cartels and oil producers. China alone holds more than $895 billion dollars in U.S. debt, more than 24 percent of the total held by foreign nations.

“China is now the largest creditor nation to the United States,” noted Victor Gao, a former top official in the Chinese foreign ministry, in a recent CNN interview. “Just imagine if China buys less of the Treasury bonds or stops buying the Treasury bond for a couple of months.” The outcome of even a couple of months diminishment or suspension of China buying America’s IOUs would cripple the U.S. economy and destroy the dollar. It doesn’t take Einstein to figure out who is the puppet and who is holding the strings in this relationship.

Things won’t get better financially any time soon. If things stay the way they are, in seven years the U.S. will be spending 20 of every 100 dollars on health care. Even more ominous, the United States has no way to pay for its major social entitlement programs: Social Security, Medicare and Medicaid. Unless major cuts are made to the entitlement programs, huge tax increases are levied, or both, in 10 years the country will be spending all of its revenues, every last penny of taxes, duties, fees, etc., to fund those entitlement programs and pay the interest on the public debt, leaving nothing left to pay for the entire rest of the government (defense, law enforcement, safety, education, science, etc.).

If we can’t gain control of health care costs, if we can’t come to grips with our spending and stop racking up more and more debt, if we can’t get our entitlement programs under control, in ten years it is game over.

Geopolitics
Geopolitically, America’s dominant position on the world stage is being displaced by rising global superpowers such as China and resurging past empires such as Russia (Soviet Union) and Iran (Persia).

China is America’s primary debt holder, and, as such, has the power of life and death over the United States. Should China simply stop buying further IOUs from the United States or flood the market with even a portion of its U.S. debt holdings, the U.S. economy and the dollar would collapse. While that collapse would cost the Chinese most of their nearly trillion dollars in U.S. debt holdings, even if they lost every penny of their investment, they could crush the United States and become the world’s sole superpower for less than it has cost the U.S. to fight the Iraq and Afghanistan wars. China would become the world’s sole superpower for a relatively bargain price, all without firing a shot.

Asians in general, and the Chinese in particular, have a very different perspective on history than the United States. Asians plan in periods of 10, 50 and 100 years. Americans plan in periods of 3 months and two year election cycles. Asians view history in periods of hundreds and thousands of years. Americans view history in periods of 30 minutes, the news cycle, and four years, a presidential term.

Due to this difference in perspective, it can come as a surprise to Americans that Asia, predominantly China, was by far the world’s largest economy for much of the last two millennia. As pointed out by Chris Patten, the last British governor of Hong Kong, China was the globe’s top economy for 18 of the past 20 centuries. While Europe stumbled through the Dark Ages and fought disastrous religious wars, while North America was populated by indigenous peoples, while the Islamic world peaked and declined, Asia and China created the largest economies and the highest standards of living in the world.

 
From our perspective here within the United States fishbowl we tend to think the world is, should be, and always will be, as it has been since we’ve been alive. However, from the Chinese perspective, the idea of China dominating the world is not a change in reality to something unusual; it is merely the return to what always was and always should be.

China’s current geographical area

China’s recent geographical area

Maximum territory during the Mongol Empire
 

The world outside the borders of the United States continues to evolve rapidly. Due to the growth and development of other nations, it is inevitable that the U.S. will no longer dominate relative to their growing strengths and capabilities. Just as the first tree that grows towers above the newer growth, as the surrounding saplings grow to maturity, they stand equal with the initial tree. The return to global power and influence of historically major empires such as China and Russia (Tsarist Russia and the Soviet Union), and to an initially lesser extent, Iran (Persian) and Turkey (Ottoman), means the U.S. must adapt to a new role and new relationships with a multilateral world of countries with current or soon-to-be peer level economies and capabilities. This does not mean that the U.S. must decline relative to itself, but it does mean that the U.S. must find within itself an identity and purpose relevant to and compatible with a new world of multiple major geopolitical players.

If we cannot find a way to transition into a new geopolitical order as one of many powerful nations, if we cannot find a way to get out of debt to our major global competitors, if we cannot find a way to form and sustain effective coalitions, it is game over.

Education
Educationally, in 2006 American 15 year old students ranked 23rd in science and 32nd in math among developed and developing countries on the OCED Program for International Student Assessment (PISA) education skills survey. In 2009 American fourth graders were surpassed by five countries that placed behind the U.S. in earlier reading tests.

From 1990 to 2006, total expenditures per student in American public elementary and secondary schools rose 31 percent in constant dollars. That 31 percent increase in spending bought a change of 38 percent to 33 percent of fourth graders reading at or below basic level, 31 to 26 percent of eighth graders reading at or below basic level, and more than one out of four freshmen who never graduate high school, a drop out rate of 27 percent nationally. 

In some quarters those statistics, a range of one quarter to one third of fourth and eighth graders who cannot read above a basic level and more than one quarter of high school students dropping out, were a cause for celebration and accolades. Others were less sanguine.

U.S. Secretary of Education Arne Duncan perhaps said it best, “Our students have stagnated educationally, putting our long-term economic security at risk.”

If we cannot find a way to educate our young to produce effective, intelligent, flexible, problem-solving workers and citizens, it is game over.

Information
All of these problems coming to a head simultaneously would perhaps be less of an existential threat if the American public could meet the requirements of a representative democracy: an engaged, educated and informed electorate.

Given the duplicity, greed and incompetence of the ruling class, it is extremely challenging to be engaged. Considering the ongoing failure of the education system to produce capable citizens fully informed of how the world and their government works, one is hard pressed to make a case for educated. And lastly, though we are literally drowning in information, the electorate is perhaps less effectively and accurately informed than at any time in the nation’s history.

In 2009 there were more than 40,000 newspaper jobs cut. Since 2001, roughly 25 percent of the industry’s news workforce has been lost. This is not just an abstract issue, it can directly affect the nation on a societal level. For instance, Mary Schapiro, chairperson of the U.S. Securities and Exchange Commission (SEC) said, “It’s an absolute worry for me because I think financial journalists have in many cases been the sources of some really important enforcement cases and really important discovery of practices and products that regulators should be profoundly concerned about.”

As what remains of journalism that watched over politicians, financiers, defense department contractors, local governments and business withers away, it is being replaced by new forms of information procurement and dissemination. In addition to “citizen journalism” created by people with no training in discerning facts from rumor, whose level of perceived credibility is typically directly proportional to their level of bombast, there is now “journalism” based on stories assigned to yield maximum popularity and advertising sales. 

For instance, AOL is launching “the newsroom of the future” in which reporters are assigned stories based on what is popular on the web and what will attract the most advertising. According to Business Week, stories are frequently assigned to explore such popular topics as “How to Open Champagne.” There are plans to pay reporters bonuses based on web page views instead of the quality, accuracy, relevance and impact of the content they create. Given a choice between creating a story on a Hollywood celebrity guaranteed to attract millions of page views and a story on congressional bribery, there is little doubt which story a reporter trying to make their rent and car payments will choose.

