The Practical Realist

North Korea has just successfully tested a “good” nuclear bomb. Their scientists know they’ve figured out the technological hurdles, and it now becomes an issue of scaling up the process so that a greater arsenal can be stockpiled. This is, to put it bluntly, just about as great a threat to global security as one can imagine.

Even a nuclear-armed Iran would have to give pause before attempting to “wipe Israel off the map”. Its people may have no great love of Israel, but they understand the principle of mutually assured destruction.

By contrast, the people of North Korea are so thoroughly crushed and cut off from the outside world that there is no legitimate expectation they would ever attempt to rise up against a government willing to bring about nuclear war and its certain retribution. This means that a sufficiently deranged North Korean leader probably would order a nuclear first strike once he had the ability.

Consider for a moment that Kim Jong-Il is believed to be in terrible health, and he has no successor publicly named. In his mind, he may have nothing to lose and everything to gain by hitting us and our allies with the biggest weapon his scientists can give him. And deployed with their increasingly sophisticated long-range ballistic missiles, such a first strike could conceivably be against our own western shores.

The trouble is, how do we deal with a proven nuclear state that is essentially a medieval fiefdom existing in modern times? Negotiations have proven almost fruitless. I concede that they did stop production at their Yongbong facility. That was their outward pretense at good faith, and so their stockpile of nuclear material is not as great today as it could have been.

Yet clearly the laboratory research never stopped. There is no way that the 6 weeks since the 6-party talks broke down was sufficient time to prepare a new nuclear weapon test. They simply needed the talks to fall apart before they could conduct it. That the latest test happened so quickly, and so successfully, we must conclude that the research program never even paused. And the bogus satellite launch last month was merely the North Korean way of sabotaging talks once that test was ready.

I think a military solution may now be the only credible option. We have legitimacy on the international stage because we attempted negotiation with good old fashioned carrot and stick diplomacy. We can point to multiple UN resolutions to demonstrate our sincere efforts at multilateralism. And while I dread to contemplate what war with North Korea could bring about in human cost, I think that we have proven all other methods are doomed to failure.

So, if it is to be war, how should a war with such a state be waged?

The first clear action is to halt humanitarian supplies. South Korea, China, and UN aid shipments are essentially propping up the country, as the assumption has been that a humanitarian crisis there would send waves of refugees out into the region, destabilizing nearby countries. And that’s a valid concern. So, prior to the cessation of humanitarian shipments, the most likely border crossings should be identified and transit routes prepared to assist the expected refugees’ journey to the nicest refugee camps that can be fashioned in a short amount of time.

The purpose of these refugee camps will be to both provide for basic needs like food and shelter, as well as to introduce these people to the outside world. There should be high-quality recreational facilities for playing, and lots of bathrooms with hot showers and fluffy towels. There should be outdoor movie screens that show fun, family-friendly movies every evening the weather will permit. And while not the Ritz-Carlton, these camps need to be demonstrably more enjoyable than whatever their old lives were.

Back in North Korea, the initial air-strikes should be targeted at the political leadership, and their emblems of authority and prestige. The people need to see that we are not seeking to hurt them, only their leaders.

The follow-up ground invasion should proceed with a simple dictum: ‘join us and be fed - fight us and die’. Every territory established under the rule of the occupying multinational force will see full resumption of humanitarian aid, as well as a few perks, such as road repairs and free clinics. The goal is not to kill an enemy, but to replace a regime, and do so with as many survivors among the population as possible - military and civilian alike.

In the end, I think the civilians will flock to areas controlled by the coalition, leaving the leadership increasingly alone and irrelevant. Plus, unlike Iraq, we won’t disband the army once the leadership is out of power. We’ll simply raise their wages and turn them to the task of rebuilding and improving their own country.

And rather than try to build a brand new democracy, our goal should be to facilitate reunification of the Korean peninsula, leaving the South Korean government to rule the entire country. Once our presence is no longer needed in fighting the army of North Korea, our troops should begin withdrawing from the region. If there is an insurgency, and I think it would be unlikely, it need not be our problem.

