Natty Bumppo Economics

The recently completed $38 billion battle of brinksmanship over next year's federal budget is going to look like child's play in comparison to the upcoming showdown over the need to increase the debt ceiling. So, so much more is at stake, including the dollar's status as a reserve currency. And yet, our congressional "leaders" have declared a recess until sometime in early May, only a couple of weeks before the Treasury hits the debt ceiling. No doubt the recent move in gold and dollar weakness reflect an increasing anxiety that the United States Government could actually default. S&P has put the US on credit watch. Without Congressional action we will simply greatly increase the cost of inevitably having to borrow anyhow when Armageddon comes knocking at our fiscal door, and who will want to lend to a deadbeat government? Why would our politicians even play such a game? Is it a form of political conspiracy to bring the government to its knees?

Agreed, carrying unsustainable debt is a sure death knell as well. But debt on the balance sheet comes not only from making poor judgments and being profligate, it also comes from failing to raise revenue. Both sides of the income statement --- expenses AND revenue ---need to be examined by our absentee representatives.

It is wishful thinking, particularly as the economy has been on life support through the Federal Reserve since the 2008 financial crisis, that we can grow enough to offset the tax cuts that have been implemented since the Clinton years. US taxpayers with the highest adjusted gross income have watched their federal tax rates fall from about 30 percent in 1995 to 17 percent by 2007. No argument that we need to simplify the tax code, but tax revenues need to be higher, simple as that. We need to revisit those Clinton rates again, a graduated tax rate without the loopholes. Close as many doors as possible to the underground economy. Eviscerate tax avoidance strategies.

We also need to shore up Social Security by increasing the wage limits for SS taxes -- or how about a similar "donut hole" we give to seniors for their drug needs, taxing wages for social security to a certain limit, then no tax until another higher limit is reached, and then resume taxing for social security revenue. On the expense side of the income statement, means testing will have to be instituted and the retirement age slowly moved back.

The ideas put forth for privatizing Medicare will slowly kill the program, so desperately needed by the middle class. Cost containment measures have to take first priority. A voucher program is smoke and mirrors. Can you imagine the average senior having to make such decisions with insurance companies pulling the strings?

And Medicare being entirely turned over to the States, many of which can hardly make their own budgets balance? Disaster for the poor.

These are huge issues and I don't mean to simplify any of them, but defaulting on our debt is NOT the first step in resolving any of these problems. It will be our last.

The amazing thing about this "movement"-- if it is fair to call it that -- is some of the people who would be hurt the most just say "bring it on, let the government fail." Perhaps this notion harkens back to the idealized Natty Bumppo from James Fenimore Cooper's Leatherstocking Tales. But this is not a mythical tale of American rugged individualism and "one shot, one kill." It is about cooperation and compromise. We need our representatives to do the hard, serious work they were hired to do without all the political posturing and partisanship, and without the brinksmanship of the twelfth hour.

Widow Maker Redux

There is a reason I've been silent so long. In fact, I am lucky to be around to resume the story I wrote last November when I described my silent encounter with the "Widow Maker" artery. The link gives the detail, but briefly I unknowingly had a 99% blockage in the infamous Widow Maker's artery, the LAD. If it were not for the fact that I regularly exercise, the problem would have gone unnoticed, and indeed my case would have resulted in another widow.

At that time, a cardiac catheterization revealed the blockage and I was given the option of less invasive three kissing stents vs. open heart surgery. Naturally, given the choice between the intrusive bypass, the possible complications, and the long recovery, I choose the path of least resistance. After all, couldn't I undergo the more invasive option if the stents didn't work?

Following that procedure, I began a cardiovascular rehab program, which consisted of 36 sessions. Once again exercise saved my life. I was on my 33rd session when I started to feel some burning sensation in my chest after about 15 minutes on the treadmill (I was doing 30 minutes at 3.8 mph). It would generally pass and I rationalized it was gas, but, here is the value of such programs (one that may become vulnerable to cuts in Medicare): the extraordinarily caring cardio nurses on duty reported it to my cardiologist who called me in for a nuclear stress test. I got through the test, so I went about my business again waiting for results the following week.

In fact, immediately afterwards, boating friends of ours from Connecticut, Cathy and John, visited us and over the next four days we took our small boat out to watch the moonrise over Singer Island, ran the boat up to Jupiter the next day to the funky, fun, Guanabanas Tiki Bar and Restaurant where we could tie up at their splintery old docks and enjoy a little bit of the Caribbean right here in Palm Beach County.

The following day we went to Peanut Island, our favorite destination on our boat, watching Tiger Wood's yacht, 'Privacy' (Tiger put the boat up for sale recently if you have a spare $20 million or so and can afford the crew and maintenance) glide by as Ann and company played Scrabble on the beach. We enjoyed lunch al fresco and later barbecued dinner and left as the sun slowly set.
A possible negative report on the stress test was the farthest thing from my mind, and I went about my normal activities as usual. In retrospect, our friends' visit could not have come at a better time.........the calm before the storm. Life as usual.