What this means is that the average American will be left with the info-celebrities and shrieking ideologues that populate television; the write-what’s-popular web based “journalism;” and “citizen journalism”  consisting primarily of hyper-partisan zombies repeating the same rumors, distortions, lies and half-truths they picked up from another hyper-partisan blog. Given that mix, it is extremely challenging, if not essentially impossible, for a voter to stay informed in anything close to a non-partisan, balanced manner.

While the entire world’s collection of information and up-to-the-second news feeds are as close as the average American’s smartphone, accurate, unbiased, unfiltered, un-agenda-ed, fact-based information is the rarest of all commodities. Like a castaway’s water on a desert island, we have never been surrounded by more information only a touch away, with more of it completely useless and counterproductive.

If we cannot find a way to keep ourselves informed and educated via unbiased, accurate, fact-based, reliable information sources that we can easily access and identify in the overwhelming chaos of available information, and use those information sources to make effective and informed decisions about our lives and our nation, it is game over.

Leadership
For at least 450 years, Europe dominated the world, moving from systematic rape and plunder of the globe to repeated, all encompassing, internecine attempts to destroy each other along with the known world. Once the Europeans finally burned themselves out, literally and figuratively, the United States spent the last half of the 20th century, its brief moment of world leadership, degenerating into a political pig sty and shallow materialism. All of the good things America did in the world during that period, from defending allies, such as winning the Cold War, to feeding the world, such as supplying India with donated food after its independence, were outweighed by America’s long spiral down into political ineffectiveness, cultural arrogance and profligate spending.

As former U.S. Representative Charles Wilson (Democrat, Texas), of Charlie Wilson’s War fame, said of the 1950s, “We were undisputedly the kings of the world, and everybody knew it. We were arrogant sons of bitches.”

That attitude and its manifestations did not pass from the memory of the world along with the era of Elvis. American foreign policies reflecting that ethos are long remembered, and remain a raw nerve for other nations. It is telling that while people in the rest of the world nearly uniformly admire and like Americans, many are hostile to U.S. government foreign policies. The legacy of “kings of the world; arrogant sons of bitches” as national foreign policy still haunts today.

Even as the U.S. carried that burden into the current era and perpetuated it by creating new versions of the attitude and foreign policies to match, the world continued to change around us. Although American society and its leaders largely assumed that everything outside the borders had remained static since Ozzie and Harriet and that the outside world largely remained in fealty, in reality, the rest of the world had rapidly advanced and changed. Those advancements and changes gave rise to a set of new challenges that the United States was dramatically unprepared for on nearly all levels. Most importantly, those decades of predominantly willful “ignorance is bliss” outlook about the rest of the world led the United States to elect and perpetuate a governing class that was entirely incapable of leading the nation in a changed, post black-and-white-television world.

The defining moment of America’s post-war world and national leadership was the greatest missed opportunity for vision and leadership in modern political history. Immediately after 9/11 the United States, from political ruling class to nearly every single citizen, stood united and ready to take on any challenge. The nation was briefly open and receptive to fundamental change and stood poised to adopt and push forward a Manhattan project, an Apollo moon shot, a defining transformative initiative of our age. Instead of being challenged to accomplish something meaningful, something ambitious, something dramatic that would fundamentally improve the country and its people for today and the future, such as energy independence, then President George W. Bush asked instead for us to go shop.

There could be no better example of the void of leadership, vision and capability of the governing class of the United States, regardless of political party, regardless of ideology, than that mandate: go shop. There could be no better illustration of what passes for both political leadership and what is guaranteed to be appealing to the American people: go shop. There could be no better lesson in the political class’s choice between challenging goals that move the nation forward and meaningless populist drivel enticing to the masses: go shop. There could be no better sample of what is viewed among the ruling class as capitalizing on a once in multiple generations opportunity for a fundamental leap forward for the nation, the chance to leverage a brief moment of unity and potential sense of national purpose: go shop. There was a tiny window of opportunity to elevate the national purpose of America from materialism to a higher plane, such as guaranteeing a viable future for our children and grandchildren. Instead, the political class, the ruling class, trotted out the best they could muster: go shop.

If we cannot instill, identify and develop leadership, leadership capable of understanding the world as it is, not as it was or as we wish it to be in some utopian form; if we cannot bring forth leadership with vision, courage and integrity, leadership willing and able to lead the nation for the sake of leadership alone; then it is game over.

A Perfect Storm
In the coming decade, the United States faces a perfect storm of financial disruption, geopolitical tectonic shifts, technology transformation, energy transition, public health, workforce education, ideological extremism, lack of leadership and pervasive political corruption and ineptitude.

It is clear from their track record over the last 50 years that the current political class of the United States is not equipped with the ethics, integrity, intelligence and skills required to take on, meet and overcome these challenges.

Countless times over the brief history of the United States the people of the country have proven themselves capable of rising to any challenge, especially if given even a modicum of leadership. It remains to be seen if in its current state of health, education, awareness and priorities the people of the United States can set aside the trivial distractions of their lives and pay attention long enough to meet and overcome this decade’s existential challenges for their country.

Abraham Lincoln, perhaps more than any other politician of his time or since, recognized that the United States is not the permanent fixture that we assume it to be simply because it’s always been the way it is during our lifetimes. Lincoln recognized that the U.S. was a novel and new experiment in citizen self-government, in representative democracy. He perceived that the United States is much more fragile, much more brittle, than we consider it today. He also realized that without tremendous levels of ongoing effort by both its citizens and its elected representatives, the republic would founder.

Perhaps Lincoln never forgot the words of his predecessor as President, John Adams, who said, “Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide.”

It remains to be seen if we as a people have the foresight and fortitude of Lincoln, who fought for and preserved the United States, or if we allow our corrupt, incompetent ruling class and a distracted, disinterested population to drive us to the collective societal suicide of Adams.

*******

“… that government of the people, by the people, for the people, shall not perish from the earth.” – Abraham Lincoln, Gettysburg Address

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Sources: 

• United States Government Accountability Office (GAO)
• United States Treasury
• United States Department of Agriculture (USDA)
• U.S. Department of Health and Human Services (HHS)
• U.S. Department of Education
• Congressional Budget Office (CBO)
• Office of Management and Budget (OMB)
• Federal Reserve
• Centers for Disease Control and Prevention (CDC)
• National Science Foundation (NSF)
• United Nations
• Organization for Economic Cooperation and Development (OECD)
• RAND Corporation 
• University of Chicago
• University of Texas 
• Stanford University
• American University’s Centre for Congressional and Presidential Studies
• Pew Research Center 
• Center For Responsive Politics www.opensecrets.org 
• New York Times
• San Jose Mercury News
• Asia Sentinel 
• Journal of the American Medical Association
• Foreign Policy
• The Economist
• The Atlantic
• U.S. News and World Report
• Business Week 
• Associated Press
• POLITICO
• Charlie Wilson’s War, by George Crile
• The Age of American Unreason, by Susan Jacoby
• American Society of Civil Engineers
• Information Technology and Innovation Foundation
• Legatum Institute
• Bowker
• China Mining Federation 
• Stockholm International Peace Research Institute
• NAFSA Strategic Task Force on Education Abroad
• Nielsen Company 
• National Geographic Society 
• National Endowment for the Arts 
• National Constitution Center 
• Romance Writers of America
• Gallup
• Roper Public Affairs
• NBC News-Wall Street Journal poll
• ABC News
• CBS News 
• CNN

Of the overall United States government budget, very few components are actually under the spending control of congress on an annual basis. The elements of the budget that can be varied year to year are termed discretionary; the elements that cannot be varied by congress are termed mandatory. The following graphic illustrates the areas of the 2010 budget that comprise the discretionary spending components.

