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Tuesday, March 9, 2010

King Canute Tries Again

March 7, 2010

David Axelrod
Senior White House Advisor
The White House
1600 Pennsylvania Avenue NW
Washington DC 20050

Dear Mr. Axelrod

In today’s New York Times, you are quoted as asking, “Why haven’t we broken though?” I would like to try to answer that question, but first a couple of points need to be clear.

One; I have been an ardent Obama supporter since the day he stood on the court house steps and declared his candidacy. I attended meetings, held up a sign (and met him in San Diego), telephoned voters in Texas, South Dakota, California, contributed almost every month, and spent election day driving little old ladies to vote. You can see I have a large vested interest in seeing him succeed.

Two; The President has made some brilliant appointments that are producing great results. Hilary Clinton, George Mitchell and Richard Holbrooke have changed the way the world looks at us. Robert Gates is showing a real determination to get Defense expenditures under control. Janet Napolitano was a perfect choice for that monstrosity, Home Land Defense. Kathleen Sebelius, Ray LaHood and Eric Shinseki are all inspired appointments who seem to be doing a great job.

My personal favorite is Arne Duncan, the first human being to stick a finger in the eye of the teacher’s union.

So the first, easy answer to your question is that the successes noted above have not received the credit they deserve. But for the larger, much more important question, the answer is different.

Firstly, the economy of the U.S. is in dire straits. Fifteen million Americans are unemployed. A record number have been unemployed for over six months. Another fifteen million are working short hours, or have simply given up looking. You know the numbers, 70% of the GDP is driven by consumer expenditures and ordinary Americans are not spending beyond absolute necessities because they don’t have incomes or are scared they will lose theirs. In addition, American households have to rebuild their finances after the Wall Street bankers “stole” them.

So the President’s first job has to be putting Americans back to work so they have paychecks to spend. He keeps saying jobs are job one, but what is actually coming out of the administration is utterly useless. The big deal that came out of Washington last week is so completely foolish that it would be laughable except that it is so serious.

The set piece of the jobs bill is a credit, to small businesses that make new hires, on their Social Security obligations. After forty years experience as an owner, principal and consultant to a wide variety of small businesses, I can guarantee you that no small business will ever hire a new employee to get a tax break. They will hire new employees when their order books are full. Ask your self, “Did AKP&D ever hire a new employee to get a tax break?”

A real cynic might ask whether the jobs bill was simply meant to create the appearance of doing something without spending any money.

So the first important answer to your question is a question, “Why would the President support such a nonsensical approach to the jobs problem?” And the answer is that he is getting truly bad advice. Larry Summers is on record more that once with the belief that people are unemployed because they don’t want to work. You can dispel that particular piece of Nobel Prize crap by taking a walk down to the local unemployment office and asking the people there if they want to work! You will get a very clear answer.

So what should be happening? You can find a very clear presentation of the appropriate policies that the government should be following in our new book, “The Great Recession Conspiracy”. David Zetland (PhD-University of California) and I (DBA-University of Southern California) have explained that there are five hundred years of repeated economic behavior that should be the basis for all government economic policy. You can find our book at It is also available as a Kindle book. If you send me an email address, I will send you a digital copy.

Section Two explains exactly what government policies should be and why they should be that way.

The second part of the answer to your question involves healthcare. And it is difficult to imagine a government program more botched than healthcare to date.

First of all, we all agree that healthcare costs are more than double any other developed country, that they are growing rapidly, and in the foreseeable future could bankrupt the country. Accordingly, the first actions should have centered on reducing those costs, and there are at least four easy to understand programs that would accomplish exactly that. Here they are;

*End of life expenditures; The numbers vary according to what is being counted but 60%, 70%, 80% or 90% of healthcare costs are spent on the last two weeks, two months, or two years of life. We can markedly reduce that cost with some simple actions; encourage living wills, DNR requests, and calm discussions with doctors (Sarah Palin’s death panels are simply irresponsible diatribe). This is a low cost action with huge cost savings potential.

*Simple hospital wide actions to reduce infections; Research has demonstrated that actions as simple as doctors and nurses washing their hands before and after seeing a patient can make huge reductions in infections and deaths. Related to this is the evidence that in-hospital costs can be markedly reduced by getting everyone to follow a check list for every procedure so that the same task is performed the same way by every one involved. These programs are also very low cost with huge cost savings potential.

*Digitizing medial records; If we could speed this program, we could save huge amounts of money. Why should the same procedure at the Mayo Clinic cost $100,000 but $200,000 at UCLA Medical Center? Peter Orszag is doing some brilliant work here and it needs to be expanded and speeded up. Again, we could get great savings at a relatively small cost.

*Tort reform; While the evidence here is weaker than the three programs above, there is still some evidence that a cap on awards could reduce healthcare costs. And once more, significant healthcare cost savings can be achieved at a modest cost.

Controlling healthcare costs and Social Security costs are discussed in detail in Section Four of our book.

If the President had actually backed these four, relatively simple, cost savings programs first, he would have considerable leverage in getting the healthcare program he really wanted because he could have shown how he intended to pay for it.

The second part of the healthcare mistake was to give the job to the two people who lead the two organizations that Americans rate just below used car salesmen. The President should have advanced his own program, but he failed to do that until just now, when it is really too late for this session of Congress. The truth is that healthcare has been so botched that the great majority of Americans do not support anything that is in Congress now.

So here you have the answer to your question. It is not too late to salvage the economy and healthcare yet, but time is running out fast.

As long as I am at it, let me bring up one more point that keeps the administration’s message, whatever it is, from registering with most Americans. One day, Wall Street bankers are “fat cats” and two weeks later the same crooks are “savvy businessmen”. That one particularly irritates me.

Very truly yours,

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