Bacon's Rebellion

One of the troubling things about this blog are the perceptions revealed by some of the commentators, especially about economic policy.

There’s a scene from “Monty Python and the Holy Grail,” in which Eric Idle plays a corpse collector making the rounds of a plague-ridden village in the Dark Ages, crying “Bring out your dead, bring out your dead.” One peasant tries to pass off an old fellow as dead. The old guy moves, saying “I’m not dead.” “He says he’s not dead,” says Eric Idle. “Yes, he is,” says the peasant. “No, I’m not,” says the old guy. “Well, he will be soon,” says the peasant. “He’s very ill.”

I would hope that Title III of the Senate version of the bill, entitled “Improving the Quality and Efficiency of Health Care Act,” could be resurrected as a stand-alone bill. I believe it would gain bipartisan consensus and quickly win passage. Perhaps Sen. Mark Warner, who took a special interest in this aspect of reform, could lead the effort. Here is a section of a chapter from “Boomergeddon” that describes the benefits and limitations of Title III.

Bending the Cost Curve, Obama-Style

President Obama and his Congressional allies had two major preoccupations in approaching health care reform. First, they wanted to extend medical coverage to the 15% of the population that lacked it, a liberal Democratic priority since World War II. Second, they had a keen understanding that the nation could not long afford medical care if the cost continued to escalate some 2.5% a year faster than the general inflation rate over the next 40 years as it had for the past 40 years.

The tumultuous debate that ensued revolved mainly around the question of how to achieve universal insurance coverage, how to pay for it, and what impact the legislation would have on the federal budget. Different versions of the legislation were estimated to cost in the vicinity of $800 billion to $1 trillion over a 10-year period. Congress spent months identifying one group after another — the rich, the young and healthy, beneficiaries of high-cost health plans, consumers of soft drinks, cosmetic surgeons, tanning parlors — that could be shaken down for enough money to make the initiative “budget neutral.” But lawmakers faced a hard reality in this zero-sum game: For every winner (someone who gained access to medical insurance), there was a loser (someone else who paid for those benefits). And the losers raised hell.

The O Team cut deals with Big Pharma, Big Insura, Big Labor, the hospitals, doctors and even senators from Nebraska and Louisiana to buy their acquiescence. But in the end, it wasn’t enough. Health reform sputtered as Congress tried to reconcile the competing visions of the Senate and the House of Representatives. After the January election of Republican Scott Brown to the Massachusetts Senate seat previously occupied by Teddy Kennedy, the initiative collapsed. It was clear even to members of Congress: Far more Americans saw themselves as loser than winners from the legislation.

It’s a shame that the Obama administration tied the fate of the controversial universal-care provisions to the productivity-and-quality reform elements of the bill. Had those components been carved out in their own bill entitled, “Improving the Quality and Efficiency of Health Care Act” (as Title III of the Senate version the bill actually was slugged), it likely would have won bipartisan support and sailed to easy passage. The measures enumerated in Title III were not in themselves sufficient to “bend the curve,” as I shall explain, but they would have moved the U.S. health care system in the right direction and set the stage for the next round of market-oriented reforms.

Under the Obama plan, the commitment to efficiency and quality would start at the top. The Secretary of Health and Human Services (HHS) would develop a national strategy to measure results, identify best practices and goad hospitals, doctors and other providers into changing the way they practice medicine. In place of the current fee-for-service system, which reimburses providers on the basis of how many procedures they perform, regardless of the outcome, Medicare would reward them on the basis of how successfully treat the disease. Superior results would get more money; sub-par results would get less. Additionally, Medicare would pioneer the “bundling” of payments so that teams of medical specialists with different disciplines could be paid for delivering coordinated care over the course of a patient’s entire cycle of care, from prevention and diagnosis to treatment and recovery. These ideas are very similar to those propounded by Michael Porter and Elizabeth Teisberg, the business school professors whose analysis I have quoted admiringly [elsewhere].