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2010 Budget Discretionary Spending Components

As you can see, very little of the $3.6 trillion dollar 2010 budget is discretionary. Mandatory items are “hard wired,” under our existing system, they cannot be varied by congress or the president. Most of the “hard wired” nature of mandatory expenses is political. No politician in their right mind would suggest cutting Social Security, Medicare or Medicaid. No elected or appointed official cognizant of their fiduciary duties would suggest defaulting on interest payments for the national debt. Consequently, mandatory programs tend to become permanent fixtures in the annual United States government budget; they form figurative “third rail” issues, much to hot for any elected official to confront. This fact doesn’t change regardless of which party controls the presidency or congress; nobody is going to alter mandatory programs unless they increase their costs as a populist appeal to the electorate.

The political reality of the United States is that once a mandatory program is set in place, it is a permanent, ever-increasing part of the annual federal budget. The implication of this reality is that if the mandatory items grow in size faster than the overall budget, then the discretionary portions of the budget must shrink as they get squeezed out by the ever bigger boxes of expanding mandatory items.

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Under current policies, mandatory and interest spending will grow from 62 percent of the budget to 73 percent of the budget in the next ten years.

That growth in mandatory and interest spending means that unless the budget grows significantly, which implies increasing our national debt even more significantly, everything that is discretionary spending must shrink by 11 percent. That means everything from alternative energy development to education to disease control to national defense must shrink by at least 11 percent during the next ten years.

In the case of the United States, the primary ever bigger boxes for the foreseeable future are Social Security, Medicare and Medicaid and interest payments on the national debt. Under current policies, by 2020 these four categories will grow by 34 percent.

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Of the four primary mandatory spending categories that will drive this expansion, interest payments on the national debt is the primary culprit. Over the next ten years, interest payments on the national debt will grow from 12 percent to 26 percent of the primary mandatory spending.

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The reason the interest on the debt will grow so rapidly and to such large proportions is that there are currently no plans to decrease the national debt. In each of the next ten years the U.S. government is projected to continue to run an annual deficit, leading to an increase in the overall national debt.

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As a result of these ongoing deficits, the Office of Management and Budget (OMB) projects the United States national debt will increase to a total of $25.76 trillion dollars by 2020.

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These future projections are troubling enough, but the really bad news is that they are almost certainly overly optimistic. The reason they are almost certainly optimistic is that they rely on assumptions that are very unlikely to be realized.

For instance, the administration and OMB assumptions include GDP growth rates from 4.4 to 6.0 percent, beginning with a 5.1 increase in 2011. They also assume continued low inflation rates ranging from 1.9 to 2.1 percent from 2011 until 2020. In addition, they assume historically low to moderate Treasury bill rates ranging from 1.6 to 4.1 for the decade.

A more realistic projection may be arrived at by considering that in the quantity theory of money, if higher money supply does not raise output it causes inflation, more colloquially expressed as inflation equals money supply times velocity. During the financial crisis unprecedented amounts of liquidity were added to the economy to stimulate activity. At that time, velocity was near zero and has remained sluggish. However, when velocity increases, it is questionable if available supply can be reduced fast enough to avoid high inflation rates. Once inflation ignites, it requires painfully high interest rates to tame.

Even shorter term, the costs for financing the national debt are likely to increase as interest rates rise from historic lows to more normal levels. Much of the additional liquidity pumped into the economy was financed with short term government debt. Because that debt was incurred when interest rates were very low, the cost to finance it was minimal. However, that short term debt is now coming due, $1.9 trillion dollars worth within this year alone, and since we don’t have the money to pay it off, the U.S. needs to roll it over into new, longer term debt. Longer term debt will require higher interest rates, reflective of historical norms. As a result, the U.S. will be refinancing $2.3 trillion of low cost debt into higher cost debt in the next two years. Along with that refinancing will come higher interest rates, thus, higher interest payments.

Aside from purely financial projections, the ticking time bombs of health care costs imbedded in Medicare and Medicaid often include best case assumptions. For instance, more than one third of adults in the United States are obese. Obesity nearly doubles the rates of debilitating, high cost chronic diseases and disability.

When measuring the long-term costs of health care, chronic disease states and disability are among the most significant cost drivers. When these conditions are projected forward, multiple scenarios are often used based on varying assumptions. For instance, when projecting rates of disability among the elderly, RAND notes that the estimated prevalence of disability among the elderly varies substantially depending on the assumptions made about the health of specific age groups.

In this example, in scenario A, they take into account the health and disability of younger populations and project the effects of these characteristics into the future; scenario B assumes that future Medicare beneficiaries resemble today’s; scenario C assumes that rates of disability will continue to decline among the elderly. It’s an easy guess as to which of these scenarios is likely to be used in an effort to present a rosy picture of future health care costs in the federal budget, when in reality, the spike in obesity among the U.S. population will increase rates of disability among the entire population, including the elderly.

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When evaluating government budget projections, it is very important to understand what scenario is used for assumptions of future costs. In this case, both the OMB’s baseline projections and the administration’s proposed 2011 budget projections make assumptions on health care costs that are more wishful thinking than reflective of the steep rise in obesity in the United States and the inevitable increase in society wide costs associated with that fact.

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Even under an optimistic scenario, in ten years mandatory and interest payment spending will consume 73 percent of the national budget, leaving 27 percent to pay for everything else the United States government provides, from defense to diaper standards. In ten years interest payments on the national debt will consume 26 percent of the primary mandatory spending. In ten years nearly 40 percent of the people in the United States will be obese, along with accompanying chronic diseases and disabilities and their associated high costs of health care. In ten years the United States will owe $25.76 trillion in national debt.

This is a near term threat. It is only ten years away. That’s not far enough into the future to let future generations worry about it. Essentially everyone reading this will be alive ten years from now and will be suffering the consequences if these challenges are not overcome.

All of this adds up to a looming, existential threat to this nation.

All we need now is a ruling class capable of addressing and overcoming the challenge coupled with nationwide sustainable political will to implement and sustain the solution.

I’m not holding my breath.

*******

Sources:

• United States Office of Management and Budget (OMB)
• Federal Reserve
• RAND
• New York University
• New York Times

When you get right down to it, as taxpayers, we purchase a set of goods and services from the U.S. government. In exchange for our taxes, fees and surcharges we get a campsite in a national park, an interstate highway system, a (supposedly) regulated financial system, an Army, Navy, Air Force and Coast Guard, a Border Patrol, CIA, NSA, FBI, DEA, TSA and countless other three letter acronym agencies, federal standards for everything from allowable amounts of insect parts in hot dogs to airplane tire performance and too many other goods and services to include in this post. We take most of these goods and services for granted, as we do how those goods and services are paid for.

