Sunday, November 02, 2008
News, In this Issue..., Politics

The 5 Torments of No. 44

Pity the man who wins the White House

Registered nurses demonstrate outside of St. Luke's hospital Oct. 10 in San Francisco.
Justin Sullivan/Getty Images

It’s a pretty safe bet that he’ll spend the first few weeks wishing he’d lost.

By Stephanie Ramage

As The Sunday Paper goes to press, the Nov. 4 election is still five days away, but whoever wins the White House, whether it’s Democrat Barack Obama or Republican John McCain, it’s a pretty safe bet that he’ll spend the first few weeks wishing he’d lost.

Regardless of Wall Street’s acrobatics—which may calm down a bit by Jan. 20, when President No. 44 starts his new job—there’ll be plenty to worry about. Five tricky challenges face our next president: the war front in Iraq and Afghanistan, unemployment here at home, tax reform, health care reform, and Iran’s nuclear threat.

The Sunday Paper talked with experts on each crisis—Josef Joffe, Joel M. Stern, Scott A. Hodge, Arthur Kellermann and David Albright, respectively—to get an idea of what lurks beyond the inauguration. 

1. Iraq (and Afghanistan)

"I don’t think the U.S. will leave Iraq in 2009, no matter who is president.”
—Josef Joffe, editor and publisher of Die Zeit, a weekly German newspaper, and author of the 2006 book, “Überpower: The Imperial Temptation of America.”
Joffe is a fellow at the Hoover Institution and adjunct professor of political science at Stanford University.

Q What should we do about Iraq?   

 A Not much. The war is going well, against all expectations. Casualty figures have come down dramatically, for U.S. troops as well as Iraqi civilians. Just a few weeks ago, Anbar Province, the center of the revolt, was handed over by the U.S. to the Baghdad government. Against all odds, this war, which so many hated, is going well, whereas Afghanistan, the war everybody approved of, is going quite badly.

What are the consequences of leaving Iraq, or in what form would we likely be staying?

I don’t think the U.S. will leave Iraq in 2009, no matter who is president. A residual fighting force will have to stay, though far away from population centers, and with a significant surge capability.
 


How much does the media have to do with our decision, come January, on Iraq?

I think that Americans will look at casualty figures—which are down, down, down—rather than at the op-ed pieces by Maureen Dowd or Frank Rich.

[The Sunday Paper didn’t manage to grab enough of Joffe’s time to talk with him solely about Afghanistan, but in an interview with the Council on Foreign Relations in May of this year, he said that whoever is elected “will have to face the realities, of cutting tail, from the most strategic and most important area in the world. What Europe used to be in the Cold War, the greater Middle East is now. For the number one power in the world to tuck tail and run from the area is to kiss goodbye to its superpower role. … I think that no European leader wants the United States to quit the Middle East. They won’t help the United States; they won’t put troops there, but none of them wants the United States to leave for the reasons I’ve just described. Nobody wants the United States to quit Afghanistan either.”]

2. The job market

“We don’t even need the president to encourage job growth—we just need him not to discourage it."
—Joel M. Stern, managing partner of international management consultancy Stern Stewart & Co. Former president of Chase Financial Policy, the financial advisory arm of Chase Manhattan Bank, which he joined after completing his graduate studies in finance and economics at the University of Chicago. He is co-author of the business classic, “The Revolution in Corporate Finance.”

Q Unemployment has climbed to 6.1 percent as the economy tanks. How can the next president create more jobs?

A Presidents don’t create jobs. Jobs are created in the private sector by regular people who save their money and invest it in their business and hire people. We don’t even need the president to encourage job growth—people want to do it—we just need him not to discourage it. What the president can do is create an environment in the private sector that encourages saving by helping people have enough money to save.

What about one of the presidential candidates’ proposed jobs program—wouldn’t that create jobs?

The problem with that is it takes money from private individuals who want to start businesses. When government “makes” jobs, it has to do that by using taxpayer money, which means that the money is taken away from the private sector and put into the kinds of jobs the government wants. When Obama talks about cutting taxes for 95 percent of Americans, when already 40 percent of them pay no taxes at all, the question should be, “Where’s he going to get the money to keep his promises?” Probably from raising taxes.

What will be the biggest obstacle to creating jobs?

Political gridlock. If the Democrats win the White House, while they already control the Congress, they will get everything they want and it will be a mess. If McCain wins, it’s going to be very difficult for him to get things done with a Democratic Congress.

3. Tax reform

“The tax system for individual Americans is broken.”
—Scott A. Hodge, president, The Tax Foundation, a nonprofit think tank founded in 1937 and devoted to educating the public about tax responsibility on the part of the government and its citizens.

Q What’s the No. 1 tax-related concern for the next president?

A We have to address America’s lagging competitiveness with the rest of the globe.
Our business tax rates are 50 percent higher than those of most other industrialized countries. If we lower the business tax rate, we will see investment in business increase and more jobs created.