In the same vein, the national health care strategy also would tackle the problems of costly medical errors, infections acquired in hospital settings, and the all-too-frequent problem of patients being readmitted to the hospital for the same medical episode. These are all areas where cutting costs and improving quality go hand in hand. Another important initiative would devise more effective ways to deliver care to patients with chronic conditions, which account for more than half of all medical spending. To carry out the Quality & Efficiency strategy, the president would convene a working group, the Interagency Working Group on Health Care Quality, to coordinate the activities of some 23 federal agencies and departments and work with the private sector.

Among the specifics identified in the bill, HHS would establish a “hospital value-based purchasing system.” Each hospital would be assigned a “hospital performance score” based upon its quality and performance metrics. Medicare payments would be raised or lowered in tandem with the score, rewarding excellence and punishing failure. Scores would be posted on a “Hospital Care” website, where it would be accessible to the public.

Likewise, the bill would create a physician quality reporting system. Physicians would be required to submit quality data to HHS, which would massage the data and then inform physicians how their “patterns of resource use” compared to that of other physicians. To avoid punishing docs who took on the hardest cases, the data would be adjusted for the severity of the patients’ conditions as well as demographic factors such as income and ethnicity.

A Center for Medicare and Medicaid Innovation would create cutting-edge payment and service-delivery models with the potential to improve the quality of care for patients at less cost. Such experiments would include sending doctor-nurse teams to elderly patients at home rather than waiting for them to arrive in the emergency room, medical homes focused on women’s unique health needs, and primary care physician groups that took lump-sum or salary-based payments in lieu of fee-for-service reimbursements. Another idea, Healthcare Innovation Zones centered around teaching hospitals, would deliver a “full spectrum of integrated and comprehensive health care services” while incorporating novel methods for training future health care professionals.

The legislation also would have endorsed an innovation called “accountable care organizations” (ACOs), which are comprised of a hospital, primary care physicians, specialists and other medical professionals. Accountable for the cost and quality of care for Medicare populations of 5,000 patients or more, ACOs would employ quality and cost measures along with new technologies such as remote patient monitoring to continually ratchet up the quality of care. As incentive, ACOs would be eligible to receive payment for shared savings.

These ideas represent the best thinking of the medical establishment. If enacted, Medicare would evolve over time from its fee-for-service system, which reimburses doctors and hospitals regardless of results, into a system that paid providers based on results over the full cycle of care. Data would be collected, massaged to identify best clinical practices, and spit back to the doctors, hospitals and other health professionals to guide them in improving their results and their public standing.

The Limits to Top-Down Reform

Title III would bring real improvements to the U.S. health care system. But let us be honest. It would not represent a dramatic breakthrough. Many of the ideas embodied in the legislation are being implemented by forward-thinking hospitals and physician practices already, even without the carrot/cattle prod of Medicare reimbursement reform. More significantly, Congress would entrust the Department of Health and Human Services to lead the charge. In other words, reform would be top-down and it would unfold at the same lethargic pace at which the federal government moves.

… After law firms, health care professionals pumped more money into the system than any other industry — $13.6 million. (That doesn’t even include the vast sums donated to the presidential campaign.) One of the advantages of being an established player like a multibillion-dollar health plan, a Fortune 500 pharmaceutical company or a billion-dollar health system is that you have lots of money to hire lobbyists and spread around PAC donations. Start-up entrepreneurs who might challenge your market dominance don’t have big bucks to throw around — they plow every penny they’ve got into growing their business. So, when it comes to translating the law into the fine print of rules and regulations, whom do you think will dominate the process? The big guys with offices in Washington, or the little guys trying to meet payroll on Friday? To ask the question is to answer it.

Here’s the challenge: It does not suffice to collect quality metrics for the nation’s hospitals and doctors, as necessary as that is to building a transparent, market-driven health care system. It is not enough to redesign Medicare’s payment system, although that, too, is an important step forward. Missing from Obama’s health care reform was any recognition of how change is driven by entrepreneurial innovation. As I shall explain in Chapter 11, the only hope we have of “bending the cost curve” fast enough to avoid Boomergeddon is to radically restructure the health care industry, rejecting the idea that hospitals must provide all services regardless of how well they do so, and jettisoning the notion that physicians should organize their practices around functional areas like oncology, nephrology, orthopedics and the like. The way to achieve dramatic gains in productivity and quality is by reorganizing health care providers around medical conditions in multi-disciplinary teams with dedicated facilities that provide focused treatment across the full cycle of care and use data to drive continual quality improvement.