Every one of those goods and services comes from one of the boxes in the illustration. What we don’t think about is how we buy those boxes.

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In the case of the United States government, we buy our boxes in two ways:
1. Government revenue via interest income, taxes, fees, duties, and other payments
2. Loans from willing lenders to cover the difference when what the government spends (outflows) exceeds what the government takes in (inflows)

When an individual or a family spends more than they earn, they typically cover the difference via credit cards or, more rarely, through loans. Those credit card debts are secured by the card holder’s promise to pay back the debt, basically an IOU. Formal loans usually require collateral, a tangible asset that will be seized if the loan is not repaid, such as a house or a car. In contrast, the U.S. government does not put up any collateral when people loan it money, it just issues an IOU in the form of a bond or Treasury note. Both of those instruments promise that we, the American taxpayers, will repay that loan along with interest. So far, the collective promise of repayment by the American taxpayers has been viewed as a valid, investment class promise by everyone in the world who has funded our profligate ways by buying U.S. government IOUs. As long as they keep believing we’ll eventually repay them and keep loaning us money, we keep spending more than we earn.

The United States government has spent more money that it earned for 47 out of the last 55 years. In each of those 47 years, the U.S. has needed to borrow the difference between its outflows, what we as a nation spent, and its inflows, what the nation took in. That difference, that delta, is commonly referred to as the deficit.

The U.S. government 2010 fiscal year deficit is projected at $1.56 trillion, or 10.6 percent of gross domestic product (GDP – the total value of goods and services produced in our economy in a year). That means in the 2010 budget cycle we are spending $1.56 trillion more dollars that we are taking in via interest income, taxes, fees, duties, and other payments. The United States has not seen deficits above 10 percent of GDP since World War II.

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When the projected $1.56 trillion dollar deficit (the red area) is overlaid on the 2010 budget, you get a visual idea of how much we can actually afford and how much we need to borrow to fund our collective lifestyles.

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When the projected $1.56 trillion dollar deficit is applied to the 2010 budget, you can see that the portion of government spending that we can actually afford leaves such basics as health, education, training, veterans benefits, international relations, natural resources, transportation, energy, commerce and administration unfunded, to say nothing of the interest payments on the $12.394 trillion national debt we already owe.

Who is willing to loan this country, which is obviously incapable of living within its means, $1.56 trillion on top of the existing $12.394 trillion we already owe? Basically, the same people and methods used for the last 55 years.

U.S. debt is held by American individuals and companies, U.S. government controlled entities, foreign nations and foreign individuals and corporations.

You will note the graphic reflects that in 2009 22 percent of U.S. debt was owned by the Social Security Trust Fund. Because there are so many people in the Baby Boomer generation, while they were working and contributing to the social security system that system ran huge surpluses. Those surpluses were supposed to be held in a trust fund to pay the bills when those same massive numbers of baby boomers retired. Unfortunately, the social security trust fund was accessible by congress, whose members either spent it outright on various boondoggles and earmarks, or used it to cover part of the deficit by purchasing the government’s IOUs. In addition to social security trust funds, surplus funds from other retirement trust funds controlled by the government, such as the retirement trust for government employees, were used to purchase government debt IOUs, which total 14 percent of U.S. debt holdings.

All told, 36 percent of U.S. IOUs were purchased by retirement trust funds that will now be short that money when it is needed to pay their retirees. In order to pay the money back to the trust funds, along with the interest owed, the American taxpayers will need to pony up the money. In essence, the taxpayers put the money away for retirement via social security and withholding taxes, only to have that money misappropriated by congress to cover the deficits of the U.S. government. Now, when the money is needed, the very same taxpayers, or more precisely, the taxpayers’ tax paying children and grandchildren, will need to pay that same money again to cover the IOUs, along with interest. The retirement money was originally paid by the baby boomer retirees, it was stolen by congress to cover the deficit and turned into IOUs, now the retirees’ children and grandchildren will need to pay off the IOUs to pay for their parents’ and grandparents’ retirement. Consequently, it will cost the American people more than double to pay for the retirement of everyone affected in the social security and government pension programs. This logic only makes sense if you are a Unites States Representative, Senator or President.

Among the foreign holders of U.S. debt, China and Japan lead with a total of $1.524 trillion dollars, or 42.2% of the $3.614 trillion total outstanding U.S. government debt held by foreigners. Other top foreign holders of U.S. debt include the United Kingdom (3rd with $302.5 billion, or 8.4%); the oil exporting countries (4th with $186.8 billion, or 5.2%); and the Caribbean Banking Centers (5th with $184.7 billion, or 5.1%).

In addition to the foreign governments, an unknown amount of U.S. debt categorized as owned by “individuals” is owned by foreign nationals, ranging from despots diversifying their portfolios from their Swiss bank accounts to investment funds to shopkeepers.

At the national level, the system is a basically a barter exchange. The U.S. sends billions of dollars per day overseas in exchange for oil, illegal drugs and manufactured goods. This leads to a huge difference between the value of what we sell other nations compared to what we buy from them. This difference in trade, this delta, is commonly referred to as the trade deficit. In 2009 the U.S. trade deficit was $380.66 billion, of which $226.83 billion was with China (both totals were the lowest in years due to the massive economic recession).

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For the last 55 years, those trade deficit nations have seen fit to turn many of those dollars around and used them to purchase U.S. government debt.

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This money laundering system has served as a bottomless ATM for the U.S. We’ve spent most of the last 55 years living beyond our means and borrowing against our assets, in this case, an asset that is nothing more than a promise that the taxpayers would repay the IOUs. In that sense, it’s very similar to how Americans lived during the recent real estate bubble, when many U.S. homeowners treated their homes like limitless ATMs, continually leveraging that asset via refinancing their mortgages to fund their spendthrift lifestyles. As we all know, that idea worked great until the real estate bubble burst.

Will the U.S. national debt IOU bubble ever burst in a similar fashion?

For it to burst, the nations, organizations and individuals selling us oil, illegal drugs and manufactured goods who have been willing to buy our IOUs would need to lose faith in our ability, or stated more accurately, our children’s and grandchildren’s ability to repay those IOUs. If the people covering our deficits ever lost faith, and foreign nations, organizations and individuals stopped buying our U.S. government IOUs, interest rates would soar (to make the IOUs more attractive by providing high returns) and the dollar would collapse, along with the U.S. economy.

If other nations, organizations and individuals stopped buying the U.S. government’s IOUs, we would have two choices. We could either double taxes, fees, duties and other sources of income to make up the $1.56 trillion dollar deficit or we could shrink government spending until all the boxes of government spending fit into the area we can afford to fund ourselves.