The corporate tax is made up of the federal tax, which is 35 percent, and the state tax, which is about 4 percent, so that’s 39 percent. That’s almost 50 percent higher than most other countries, which are at about 20 percent.

Businesses don’t bear the real burden for taxes, real people do—workers who get lower or stagnant wages and shareholders who have lower dividends.

Our problem is not just here in the U.S., it’s a matter of competition in the global marketplace. The strength of our U.S. companies is in their ability to compete globally.

How do we do that?

The evidence is clear that countries with lower business taxes have higher wage growth than those with higher business taxes. Germany was losing jobs and investment to smaller countries like Slovakia and Poland, which have a 20 percent flat tax for business. Germany was seeing the direct flight of jobs and capital out of the country.

We need to dramatically slash our corporate tax rate down to about 20 percent to bring our rate in line with average rates of other industrialized countries that are growing.

What about the taxes of private individuals?

The tax system for individual Americans is broken. People inherently believe that it has become too complicated, so much so that 60 percent of Americans pay someone else to do their taxes because they are so afraid of making a mistake.

We should go to a flat-tax type system and remove the credits and reductions and just lower the tax rate.

The president and Congress will also have to deal with our entitlements. The explosive growth of entitlements means that for the next generation, taxes will increase by as much as a third.

So, what should we cut?

Medicare, and to a lesser extent, Medicaid. They are growing at an unsustainable rate. Social Security is marginally less of a problem. Even a robust economy could not make up for the overcommitment that today’s politicians have made to these entitlement programs.

4. Health Care reform

“It’s going to be big-time political hard ball.”
—Arthur Kellermann, founding chairman of the department of  Emergency Medicine at Emory University. Kellermann co-chaired the Committee on the Consequences of Uninsurance of the  Institute of Medicine. As a 2006-2007 Robert Wood Johnson Foundation fellow, he joined the professional staff of the United States House Committee on Oversight and Government Reform.

Q What should the president do about health care?

A Getting control of America’s health care cost without wrecking American health should be a top priority. We are spending $2.1 trillion each year, or $7,000 for each man, woman and child—twice that of Canada and countries in Europe—and we’re providing spectacular care to some and mediocre care to most.

Health care costs are the No. 1 concern. We have to address both cost and coverage. If you address cost and ignore coverage, you’ve still got about 45 million people without coverage. If you don’t address cost, but everybody has government-subsidized health insurance, you’ll bankrupt the country in a few years.

Why are costs so out of control?

One big problem is that we come up with new and more expensive drugs and technologies, and many of these treatments are useless or only marginally beneficial. The taxpayers should be paying for what works, and not paying for what doesn’t.

For example, we are spending more money on new diabetes drugs that are no better than the old ones. Some new drugs harm people. Let’s just stop paying for the stuff that is harmful. If you want to buy it, you can, but don’t ask the taxpayers to pay for it [through entitlement programs].

I’m not opposed to coming up with new and better drugs and technologies. What I am opposed to is the fact that $750 of a $1,000 pill goes to marketing the pill to doctors.

If we try to reform that, it’s going to be big-time political hard ball. The industry will fight back tooth and nail.

5. Iran

“Probably the biggest challenge will be from Iran.”
—David Albright, president of the Institute for Science and International Security, a nonprofit, non-partisan institution that focuses on stopping the spread of nuclear weapons.

Q What’s the biggest national security threat for the new president?

A From my point of view, probably the biggest challenge will be from Iran. Getting rid of Iran’s threat is not a matter of just knocking out one facility. That was the case with Syria, but Iran’s pursuit of a centrifuge program is very different. They could have thousands of centrifuges built already at many different sites, hidden underground and in the mountains, and even if you manage to knock one out, centrifuges are easily replaced.

You’ve painted a dismal picture. Under such circumstances, what can we do?

This next administration will have to work that out. They may want to look at the way we did things regarding South Africa. We didn’t want South Africa to have nuclear capability, and we used sanctions very effectively.

You can also just maintain your position, refuse to allow your position to drift. South Africa gave up on nuclear weapons [South Africa signed the Nuclear Non-Proliferation Treaty in 1991]. The idea is not to capitulate, but to realize this is not going to be easy. Iran’s been very bold lately, talking aggressively about nuclear capability, and we need to hold our position.

Is North Korea still a threat?

The Bush Administration has done the next administration a big favor by getting North Korea to freeze its plutonium production. The inspection arrangements are not quite strong enough, and you can always count on North Korea to find loopholes, but they’ve said they’ve frozen the plutonium production. There is still the matter of deciding how many weapons it has. Inspectors need to be able to do certain things, and we’ll have to make sure North Korea allows that.

The next administration doesn’t need to make the mistake of not focusing on North Korea. That’s what happened in the Clinton Administration. SP