I don’t imagine it will be cheap, but in the long run I think we’ll be better off fixing North Korea than defending ourselves against it.

On the one hand, I strongly support the goal of universal coverage for all Americans. And I agree it has to be affordable to everyone. But the Obama plan, high-minded though it may be, has some serious shortcomings showing up in the deliberations in Congress.

They say they’re going to require all Americans to get health insurance. And they want to subsidize coverage for families making under $88,000 per year. That might sound good, but it’s going to drive up costs by piling everyone into the same broken system we have now. When more money is available to pay for a particular good, but no new supply is created, it will become more expensive. You’ve simply altered the supply and demand curve.

Real reform will come when public health care is managed by a national health system of some sort, one where every level works exclusively for the benefit of the patient rather than profit. The fundamental shortcomings of the health care system we have today are that it makes more money from sub-standard care than it does from superior care, and that costs go up at every stage of delivery for administrative and procedural reasons that do not improve patient outcomes.

For those who have been priced out of the current system, the proposed plan will get them into the health care system at a point other than the emergency room. That alone will be a positive, since about 40% of emergency room visits can be treated ahead of time by preventive care, and at a much lower cost. But the underlying problems that cause health care to be so expensive and at the same time so ineffective are being ignored. And with the subsidies and mandate, we’re essentially throwing the health insurance industry a few hundred billion dollars in taxpayer money that we can ill afford to spend.

If this bill passes without major changes, then the best I can hope for is a wash, where my health insurance premiums plus my taxes add up to about the same as they are now. But except for the uninsured, I suspect most of us will probably get screwed when one or both increase.

A public plan would help, since it would be sure to have lower administrative costs and be able to place some sort of cap on provider costs, but it won’t improve the standard of care. And simply placing a cap on those costs doesn’t do anything about the fact that a hospital makes a lot more money when people have to be re-admitted because they didn’t get the treatment they needed on their initial visit.

On March 30, I wrote that it looked as if Geithner was going to hang on to repayments of TARP funding in order to continue lending it out until it was gone. http://pr.hbblogs.com/2009/03/30/that-feeling-youre-being-had/.

Today I read that Geithner is finally being completely up front about that reality: http://news.yahoo.com/s/ap/20090513/ap_on_bi_ge/us_bank_rescue

I have to know - will we ever get this money back into the federal coffers? Our federal budget now borrows 46 cents for every dollar it spends, and yet we’re going to continue pissing this money away as if we don’t need it. Doesn’t anyone in DC understand that eventually we have to repay our creditors?

There has been much fuss over the recent memos from the Bush administration that appear to authorize the torture of terror suspects. While I’m perfectly willing to admit that the techniques used sounded unpleasant, I also heard quite a few safeguards deliberately written in so as to prevent any lasting harm to the interviewee. What I have not yet heard is whether anyone died from this torture or suffered permanent physical damage. Honestly, the techniques seemed designed not to even cause much pain. Slapping stings for a moment or two, and I know having water up your nose is incredibly uncomfortable, but as torture techniques go, they all seem rather tame. Forced nudity? Uncomfortable positions? Sleep deprivation? I can understand why John Yoo at the Justice Department thought these techniques fell short of actual torture.

Perhaps I’ve simply been desensitized by the media, but when I think of torture, I think of hot pokers being shoved into sensitive areas, the use of dental equipment without anesthetic, or stretching someone out on a rack. I don’t think of being forced to hold still in a painful position or of being slapped in the face.

The problem, as I see it, is that the definition of torture is far too subjective. Is causing any pain while questioning someone really torture? Is any level of fear-inducement unacceptable? Here is what the Geneva Convention on torture actually says:

For the purposes of this Convention, the term “torture” means any act by which severe pain or suffering, whether physical or mental, is intentionally inflicted on a person for such purposes as obtaining from him or a third person information or a confession, punishing him for an act he or a third person has committed or is suspected of having committed, or intimidating or coercing him or a third person, or for any reason based on discrimination of any kind, when such pain or suffering is inflicted by or at the instigation of or with the consent or acquiescence of a public official or other person acting in an official capacity. It does not include pain or suffering arising only from, inherent in or incidental to lawful sanctions.