If you think doubling taxes, or, in the American way, taxing the rich to pay for the deficit, is the best approach, consider the following. If you doubled taxes only on the rich, they would be taxed at 70 percent of their income. Since only taxing the rich would probably not provide enough income to cover the $1.56 trillion dollar deficit, you would probably need to raise that rate higher, perhaps to 80 percent or more. In states that add state income tax, such as California, the rich would be paying more than 90 percent of their income in taxes. Historically, such systems have not proven effective for the overall economy. For example, top marginal rates in the United Kingdom exceeded 80 percent in the 1970s and their economy nearly ground to a halt. And besides, individual income taxes make up only 45 percent of U.S. government income, so it may not even be possible to make up the deficit regardless of how much you tax the rich.

Since doubling taxes, even if only on the rich, probably won’t work, we would need to dramatically reduce government spending to fit within a box we could actually afford.

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As you can see in the illustration, if you shrink the federal government down to where it can fit within a box the American taxpayer can actually afford to buy, some of the departments and programs start to get very small. We could end up with one guy with a cell phone and a laptop in charge of infectious diseases or an entire Navy rusting at the docks because we couldn’t afford to fuel the ships or pay the sailors to use them. In order to make this scenario work, as a nation, we would need to make very tough choices. That means our elected representatives would need to make very hard choices with what’s best for the nation being the only criteria. OK, so that’s obviously not going to happen.

Of the two options, doubling taxes, fees, duties and other sources of revenue would cripple the economy while cutting government spending enough to shrink all the boxes to fit into the area we can afford to fund would require decision making and leadership our current political ruling class is incapable of executing. If we could somehow implement either option or a blend of the two, it would be the end of living beyond our means and the beginning of an entirely new form of the United States of America.

But we don’t have to worry about that as long as other nations, organizations and individuals continue to be willing to buy our U.S. government IOUs in exchange for a promise that the American taxpayers, their children and grandchildren will repay the debt.

And that gravy train will never stop, right?

*******

News Item: China liquidated $34.2 billion of US Treasury securities in December 2009, initiating their previously communicated plan to “diversify” their more than one trillion dollars worth of primarily U.S. dollar denominated hard currency reserves.

*******

Notes:

• United Kingdom includes Channel Islands and Isle of Man, well known offshore tax havens used by people and organizations seeking to hide and disguise assets.
• The oil exporting countries include Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria.
• The Caribbean Banking Centers are nations often used as offshore money laundering operations for the drug cartels and other criminals and tax evaders: Bahamas, Bermuda, Cayman Islands, Netherlands Antilles and Panama and the British Virgin Islands.
• Foreign debt based on estimated foreign holdings of U.S. Treasury marketable and non-marketable bills, bonds, and notes reported under the Treasury International Capital (TIC) reporting system are based on annual Surveys of Foreign Holdings of U.S. Securities and on monthly data.

Sources:

• United States Treasury
• Internal Revenue Service
• Tax Policy Center of the Urban Institute and Brookings Institution
• MSNBC
• Daily Mail
• New York Times
• US Debt Clock.org
• Financial Times
• Reuters
• Wall Street Journal
• Traxel.com

It reads:

“As a business management consultant I heard a lot about priorities. In the introductory meeting and group management team interviews, senior executives would drone on endlessly about the organization’s priorities. Top priority this and critical priority that; it was all I could do to keep my eyes from rolling back in my head.

If the senior executives started down that same path in my personal, one-on-one, interviews I would usually cut them off and say, ‘Don’t tell me about your priorities, show me your budget.’

People, teams, groups, tribes and organizations often make a big show of pontificating about their priorities. Very rarely does the investment of their resources reflect their stated priorities.

It comes down to fundamental honesty – honesty with yourself, with your team, with your organization, with your business. It is one thing to spout about priorities. It is another to live them.

Show me your budget.”

The same is true of countries. Their leaders and citizens often pontificate about the priorities of their society, but the truth is revealed in what they invest their resources in, especially their financial resources.

The New York Times posted a wonderful interactive graphic that illustrates the current 2010 budget and the proposed 2011 budget here: http://www.nytimes.com/interactive/2010/02/01/us/budget.html?hp

The various boxes are sized proportional to the amount of money allocated for that particular category of spending. The bigger the box, the more money invested there.

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As you can see, social security and defense are the two biggest boxes in the 2010 budget. Everything else gets less money.

By positioning your cursor over various segments of the graphic on the New York Times web site, you can see how much money has been allocated for various departments and programs of the U.S. government.

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In this case, I positioned my cursor over the higher education budget segment and its details displayed, including the delta between the current 2010 budget and the administration’s proposed 2011 budget for that expense category.

It’s interesting to compare the budgeted amounts to what most people would consider reasonable priorities for their country.

For instance, most people would consider an investment in education to be a priority. After all, if we don’t produce educated citizens, we won’t have a viable and relevant work force to contribute to the tax base, much less be part of an informed, engaged electorate. Nevertheless, you can see that all of education is a pretty small box, and as illustrated, what is set aside for higher education is a pittance compared to the overall budget, a mere .0628 percent of our overall spending.

Considering the precarious state of the world, others might consider energy independence to be a national priority. Since we send more than one billion dollars a day overseas for imported oil and an unknown portion of that billion dollars a day is used to fund groups whose primary purpose is to kill us, energy independence seems a reasonable and desirable goal and an area worthy of sustained investment. It’s interesting then, taken in the context of more than thirty five years of president after president and congressional leader after congressional leader stressing the need to achieve energy independence that right now we are investing less than 1 percent of our spending to achieve that goal, .0933 percent, to be exact.

Given this ongoing reality, a cynic might suggest that the politicians are not really interested in achieving energy independence, and instead are a lot more interested in pocketing millions of dollars in influence payments, errr, of course I meant so say campaign contributions, from the oil industry. But I digress.

I encourage you to click on the link to the New York Time’s interactive graphic http://www.nytimes.com/interactive/2010/02/01/us/budget.html?hp and move your cursor over the various boxes to learn what money is actually spent on various programs.

Pick your priority, whether food safety ($1.02 billion, .0283% of total spending), refugee programs ($1.74 billion, .0483%), Medicare health care fraud and abuse control ($1.2 billion, .0333%), homeless assistance ($1.85 billion, .0514%), disease control ($6.24 billion, .1733%), the Federal Bureau of Investigation (FBI) ($4.44 billion, .1233%), mass transit ($8.36 billion, .2322%) or any other category. I think you will share my reaction to what we would consider to be our national priorities versus what we actually spend our money on.

Are we investing in what we need to invest in for a vibrant today and a better tomorrow?

When returning to the United States from the 43 countries I’ve visited, one thing that stands out is that just about everywhere else I’ve been in the world that country had a strong sense of national purpose. In some countries it is palpable, so thick you can cut it with a knife. However, when I return I realize that there is no sense of that here because America has no national purpose. There is nothing that this country is working to achieve; there is no direction this country is moving in; there is no goal that this country is striving to reach. Compared to other countries the lack of national purpose here is haunting, troubling and does not bode well. If you are not heading somewhere, you go nowhere.

That reality is reflected in this interactive graphic. While everyone from the politicians to your neighbor on the bar stool talks boldly about what our national priorities are, those priorities are not in any way reflected in how we spend our national budget.