Here are some of the barriers that block the adoption of entrepreneurial business models in U.S. health care:

• The third-party payment system. With employers and insurers acting as intermediaries between patients and doctors, medical entrepreneurs have to gain the acceptance of bureaucratic insurers.

• Lack of price transparency. The Obama plan would have made performance data available. That’s half the value equation. But it’s only half. There is no price transparency in U.S. health care. Without quality and price transparency, patients cannot make informed consumer decisions. Instead, they rely upon referrals, usually from other doctors. If those docs are tied into integrated health systems that feel threatened by the competition, they make not refer patients to interlopers.

• Monolithic health care systems. The players with the most to lose from specialty hospitals are giant hospital systems, which provide a broad spectrum of health care services, usually excelling in only a few of them. As demonstrated repeatedly in the past, they will use their bargaining power with physicians and insurers to freeze competitors out of the market.

• Certificate of public need. Hospital giants can block new competitors in this bureaucratic forum by making the case that there is no “public need” for “duplicative” and “redundant” hospital facilities. They also can argue that the interlopers will “skim the cream,” leaving the unprofitable patients for the hospitals. The argument doesn’t have to be true to be effective.

• The Stark law. The law prohibits physicians from referring patients to a medical facility in which he/she has a financial interest. That could stymie physician/entrepreneurs from taking an equity position in a specialty hospital they set up.

• Tort law. Indiscriminate lawsuits against physicians imposes many costs on the health care system, the least of which is the cost of paying for medical malpractice insurance. A larger cost, as is commonly observed, is the cost of defensive medicine, as doctors order extra tests, often unnecessary, to protect themselves in the event of a lawsuit. The biggest cost may be the chilling effect that fear of lawsuits has on the corporate culture of healthcare organizations. What doctor or hospital would want to systematically collect data on misdiagnoses and medical errors for quality-improvement purposes knowing that it could be used to crucify them in the court of law?

None of these issues were addressed by Obamacare.

The United States has pioneered awe-inspiring breakthroughs in genetics, cell chemistry, medical imaging, non-invasive surgical tools and related technologies. But innovation in business management and delivery models has slowed to a crawl. Labor productivity has stagnated. Despite the massive amount of information that exchanges hands in the course of medical care, implementation of information technology lags that of other industries. And quality control techniques remain in a state of barbaric simplicity compared to best practices like Six Sigma and Total Quality Management in the manufacturing sector.

The corporate culture of the health care industry desperately needs to change. An entrepreneurial revolution that builds new patient-centered and quality-focused businesses from the ground up is far more likely to succeed than diktats handed down by the U.S. Department of Health and Human Services.

It used to be that Virginia is for lovers. Now it seems that Virginia is for shooters.

Fact One: Democrat health care negotiators have buckled to demands to exempt union contracts from the tax on high-end health plans until 2018, five years beyond the start date for other workers. The deal represents a giveaway to the unions of $59 billion. (See the Wall Street Journal coverage for details.)

Fact Two: Only 4.1% of Virginia’s workforce has union representation — the fourth smallest percentage of any state in the nation.

One of the initiatives that Gov. Tim Kaine fought hardest for was expanded access to pre-K programs for at risk children. It was an “investment,” you see. Pre-K programs would better prepare children for Kindergarten and 1st grade. The kids would do better in elementary school, fewer would get discouraged and drop out of high school, and fewer would end up on welfare or wind up in jails. Twenty years later, taxpayers would reap the rewards in the form of lower social services costs.

Eliminating the state corporate income tax sounds like a crazy idea when the commonwealth is facing $4.2 billion revenue shortfall in the Fiscal 2011-2012 budget. After all, the Kaine administration expects the tax to bring in $660 million, or 4.7% of all General Fund revenues.

But is it really so crazy? Only if you engage in static revenue analysis, assuming that cutting the tax — and putting $660 million back in the hands of Virginia businesses — would do nothing to stimulate economic expansion, job creation and revenues from other taxes.