Obviously, we have to keep our international treaty obligations, but what exactly are those obligations? Do you know where the line between severe pain or suffering and moderate pain or suffering lies?

I also understand the argument that if we torture, eventually our soldiers will be captured and tortured as well. But against Al Qaeda I have little reason to believe that any captured American soldier would not be tortured, regardless of how we treat our own captives, so in asymmetric warfare that particular argument loses some of its weight.

If the Geneva convention on torture is to have any legal authority, then it needs to include precise language delineating the difference between torture and non-torture. If we did torture, then we have got to have prosecutions. And if we didn’t, then we need to move on and leave this painful chapter in the past.

Tim Geithner made the Sunday morning talk show circuit yesterday, making his case for the way the administration is handling the ongoing financial crisis. When he went on ABC’s program with George Stephanopoulos, he revealed that the Treasury thinks it has $135 billion left in uncommitted TARP funds. This was news to George, since his own fact-finders estimated there was only $32 billion remaining. The discrepancy, according to Secretary Geithner, was explained like this:

“Now that, that estimate includes a judgment, a very conservative judgment, about how much money is likely to come back from banks that are strong enough not to need this capital now to get through a recession. But that’s a reasonably conservative estimate. And it gives us, and this is very important, substantial resources to move ahead with this broad based sweep of initiatives to help get the financial system back in the business of providing credit.”

Now, that to me triggers major alarm bells when I hear it. What it means is that the taxpayer isn’t going to be made whole when the money starts coming back. Instead of returning as revenues for the federal government (thus reducing our need to tax or borrow), the Treasury clearly expects that any repayments can be used for continuing bailouts.

To put it another way, the $700 billion TARP program is changing once again. Apparently, that money is going to be re-distributed over and over until the Treasury finally can’t get any of it back (at which point it’s time to ask Congress for more).

Honestly, I haven’t read the TARP authorization (but hey - hats off to anyone with that kind of time!), so I have no reason to doubt the legality of what the Treasury is doing. But we were sold something different. We were told that this huge allocation of taxpayer money wasn’t so much a spending spree as it was a bad investment. Sure, all but the rosiest projections assumed we would lose some of that money, but we’d get most of it back in the end, and in return we’d save our banking system. But so long as every dollar that DOES come back returns to Treasury rather than the taxpayer, it’s just a countdown until it’s gone.

I’m not a pot user, and I never have been. I never saw the point, but that’s just me. The few people I’ve been around when they were high seemed happy enough, but they acted and talked pretty stupid. I’m not their judge, but I’m not interested in it either.

That said, why the heck are we throwing people in jail for it? They may be stupid while they’re high, but who are pot-heads actually hurting? Most research shows that they aren’t even hurting themselves anymore than if they were taking an occasional cigarette. Nearly every problem we have with pot - the gangs, the rising costs of prisons and law enforcement - would all disappear if it were simply legal. And not only would we have a reduction in crime, but we’d be able to regulate it, tax it, and restrict it from being sold to minors far more effectively than we can now.

But I’m not going to try listing more reasons why it should be legal. In a free society you don’t NEED reasons to make something legal. Things should be legal by default unless there is a reason for them not to be. So the real question is: why ISN’T pot legal? Every reason I’ve ever heard (it impairs judgment, it makes people act stupid, it’s unhealthy) is at best an argument for helping people get treatment, but more likely an argument for moderation and self-control by individual users - same as we expect from people who drink beer.

I was pretty annoyed at Obama’s flippant response to millions of his constituents who came to the same conclusion I did. Why shouldn’t we legalize pot, tax it, and regulate it? It wasn’t a joke to them, and most of them voted for him in the elections.

Instead of arming the cartels, the money we spend on drugs like marijuana and cocaine should be staying in this country - going toward the production of safer drugs, as well as taxes that fund drug rehab programs. The war on drugs has been such a dismal failure, and such a waste of money, that the public is finally starting to call for a change in tactics. Let’s hope the politicians start paying attention.