You can tell me what your priorities are all you want, but in the end, when I want to really know what your priorities are, just show me your budget.

The web site pagetutor.com put up an excellent illustration of what 1 trillion dollars looks like. The original site is here: http://www.pagetutor.com/trillion/index.html

I excerpted the post here to help illustrate how much the United States spends on health care.

What does one TRILLION dollars look like?

We’ll start with a $100 dollar bill, currently the largest U.S. denomination in general circulation. Most everyone has seen them, slightly fewer have owned them. Guaranteed to make friends wherever they go.

A packet of one hundred $100 bills is less than .5 inch / 12.7 mm thick and contains $10,000. It fits in your pocket easily and is more than enough for week or two of shamefully decadent fun.

Believe it or not, this next little pile is $1 million dollars (100 packets of $10,000). You could stuff that into a grocery bag and walk around with it.

While a measly $1 million looked a little unimpressive, $100 million is a little more respectable. It fits neatly on a standard pallet…

And $1 BILLION dollars… now we’re really getting somewhere…

Next we’ll look at ONE TRILLION dollars. This is that number we’ve been hearing so much about. What is a trillion dollars? Well, it’s a million million. It’s a thousand billion. It’s a one followed by 12 zeros.
Ladies and gentlemen… I give you $1 trillion dollars…

In 2008 the United States of America spent $2.4 trillion dollars on health care. That equals 2.4 times this graphic.

The current unfunded liabilities (meaning the U.S. is committed to spending the money but has no way to pay those obligations) for Medicare total $85.6 trillion. That equals 85.6 times this graphic.

The crisis related to health care spending in the United States is real, it is just sometimes very challenging to visualize. In this case, each one of us is that man in the red shirt in the lower left corner of the graphic. We face a challenge 2.4 and 85.6 times the pallets of money illustrated in this graphic. And that is a lot of $100 bills.

The following are the views of one PhD on that topic.

Key excerpts:

• 80% of total health care spending linked to chronically ill patients
• Rise in obesity prevalence in the US accounted for 27% of the growth in health spending over the past 20 years.
• We are not going to “solve” the spending growth through a singular focus on health insurance redesign (i.e. HSAs, higher co-pays).

I have gathered a few repsentative samples here to give you an idea of what is being offered. It is very likely that some of the elements of these proposals will be included in the new health care system.

The Options: A Single Payer Example

For those who long for or dread a government owned and operated single payer system, here’s a chance to see how one operating within the United States would be structured, governed, funded and operated.

A bill was introduced into the California legislature on 27 February 2009 that would create a state owned and operated single payer health care system in California.

The bill is posted here: http://info.sen.ca.gov/pub/09-10/bill/sen/sb_0801-0850/sb_810_bill_20090227_introduced.html

For those who have never read legislation before, it will be an interesting introduction to how the laws that define our society are written.

For those interested in how a single payer model of health care might be structured, it will be interesting reading.

For those adamantly opposed to or in passionate support of a single payer system, there will be plenty of material to absorb.

One opinion I have openly stated in this thread is that a single payer system is not on the table as an option for a national health care system. I have stated that it is a complete political non-starter and a ‘third-rail’, poison topic at the national level. I have stated that any system we end with nationally will retain all the familiar components we currently know, such as private insurance companies, HMOs, PPOs, lawyers, etc. I still hold those opinions.

Happy reading!

Highlights of Aetna’s proposal for health care reform:

Excerpts from the introduction section – the challenge:
A robust body of research concludes that the uninsured obtain less care, receive fewer preventive services and fail to adhere to recommended treatments. Additionally, tens of billions of dollars are spent each year treating those without health insurance, often in expensive emergency room settings for illnesses or chronic conditions that could have been prevented or treated earlier had they been part of a course of care associated with having health insurance.

Premium increases are driven primarily by three factors: general inflation, health care price increases in excess of inflation (for example, cost shifting and higher priced technologies) and increased utilization (for example, aging population, lifestyle changes and new treatments).(1)

With the average premium for employer-sponsored family coverage now exceeding $12,000, participating in the health insurance marketplace is a financial strain for a growing number of Americans.(2)

These [health care delivery] quality gaps result in 35,000 to 75,000 avoidable deaths each year and between $2.7 billion and $3.7 billion in avoidable medical costs.(3)

(1) Price Waterhouse Coopers, “The Factors Fueling Rising Healthcare Costs 2006,” Prepared for America’s Health Insurance Plans, January 2006.
(2) Of this total premium cost, workers pay an average $3,281 from their paychecks, with employers covering the remaining premium costs. Gary Claxton, Samantha Hawkins, Jeremy Pickreign, et al. “Employer Health Benefits: 2007 Annual Survey,” Kaiser Family Foundation and Health Research and Education Trust, September 2007. Accessed online: www.kff.org/insurance/7672/upload/76723.pdf.
(3) National Committee on Quality Assurance, “The State of Health Care Quality 2007.” Accessed online: http://www.ncqa.org/Portals/0/Publications/Resource%20Library/SOHC/SOHC_07.pdf

Excerpts from the proposed plan section:
Get and keep everyone covered
Require all Americans to possess health insurance coverage — an individual coverage requirement — as a common-sense approach for achieving universal coverage through universal participation.

Strengthen public programs to ensure certain populations have access to quality health care.

Maintain the employer-based system and export its
strengths to make the individual market function betterEqualize the tax treatment of health insurance for those who obtain coverage through their employer and those who purchase it directly in the individual market by extending favorable tax treatment to both sets of individuals, without changing the favorable tax treatment employers currently receive for offering benefits.

Permit the purchase of health insurance across state borders (that is, rather than having to purchase in one’s home state) so consumers can use phone, mail and internet facilities to purchase coverage in states with legislative and regulatory environments that facilitate the existence of affordable health insurance options.

Reorient the system toward prevention,
value and quality of care
Create incentives for individuals to achieve optimal health status by making healthy choices, participating in wellness, chronic care and disease management programs and obtaining routine preventive care.

Reward health care providers who efficiently deliver evidence-based care through pay-for-performance (P4P) programs.

Transform the medical liability system into one that focuses on the fair and timely resolution of medical disputes and promotes health care quality improvements. The medical liability system should encourage — not discourage — physicians to discuss and learn from mistakes and preventable errors.

Use market incentives to improve coverage, drive down
costs and make the system more consumer-oriented
Create new pooling mechanisms that facilitate affordable access to health insurance for individuals and small employers.

Encourage uniformity of state laws and regulations. Explore the development of an optional federal charter.

Invest in efforts to improve health and benefits literacy, especially for the nearly half of adults in the nation who have difficulty locating, matching and integrating written information.

Advance public-private partnerships to develop and implement health information technology (HIT), including personal health records and the development of an interoperable health record system that allows for the seamless and secure transmission of health information.