A group of Richmond-area businessmen led by Bob Marcellus, a hedge-fund manager and global trader, has been working behind the scenes to get Gov.-elect Bob McDonnell on board with the idea, pushing the angle that the tax cut would stimulate job creation and, perhaps, even pay for itself. According to the Times-Dispatch, Del. Harry R. Purkey, R-Virginia Beach, has submitted legislation in the House, and Sen. Ryan T. McDougle, R-Hanover, has said he would do so in the Senate.

So far, McDonnell has been noncommital. “It’s an innovative idea and something that we are looking at,“ Eric Finkbeiner, director of policy with McDonnell’s transition team, told the T-D.

I can understand why McDonnell is cautious. He is obligated by the state constitution to balance the budget, and $4.2 billion is a big hole to patch, especially following the belt-tightening measures already instituted by Gov. Tim Kaine. Eliminating the corporate income tax would make that hole even bigger if it failed to pay for itself through extra tax revenues from accelerated economic growth. Unlike Barack Obama, McDonnell doesn’t have the luxury of borrowing money to finance the government. He has no margin for error.

Gov.-elect Bob McDonnell no doubt feels constrained by his campaign promises to address Virginia’s transportation needs without raising taxes, in other words, by grabbing money from whatever miscellaneous source he can find it. But with the state’s acute fiscal crunch, it won’t be easy to find much cash laying around. Sooner or later, he may be forced to adopt the proposition that the people who pay for roads should be the people who use them and benefit from them.

As the head of the political party in Virginia that putatively believes there’s no such thing as a free lunch (at least when it comes to providing government support to welfare queens), McDonnell should have an intuitive understanding that people will always demand more of something if they perceive it to be free (or if someone else is paying for it). Whether he can buck the Republican Party’s suburban, auto-dependent constituency and tell the people who voted for him, “You want new and better-maintained roads? You’ll have to pay for what you use,” will be one of the big questions of his governorship.

Here is some suggested quick-and-easy reading that might get McDonnell on the right track (hat tip to Ted McCormack for bringing these articles to my attention):

• “Vaporizing the Gas Tax Myth,” by Jack Finn, national director of toll services for HNTB Corporation, makes several pertinent points. “There is no such thing as a free road.” If you don’t pay the cost of maintaining your transportation system, it will degrade over time. “Roads don’t pay for themselves.” Citing research from the Texas Department of Transportation, he notes that no road completely pays for itself over a 40-year lifespan. “The gas tax isn’t what it used to be.” The purchasing power of fixed gas taxes have been eroded by inflation. And the shift to more fuel-efficient cars will erode the tax even more.
• “Should Drivers Be Taxed by the Mile?” The Texas Transportation Commission has directed a study on an alternative to the gas tax: taxing by the mile.
• “Death to Dead Ends: Will the New Suburbia Omit Cul-de-Sacs?” This article in Fast Company profiles one of Gov. Tim Kaine’s more noteworthy accomplishments: legislation requiring that new cul-de-sac subdivisions create through connections to neighboring developments. This is a critical reminder that finding a funding solution for transportation only addresses one piece of the transportation quandary. We also need to re-think our human settlement patterns.

Here’s my humble proposal. Start transportation funding reform by pegging Virginia’s gasoline tax to whatever it costs to maintain state roads. No money for new projects — just pure maintenance. If maintenance costs go down (thanks to better VDOT management, outsourcing, lower raw-material costs, whatever), then the gasoline tax goes down. If maintenance costs go up (the more likely scenario), then the gasoline tax goes up. Ideally, we would peg the gas tax high enough that we can start working through our backlog of decrepit bridges over a period of, say, 20 year years.

Here’s the case we make to the people of Virginia: There are no free roads. If you use Virginia roads, you have an obligation to help pay to maintain them. The gasoline tax will do that. Gas tax money will not be used to fund boondoggle mega-projects across the state. It will not be used to make developers rich by opening up new land for development. It’s the closest thing we’ve got to a user fee. You use the roads, you burn gasoline, and you pay your fair share.

With a floating tax, it won’t matter if people buy more fuel-efficient cars. If less gasoline is consumed, the tax will rise. At some point, as motorists shift to electric cars in large numbers, the deficiencies of the gas tax will become readily apparent. At that time, we prepare for the shift to a tax based on Vehicle Miles Driven.