Fires are expensive to put out. I mean really expensive. You have to get brave, highly trained and physically fit men and women willing to endanger themselves in order to rapidly deploy sophisticated fire suppression equipment. The equipment itself is costly to begin with, and it has to be expertly maintained or else it may not work when property and lives are depending on it.

Right now, the local government is responsible for maintaining fire stations, with subsidies coming from the state. And to help pick up the excess, we have volunteers and community fundraisers. Essentially, we all pay for it through taxes (or donations), and we trust the government to run the whole system on our behalf.

It works to some extent, I guess. But maybe it’s not the best way. It may be time to harness the proven power of the free market to do things more efficiently.

First off, why do we pay to have fire houses even when there aren’t fires? Maybe we should only pay fire crews when they put out fires. The rest of the time, what good are they really? And instead of forcing everyone to pay for the stations, maybe we should move the burden to the individuals who need to be evacuated from a burning property, as well as the property’s owners. After all, who else really benefits from having the fire crews come out?

I can imagine it might be a little upsetting to have your home damaged or destroyed by fire, and then still have a $50,000 bill for the fire crew’s services, but how is it fair to ask anyone else to pay? And besides, you can always get fire insurance. There’d probably be a deductible - maybe you’d have to pay for the first couple thousand, and then the insurance company can pay for the rest.

Of course, there might be less emphasis on fire prevention then we have now. Maybe the fire marshall wouldn’t be quite as concerned about fire safety checks of new buildings, seeing as he and his crew make most of their money when they actually extinguish fires. And I suppose once a crew actually arrives to put out a fire, there might be some incentive to use more expensive fire suppression techniques then may actually be necessary, but then again, your fire insurance policy would pay for it, not you.

And sure, fire insurance premiums might be a little too expensive for everyone to afford, but most people could probably get a policy through their jobs. And as for the uninsured - well, they might have to face bankruptcy in the event of a fire, but ultimately the people who have insurance would make up the difference. That would raise costs further on them, but at least the market would be in charge of rates and not some incompetent government bureaucrat.

And on the up-side, if a for-profit fire crew accidentally fails to rescue a family member from your burning house, it would probably be a lot easier to sue them for malpractice than today’s legally unaccountable firemen - people who under the current system can’t even be sued unless they practically set the fire themselves. In fact, that might make a for-profit fire crew motivated to do a much more careful job than today’s government-run crews, even if the extra care meant slightly more expensive techniques. And hey, if they did get sued, they’d probably have fire-fighting malpractice insurance to pay their legal costs.

It’s a neat thought, right?

Right?

Ok…

So maybe you already guessed this is actually a satire on our health care system. But it brings up a point. Why is it that when you call 911 and the operator asks ‘fire, police, or ambulance?’ only one of those three presents you with a bill afterward?

Our system runs on a fee-for-service model. It makes money by treating the sick, and gets almost nothing from the healthy. In a publicly funded system, the government saves money by keeping people healthy and loses money when they get sick. In our system, instead of taxes, we pay for our care through insurance premiums and deductibles. Our insurance companies then try to avoid paying claims, or else pay as little on them as possible, in order to maximize profits for shareholders. A public system also tends to look for ways to keep costs low, but instead of investor profits, cutting costs means lower taxes.

The issue became more important for me personally when my wife had to be taken to the hospital for a gall bladder infection. It was serious illness, and she had to have surgery to get it removed. A few days later, she had to go back to the hospital, because of a common complication of the surgery called pancreatitis.  Now, theoretically, the doctors should have found the gall stone that, by getting lodged in a bile duct, led to the complication, and she could have had it dealt with during the first visit. And to be fair, they did try to find it.

But it brings up a question - what motivation does the hospital have to do a better job? In a publicly-run system, the hospitals don’t make more money when someone has to be admitted more than one time for the same condition. But according to my insurance statement, the hospital in question made almost $40,000 during my wife’s two subsequent trips (the first time the emergency room physician decided to send her home with some anti-nausea and painkiller meds - the condition was only found and treated on the following visit).