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——————————————————

Jack Ebeler of Ebeler Consulting

Source for presentation:
Approaches for Covering the Uninsured: A Guide by Jennifer Tolbert, Jack Ebeler, Tanya Schwartz
Kaiser Commission on Medicaid and the Uninsured
http://www.kff.org/uninsured/upload/7795.pdf
December 2008

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Overview of Options

Overall approaches

• Build on current financing approaches
• Substantially replace current approaches

Within either, attend to access to and affordability of coverage

Mix and match from menu

——————————————————

Overall: strengthen/build on current approaches

Overall approaches

Employment-based coverage:

• Employer mandate – require employer to offer/subsidize
• “Pay or play” – require employer to offer/subsidize, or pay to pool to finance alternative coverage source

Public coverage:

• Expand Medicaid/CHIP enrollment, and/or eligibility
• Medicare for those age 55-64
• Subsidize benefits for temporarily unemployed

Individual coverage: revise regulatory approaches

Individual mandate option [within] any of these arrangements

——————————————————

Overall: substantially replace current financing and tax subsidies

• Single payor (eg, Medicare for all)
• Redirect tax subsidy away from employment-based coverage and provide directly to individuals: tax credits for individual market

——————————————————

Availability/affordability/subsidy approaches within overall framework

Affordability/subsidies

• Subsidies (tax, other) for individuals and/or employers
• Offer/encourage products with less expensive premiums (high deductible)
• Young adult plans
• Reinsurance

Availability of products/market organization

Access to/organization of larger purchasing pools (eg., connector; FEHB)

• Medicare-like plan available as an option
• Association health plans
• High risk pools

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Mix and match

If Congress does not go for one “pure” model, multiple combinations possible – can mix and match from the menu:

• McCain
• Obama campaign
• Baucus
• Wyden
• And…

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Bradley Herring, The Johns Hopkins University

Potential Complications with the Different Approaches to Health Reform

——————————————————

Potential Complications

Ideology:
Private markets vs. government

Special Interests:
Insurers, physicians, hospitals, drug companies, business

Redistribution of Income:
How much? How complex?

Consider These Four Options:
Single payer, McCain, Obama/Baucus, Wyden-Bennett

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Single Payer: HR 676

The Underlying Appeal:

• Elegant
• Universal
• Large reduction in administrative costs

Potential Complications:

• Who says no?
• Taxes: employer/employee payroll taxes of 4.75% each; repeal Bush tax cuts; additional 5% tax on top 5% of income and 10% tax on top 1% of income; 0.25% stock transaction
• Lower reimbursements to medical providers

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McCain / Republican Vision(Tax Reform, Individual Markets, Cross-State Purchasing)

The Underlying Appeal:

• Tax reform “can” improve efficiency and equity
• Achieve a competitive market for health insurance

Potential Complications:

• Reductions in pooling across health status
• High risk pools either expensive or underfunded
• Reductions in consumer protections
• High administrative costs in individual markets

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Obama / Baucus

The Underlying Appeal:

• Built on the current system – least upheaval

Potential Complications:

• Built on the current system – fragmented
• Who really pays under an employer mandate?
• Does it have an individual mandate? Is it enforceable?
• “Crowd out” with expanded Medicaid/SCHIP
• Controversy surrounding the public plan option
• Is this bipartisan enough to actually pass?

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Wyden, Bennett, et al.’s “Healthy Americans Act”

The Underlying Appeal:

• Bipartisan support
• Grand compromise: markets w/ regulation, ample subsidies
• CBO/JCT: breaks even after a few years

Potential Complications:

• Willingness of high-income people to redistribute?
• Vulnerable Medicaid population folded into private plans
• Defining the basic benefit package
• Hardly anyone’s favorite: third place behind status quo?

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——————————————————

The Options: A Health Care Professionals Advocacy Group’s Plan

Healthcare Professionals for Healthcare Reform (HPfHR) is a group of physicians, nurses, public health experts, healthcare economists, health information technologists, business leaders, hospital administrators, politicians and patients with a 3 Tier plan that offers a comprehensive, effective, efficient and politically viable alternative to the current defective system or other plans previously proposed.

The HPfHR plan is called Expanding Medical and Behavioral Resources with Access to Care for Everyone (EMBRACE), and is based on the tenet that the entire population should be covered for life sustaining and health promoting “basic” healthcare with supplemental levels of coverage for those desiring it. The plan is designed to make healthcare delivery more effective, efficient, and universal; yet, preserve the unique American character of the present system.

The HPfHR web site is here: http://www.hpfhr.org/

The EMBRACE plan is described in this article from the online edition of The Annals of Internal Medicine ahead of a printed publication date of 7 April 2009 | Volume 150 Issue 7

Article is here: http://www.annals.org/cgi/content/fu…904070-00113v1

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The Expanding Medical and Behavioral Resources with Access to Care for Everyone Health Plan
Gilead I Lancaster, MD; Ryan O’Connell, MD; David L. Katz, MD, MPH; JoAnn E. Manson, MD, DrPH; William R. Hutchison, MSIR; Charles Landau, MD; Kimberly A. Yonkers, MD; and for Healthcare Professionals for Healthcare Reform

7 April 2009 | Volume 150 Issue 7

Healthcare Professionals for Healthcare Reform is a group of physicians and others interested in health care reform who, recognizing the urgent need for change, convened to propose a universal health care plan that builds on the strengths of the U.S. health care system and improves on its coverage, efficiency, and capacity for patient choice.

The group proposes a tiered plan, the core of which (Tier 1) would be lifetime, basic, publicly funded coverage for the entire population on the basis of the best evidence about which therapies are considered life saving, life-sustaining, or preventative. Optional coverage (Tier 2) would be funded by private insurance and cover all therapies considered to help with quality of life and functional impairment. Items considered to be luxury or cosmetic (Tier 3) would generally not be covered, as is the case under the current system.

The entire system would be overseen by a quasigovernmental, largely independent organization known as “The Board,” which would resemble the Federal Reserve and interact with U.S. Department of Health and Human Services agencies to oversee implementation and coverage.

By building on the current health care system while introducing other features and efficiencies, the Expanding Medical and Behavioral Resources with Access to Care for Everyone (EMBRACE) plan for universal health insurance coverage offers several advantages over alternative plans that have been proposed.

The United States spends twice as much per capita on health care as other developed countries (1) but ranks in the bottom third for important measures, such as infant and maternal death rates and life expectancy (2). Current interest in U.S. health care system reform focuses on the expansion of health insurance to more individuals (3), but many proposals lack the structure that would improve the health of Americans in an affordable, efficient, and transparent way that maintains or even expands patient choice (4).

Healthcare Professionals for Healthcare Reform is a group of physicians, nurses, medical technicians, hospital administrators, public health experts, health care economists, business leaders, politicians, and patients who, inspired by the realization that conversations about health care reform lack input from health care professionals, convened to propose a universal coverage plan that builds on the strengths of the U.S. health care delivery system and improves on its efficiency and capacity for patient choice. Our plan, called Expanding Medical and Behavioral Resources with Access to Care for Everyone (EMBRACE), is based on a tiered approach to health care and on the tenet that the entire population can be covered for life-sustaining and health-promoting (basic) health care, with additional coverage available for those who desire it.