A floating gas tax doesn’t address how we pay for new roads. (Other means are preferable, as we have discussed elsewhere.) But at least we can maintain our multi-billion dollar investment in the roads and bridges that we already have. As a bonus, we’ll move one step closer to the Risse-Bacon bedrock principle that people must pay their full location-variable costs, the single-most important of which is transportation.

On Jan. 18, 2001, President Bill Clinton sat in the Oval Office and gave his farewell address to the American people. The nation had enjoyed eight years of peace and prosperity, he said proudly. The economy had created 22 million new jobs. And the fiscal health of the nation had never been stronger. As the nation looked ahead, he said, it needed to maintain its record of fiscal responsibility.

Through our last four budgets we’ve turned record deficits to record surpluses, and we’ve been able to pay down $600 billion of our national debt, on track to be debt-free by the end of the decade for the first time since 1835. Staying on that course will bring lower interest rates, greater prosperity, and the opportunity to meet our big challenges. If we choose wisely, we can pay down the debt, deal with the retirement of the baby boomers, invest more in our future, and provide tax relief.

Nine years ago, Americans were facing a very different kind of budget quandary than they are today. Budget projections indicated that surpluses would grow to $625 billion a year by the end of the decade. The big question was what to do with all the money. Cut taxes? Invest in education and the environment? Put Social Security in a “lock box”? Pay off the $5.7 billion national debt?

It was a wonderful dilemma to ponder. But it didn’t last long. Consider where we stand today.

The national debt has surged past the $12 trillion mark — double the level when Clinton gave his speech — and the Obama administration has forecast that the nation will add another $9 trillion by 2010. The Congressional Budget Office is even more pessimistic, projecting that another $11 trillion in deficits will pile up by 2010. It’s probably a good thing that the feds don’t conduct 20-year forecasts or they might spark a panic. That’s because the really big expenditures on Medicare, Medicaid and Social Security start kicking in a decade from now, pushing spending levels remorselessly higher.

Today the question isn’t whether we should pay off the national debt, it’s how long we can continue adding to it before the whole system collapses. How did we reach such a state of affairs in nine short years?

The two dominant political clans — the Hatfields and McCoys of American politics otherwise known as the Democrat and Republican Parties — would have you believe that it’s all the other’s fault. The sad truth is, there is plenty of blame for both. Since 2001, neither party has been serious about controlling the deficit.

The point may seem obvious to some, but it apparently eludes bloggers and TV’s talking heads who peddle the official party line, admitting no flaw and conceding no weakness. I dwell upon the issue because in my experience in personal conversations and as moderator of the Bacon’s Rebellion blog, an Internet forum where people of diverse perspectives actually do debate civilly, many people are more interested in exonerating their partisan favorites than fixing the problem. The sad reality is that, while balancing the budget is something that everyone says the U.S. ought to do, it isn’t at the top of anybody’s list of priorities. Given a choice, Democrats would rather jack up domestic spending and entitlements every time. Republicans would rather cut taxes and project national might overseas. As long as the elephants can pin the blame on the donkey, and vice versa, no one has to take ownership of their own actions.

We now know that the nation’s fiscal health was not as sound in January 2001 as President Clinton thought it was. Indeed, following the collapse of the dot.com bubble, the economy slipped into recession by March — only two months after Clinton’s speech. Then on September 11 the unthinkable happened: Islamic terrorists hijacked four jets and slammed two of them into the twin towers of the World Trade Center. Markets panicked and the slump deepened. Federal revenues took a dive and the surplus evaporated.

The terrorist attack also highlighted the U.S.A.’s lack of military preparedness. Following the collapse of the Soviet Union, the Clinton administration had overspent the so-called “peace dividend.” To respond to the challenge of fundamentalist Islamic terrorism, the Bush administration ramped up spending across the board on the military, homeland security and intelligence. While the invasion of Iraq was discretionary and arguably unnecessary, few disputed the necessity of spending more money to ensure that a repeat of 9/11 never reoccurred.