Essentially, the hospitals and doctors are motivated to do a good enough job to prevent getting sued. And there’s little incentive to treat cheaper, more minor conditions before they become serious. In a publicly-funded system, every health care provider is guaranteed the same salary regardless of how expensive the treatments are. And cheaper treatments that can avoid more serious complications later are going to be pursued at every level. In every industrialized country that has a universal public health care system, the result is a healthier citizenry that spends less money per capita on health care than we do. Click the image below to learn more about that.

One of the oldest laws of economics says that, if you want more of something, subsidize it. Our health system makes more money off sick people then healthy ones. Maybe there’s a reason we have so many.

But hey, maybe I’m missing something. If you think it makes sense to have a for-profit health system, but not a for-profit fire department, I’d like to hear your reasoning in the comments.

Somewhere in a back-room in DC, a small group of powerful men fretted about how they could possibly redirect the public outrage over the soon-to-be-revealed details about the final disposition of most of $180 billion taxpayer dollars.

The sum was staggering, but that was a point in their favor. Once people start stringing phenomenal-sounding numbers together, be it hundreds of millions or hundreds of billions, it all starts sounding the same. So yes, the billions sent to Goldman Sachs, Societe Generale, and assorted smaller players would surely make the news, but if they could manufacture a sufficiently noisy scandal, they figured they could redirect public rage against those whose only crime was asking the government to stop their firm from going out of business. The distraction was so brilliantly executed, and the media so willing to lap up every tidbit of mock outrage, that all public discussion of those irrevocably squandered billions now seems like so much silence.

Does no one else realize what happened? Banks who decided to make risky loans, covered by these exotic policies, absolutely should have been forced to face at least some of the consequences of those loans. We didn’t bail out AIG so much as we bailed out these banks whose fast and loose credit policies inflated the housing bubble and wrecked the global economy.

Obama was never outraged by bonuses. If he were, he could have said so last month back when Treasury was first alerted to the fact that they were about to be paid. But if the whole distraction engine hadn’t gone into high-gear when it did, we’d all still be talking about how incredibly stupid our government officials were (and former candidate Obama prominently among them) to spend so much money to prop up AIG, without so much as an assurance from the assorted policy-holders that they’d be willing to accept a reduction in their payouts. Prior to the bailout, we had the leverage. The insured were facing the risk of getting almost nothing if AIG were simply allowed to collapse. For some reason, we discarded that leverage in our rush to fill the ultimate money pit.

It’s an old saw that when the government has to bail out an institution for whatever reason, the investors and creditors are forced to take a major hit, and the taxpayers are always the first to be repaid once the business returns to profitability. Somehow I don’t imagine that many of those billions will ever be recovered, and I don’t think 80% of AIG is much compensation.

So why didn’t it happen this time? I don’t know anything for certain, but I don’t believe it’s mere coincidence that one of the largest holders of credit-default swaps was Goldman Sachs, and that prior to becoming Treasury Secretary, Hank Paulson was its CEO. He had to know how much his old firm was counting on those policies paying off, and if you think that wasn’t an ever-present thought in his head as he was negotiating the original AIG bailout, then I’ve got a sweet deal on a bridge just for you.

But while I’m mad as heck over finding out where the money went, I’m angrier over the crucifixion going on over those bonuses. A few key people came up with the idea for these exotic policies that ultimately tanked the entire capital position of the world’s largest insurer. For them, I have no sympathy. But they stopped selling them in 2006. The outrage over those key executives’ compensation is already 3 years out of date.

So who got the bonuses this year? Most of them are just regular employees. Some of them might have had a hand drawing up those credit default swaps a few years ago, but they were just doing their jobs. And even the executives who were present when AIG reported that $60 billion loss in the fourth quarter aren’t all responsible. They were simply at the helm when the federal government used their company as a conduit for passing money to assorted financial institutions.

In my book, $165 million dollars is so much less than $180 billion that I simply cannot fathom why people are even paying attention to it. Be mad, but not at the people who got paid for doing their jobs. Be mad at the ones who pissed away a trillion dollars (and counting) in Wall St bailouts.