The EMBRACE 3-Tier System

The EMBRACE system would be composed of 3 tiers of coverage.

Tier 1, the base level, would cover the entire population from cradle to grave. It would include all medical, surgical, and psychiatric therapies considered to be life saving, life-sustaining, or preventative on the basis of the best evidence (from the medical literature and expert opinions).

A government-subsidized account similar to Medicare would provide the funds (with the elimination of all other public insurance). The method of raising this revenue could be similar to the present funding of Medicare (such as the Federal Insurance Contributions Act tax) and Medicaid, but because businesses should receive substantial savings after initiation of this plan, additional sources of revenue may be considered. These could include payroll taxes (indexed to salary), a tax on businesses on the basis of the number of employees (and their wages), or a combination of these. Because the number of items covered by Tier 1 in this new system would be substantially less than what Medicare and Medicaid currently cover, funds would be available to redistribute to achieve universal Tier 1 coverage. We believe that this should be a “revenue neutral” redistribution of public funding.

Tier 2 would cover all therapies considered to help with quality of life, as well as some diagnoses or services that do not have sufficient evidence for a Tier 1 indication.

Private insurance carriers would administer Tier 2 services. The private insurance carriers would be allowed to offer a limited number of plans that would be developed by an oversight board (see next section), similar to the Medigap Plans A to L now stipulated by the Centers for Medicare & Medicaid Services (5). Although each insurance carrier would not have to offer all the plans, the offered plans would cover all the services stipulated by the board. A major advantage of this approach is that consumers (either employers or individuals) can compare the price of the plans.

Tier 2 plans can be broad (covering most Tier 2 services) or can be customized for specific groups, such as a geriatric plan that covers extended care facilities but not fertility care, a heavy laborer plan that includes chiropractic therapy, or a Workman’s Compensation plan purchased by employers, employees, or unions.

Tier 3 would apply to all medical and surgical issues considered luxury or cosmetic, such as Lasik surgery or Botox treatments. Funding for Tier 3 would not be covered under the EMBRACE system—as in the current system—and all bills would go to the patient.

Pharmaceuticals will have similar Tier assignments for medical coverage: Tier 1 would include formulations and therapies that treat or prevent serious illnesses and would mostly be paid for by public funds or be heavily subsidized. Tier 2 would apply to those drugs and therapies that enhance quality of life and would be covered by private insurance. Tier 3 would be for luxury items.

Oversight

Our proposed system would be overseen by a panel of physicians and other health care professionals, public health experts, and economists who specialize in health care, known as “The Board”. The Board’s mission would be to promote the health of Americans in a socially responsible and economically sound way. Similar to former Senator Tom Daschle’s recently proposed “Federal Health Board”(6), it would be a quasigovernmental organization that resembles the Federal Reserve, which should make it less beholden to political pressures. It would be headed by a chairperson who would be appointed to a 10-year term by the president and require Senate confirmation.

The Board would have oversight of the Centers for Medicare and Medicaid Services and input into the Food and Drug Administration and the National Institutes of Health. Using already-established Diagnostic Related Group, Ambulatory Payment Classification, and International Classification of Diseases codes, the Board would decide which diagnoses and services are covered by Tier 1, 2, or 3 on the basis of medical importance (by using evidence-based data, including practice guidelines developed by expert medical panels, Cochrane Library reviews, and other sources), public health considerations, and economic effect. These assessments would be updated periodically.

The Board’s authority to direct the National Institutes of Health and the U.S. Food and Drug Administration would allow it to direct research that focused on the therapeutic issues that it needs to achieve its mission (to improve the health of the country and reduce costs). For example, if evidence supporting a particular treatment is based on expert consensus, the Board may direct the U.S. Food and Drug Administration (for a medication or device) or National Institutes of Health (for an intervention) to request applications for studies that will allow better tier determination.

Among the prerequisites to the implementation of this system would be delineation of the specific relationships between the Board and existing agencies within the U.S. Department of Health and Human Services, in particular the U.S. Food and Drug Administration and the National Institutes of Health. Some reorganization of these government agencies might be warranted to optimize interagency interactions.

Billing

To address the excessive overhead involved in claim submission by providers and insurance companies, the Board would create a universal reimbursement form that would be implemented electronically by using a Web-based tool available to hospitals and physician offices. This form would be the only form of billing for all providers and would be Internet-based and simple to use. Form data would be transmitted to a central billing system, which would decide whether the condition or service is Tier 1, Tier 2, or Tier 3. Tier 1 services would be reimbursed directly to the provider. Tier 2 services would trigger a computerized search for insurance coverage; if insurance is found, the insurance carrier would be billed and if not, the patient would be billed. Bills for Tier 3 would be sent directly to the patient.

To help with questions about the assigned tier for a particular service, the central billing system would have a billing inquiry feature available to providers and consumers to allow inquiries about tier assignment in advance.

Advantages of the EMBRACE System Over Single-Payer Models

Ideally, a single-payer model would accomplish the goals of improving the health of the nation with a uniform and universal system of health care delivery. One such proposed system is the “Physicians for a National Health Program” model. Proposed in 2003 (7) and introduced to Congress in 2007 as H.R.H. 676 (8), the plan advocates an expanded Medicare system that would exclude all private insurance payers and eliminate all for-profit hospitals and HMO-type providers.

Like our proposal, the Physicians for a National Health Program plan would provide patients universal access to approved medical care that would be paid by a national health insurance agency. However, if the desired treatment or service in the Physicians for a National Health Program system is not approved, patients will most likely find ways outside of the system to obtain that service. As in other countries with a single-tiered health care system, use of unapproved services may lead to a de facto multitiered system (9). In these latter systems, parallel outside enterprises often grow, become private, and compete with the publicly funded system—usually to the detriment of both.

EMBRACE encourages private (Tier 2) participation for those services that are not publicly financed. The existence of this integrated private tier would allow for fewer covered services in Tier 1, which in turn would reduce the public financial burden. In addition, allowing all the tiers to be a part of the same system would allow patients to see the same provider for all services and render all services subject to the same ultimate oversight. Politically, a system that continues to allow private, for-profit insurance and some degree of free market forces would be more viable than a system that attempted to control or eliminate them.

Our plan preserves many of the favored features of the present system, such as a provider’s ability to offer all services even if they are Tier 2 or Tier 3, which would keep the new system more familiar to the patient and provider and in turn facilitate the transition to it.

Conclusion

The EMBRACE plan offers universal coverage for essential health care and promises to reduce mortality and morbidity and encourage preventative care. The increased efficiency of the system should allow hospitals to reallocate funds to other services, such as health information technologies, and allow health care professionals more clinical time. For the patient, the system offers universal coverage for basic health care needs, transparency for Tier 2 coverage, and complete portability of all insurance coverage. Employers would be relieved of the financial burden of coverage for most services but retain the option to offer Tier 2 coverage as a benefit to employees. Finally, insurance providers would benefit from the elimination of the financial risks associated with Tier 1 services, and the system at large would benefit from centralized billing and a reduction in administrative overhead.