Finally, against the backdrop of the wobbly economy and war on terror, Congress let expire in 2002 a piece of legislation that had been crucial to holding deficit spending in check over the previous decade. Reneging on his famous vow, “Read my lips: no new taxes,” George H.W. Bush had agreed to a budget deal that included the Budget Enforcement Act of 1990. By conceding modest tax increases, he won important spending caps that helped restrain spending through the Clinton years. Unfortunately, his son, George W. Bush, had to work with a Congress that had no such institutional brake on its appetites.

Democrat spin-meisters tend to forget that Clinton had a partner in restraining spending: a Republican Congress. By putting Republicans in charge of both houses of Congress in 1994, for the first time in 40 years, voters sent a clear message that they wanted an end to fiscal business as usual. A champion of smaller government, House Speaker Newt Gingrich deserves much of the credit for pushing through welfare reform and other budget-tightening reforms. By 1996, small-government Republicans were so firmly in control of Congress that Clinton acknowledged the obvious, declaring, “The era of big government is over.”

While Republicans and Democrats alike share credit for balancing the budget in the 1990s, president George W. Bush bears much of the responsibility for letting deficits run amuck in the 2000s. Bush’s defenders could argue, like President Obama does today, that he inherited his fiscal problems. After all, the economy went into the tank two months after he stepped into office, and 9/11 took place after nine months. Had Clinton not drawn down military spending so much, Bush wouldn’t have had to ramp it back up so much. But other big fiscal decisions were his. Bush fought for tax cuts as an economic stimulus. He expended political capital to gain support for the budget-busting war in Iraq. He launched the two biggest expansions of entitlements in years, the State Childrens’ Health Insurance Program (SCHIP) and Medicare Part D, the prescription drug benefit. And he tolerated Congress’ growing predilection for pork, allowing earmarks to multiply like feral swine.

The administration’s insouciance toward deficits was captured in a famous story told by Bush’s first Treasury Secretary, Paul O’Neill. During a meeting of the Economic Policy Group O’Neill argued against the proposed tax cut. Government, he argued, needed the money to fix Social Security and Medicare, redesign the tax system and fund the ongoing war on terror. Vice President Dick Cheney disagreed. As O’Neill remembered Cheney’s retort: “When Ronald Reagan was here, he proved that deficits don’t really matter.”

Animated by Cheney’s advice, the Bush administration followed the easy fiscal path, borrowing record sums to pay for guns and butter. On the day Bush took office, the national debt stood at $5.73 trillion. On the day he left office, it had risen to $10.63 trillion — an increase of $4.9 trillion, and the most spectacular run-up since the United States mobilized for total war in 1942.

President Barack Obama rightfully criticized Bush’s fiscal recklessness during his presidential campaign, but he conveniently forgot that the Democrats, who had recaptured control of Congress in Bush’s final two years, passed the budget bills that he was now denouncing. Posturing as a fiscal hawk, Obama continued to blame his predecessor for the worsening fiscal straits when he took office. As he said during a high-level summit one month into the job:

This administration has inherited a $1.3 trillion deficit — the largest in our nation’s history, and our investments to rescue the nation’s economy will add to that deficit. We cannot and will not sustain deficits like these without end. Contrary to the prevailing wisdom in Washington these past few years, we cannot simply spend as we please and defer the consequences to the next budget, the next administration or the next generation.

After saying all right things, Obama proceeded ignore his own advice. After signing a $797 billion stimulus package, to be paid for all with borrowed money, he employed TARP money to bail out Chrysler and General Motors, a use which Congress had never contemplated, and he made his top legislative priority the overhaul of the U.S. health care system, an initiative that would add, depending upon the particular bill in question and who was conducting the analysis, upwards of hundreds of billions of dollars to the national debt over the next 10 years. The budget shortfalls would be even bigger in the out years.

While the Congressional leadership made an effort to give the health care bills the appearance of being “budget neutral,” the debate bogged down in back-room negotiating over whose ox would be gored to cover for the cost of the initiative, variously estimated between $800 billion to $1 trillion over 10 years. The problem was, the Democrats’ version of health care reform was a zero-sum game. For every winner (someone who gained access to health care insurance), there would be a loser (someone who paid the fees and taxes marbled throughout the legislation). In the end, the debate degenerated into a classic exercise in dodgy accounting and redistribute-the-wealth politics. Other than a few promising pilot programs, none of many proposals floated by Democrats would have boosted productivity or improved patient outcomes enough to bend the long-run cost curve downward.

The Democrats may believe Obama’s rhetoric about fiscal responsibility, but the American people do not. Toward the end of 2009, public opinion polls showed flagging approval ratings for Obama generally, opposition to “ObamaCare” specifically, and a throw-the-bums-out mindset universally. Despite Obama’s lingering personal popularity, Americans disapproved in September of his handling of the federal deficit by 58% to 38%. As the year came to a close, the public mood soured even more. A Nov. 30 Rasmussen poll showed that 71% of voters said they were angry at the policies of the federal government — up five points from September — and 46% were very angry.

The American people are clearly focused on something that the political class, growing fat on unprecedented spending, would prefer to sweep under the rug: The federal government faces massive unfunded liabilities with Social Security and health care. With no credible plan for making good on the old entitlements, the nation cannot afford to be making new entitlements. The bail-out and stimulus money may be helping the Wall Street tycoons, the United Auto Workers and incumbent Democratic Congressmen, but it isn’t helping ordinary Americans. All they get is a mountain of debt that propels the nation ever faster toward Boomergeddon.

More than 200 years ago, the economist and moral philosopher Adam Smith observed that there is much ruin in a nation. The United States is a great nation. We have great strengths, not the least of which is the entrepreneurial vitality of our economy and the adaptability of our people. And it will take a lot to ruin us. But ruined we will be if we continue down the path we’re on.

There are four primary drivers of our looming budget disaster: Social Security, Medicare, Medicaid and interest payments on the national debt. The numbers are well known, and I shall not dwell on them at any length. My main purpose is to avoid mushing them all together into one big SocialSecurityandMedicareandMedicaid crisis, to borrow Ezra Klein’s phrase. By examining each one in turn, we can gain a keener appreciation of the problems we face.

In brief, here is the argument that I shall lay out. Social Security is a problem but it is not beyond redemption. Tweaks to the system made within the next few years should suffice to put the program on a firm footing that will survive the stress of Baby Boomer retirement and old age — although there is no “lockbox” to protect Social Security in the event of a total fiscal meltdown. Medicare and Medicaid, meanwhile, are disasters unfolding before our very eyes. If left on auto-pilot, they will precipitate the melt-down. End of story. The one ray of hope is that everybody agrees that a problem exists, even if no one can agree on a remedy.

Finally, there is the interest payment on the national debt. Of all the fiscal challenges facing the nation, this is the least appreciated by the American people — and the most threatening. While there is at least the theoretical possibility that runaway health care costs can be contained, by rationing if nothing else, there is no way to finesse the snow-balling size of the national debt. A debt burden that grows at an accelerating rate is a mathematical certainty.

As long as we depend upon foreigners to lend us the money, we have limited options for dealing with that debt. If American citizens were the only significant creditors, as Japanese citizens are the primary creditors to their own government, we could play the usual redistribution-of-wealth politics that allow us to rob Peter to pay Paul. But the Chinese, Japanese and Persian Gulf oil states are not subject to Congressional jurisdiction. We cannot tax them, fine them or regulate them, nor can we sneakily devalue our debt through inflation or talking down the value of the dollar. Our foreign creditors don’t even have to yank their trillions of dollars in loans to bring us to our knees. As long as we’re running trillion-dollar deficits, all they have to do is stop lending us new trillions, and it’s Boomergeddon time.

My posting on Bacon’s Rebellion has been sparse as of late because I am dedicating my spare time to writing a book. As the occasion arises in the future, I plan to post passages from the book or ruminations on related topics with the expectation that readers will set upon them like a pack of hyenas upon a kudu carcasse and rip them to shreds, thereby exposing factual or logical weaknesses.

In the health care debate, there’s plenty of talk about so-called “market” principles as being especially desirable to improve quality, and contain costs. Any form of “government” is considered bad. Whatever the big insurance companies want is considered “good” because they are typically for profit firms.