My follow up appointment with my cardiologist was the day after they left. Apparently, the stress test, combined with the burning symptoms when exercising, called for another catheterization and, as was explained to me, the sooner the better. The following Monday, March 28, I went into the hospital and had the catheterization expecting, at worst, Restenosis, which usually happens within 3-6 months after stent placement and I was still in that time frame from my previous procedure. I thought I would wake up to still another stent or a treatment of intra-coronary radiation (brachytherapy).

Wishful thinking. I was told my Widow Maker was now more than 90% blocked again (turned out later to be 100%) with another artery 50% and I would need dual bypass open heart surgery. There is a delightful acronym for this surgery as it is sometimes called: CABG ("cabbage"). I was to become a cabbage patient. Luckily for me, one of the gifted thoracic surgeons in the area, Dr. Arthur Katz, was available for the task, and also that I was at the Palm Beach Gardens hospital which is a leading heart hospital.

First order of business was to get as much as possible of the blood thinning Plavix out of my system before surgery. I had been on the drug since my first stent more than six years ago. However, knowing that I had such extensive blockage in the LAD (the LAD coronary artery supplies a very large part of the heart muscle) made it a judgment call of how long we could wait. The surgery was scheduled for March 31 but after a blood test, it was delayed one more day (April Fool's day). Our son flew in from Tokyo (where he had been during the earthquake, but that is another story) to be with me and my wife. His presence made all the difference to Ann who bore the brunt of seeing my struggle and trying to communicate status reports to friends and family via email and phone. My older son, Chris, could not be here but Ann kept in constant touch with him.

Dr. Katz specializes in surgery without the use of a heart lung machine (off-pump, it's called), something I was grateful for as I have heard about cognitive recovery and other issues resulting from that. But as it turned out, my operation was anything but routine. First, endotracheal intubation (the process of placing a breathing tube to protect my airway and control breathing during the administration of general anesthetic), became very difficult because of various anatomical issues unique to me. A fiberoptic bronchoscope had to be used after several unsuccessful attempts at direct larngoscopy and glidescope.

Surgery went well initially, using an internal mammary artery and another artery from my left leg, but then there was increasing difficulty controlling bleeding. I had a number of transfusions. In fact, after my sternum was wired and the chest stapled, there were further signs of internal bleeding so for the first time in recent memory, Dr. Katz had to reassemble his OR team and go back into the wound. This carries a risk of course and it is why surgery is as much an art as it is a science.

Thankfully, he was able to control the bleeding at this point, but I had been through the wringer and back again, and had to have half of my body's blood replaced. As I had so much anesthesia, my recovery was to be equally slow and for four days I had that breathing tube down my throat as I went in and out of consciousness. My throat had been lacerated and was now excessively swollen. Waiting for my throat to return to normal, mittens had to be put on my hands so I wouldn't grab the tube when I had brief borderline awareness. Ann said during those moments I was waving my arms, gesturing with my boxing glove hands and giving everyone the fish eye. No wonder.

When I finally came to, I was in intensive cardiac care, pretty much unable to move, and having been unconscious for four days, would now probably be awake for at least two days. Those nights were the most difficult, not being able to move much, trying to get into a comfortable position, forced to lie on my back. I could hear almost every precious heart beat and sometimes the creaking of my sternum which was wired together. Deep into those nights you are left with your thoughts and fears, regrets and hopes.

I could operate a TV on the wall with a remote. It is not possible to realize how bad late night TV is until I became dependent on watching it all night, unable to sleep. I thought it ironic that juxtaposed to my surgery was all the rhetoric on the news shows about shutting down the government because of the lack of a budget compromise, all the posturing and huffing and puffing by the wolves in Washington, the propaganda about "entitlements" and the inexplicable inability of rolling back some of the Bush tax cuts as one part of dealing with the growing deficit. A subject for another entry, but, this is what I listened to as I was personally benefitting from an excellent healthcare system and no doubt a very expensive one, the very one some of our politicians would like to turn over to the insurance companies.

There is no way to describe everything that had to be done to me and for me to pull through, but I had asked my son to take a picture of me in recovery, thinking I might want to post it if I survived the operation. Warning, it is not a pleasant sight, but I include this at the end of this entry. It puts a "face" on Medicare. In spite of all of the shortcomings of the program, as one of the most civilized countries in the world, such care must be available to all. And of course, throughout all of my 15 days and nights lying in that hospital bed, I was looked after by a revolving crew of highly trained nurses who literarily kept me alive changing vital fluids, making me as comfortable as possible with all the tubes and apparatus attached to me and using all their skills and experience to help me survive my arduous surgery. There is no way I could ever thank them properly enough for their dedication and professionalism.

My breathing tube was gone by the time I came to. The third chest drain was yanked out (yanked is the correct word) by Dr. Katz as he diverted my attention to a discussion of where I grew up and my familiarity with Jahn's, a favorite teenage hang-out in Richmond Hill. Strange to be talking about Jahn's "kitchen sink" some fifty years later while a chest drain is being removed. Finally my urinary catheter was removed as well.

Another complication was a sudden spike in fever when I finally got to the regular cardiac unit, so for the next two days I was tied to massive intravenous antibiotics. No one could explain this spike which disappeared as quickly as it appeared other than it being somewhat par for the course.

So now I have been home for a little over a week and thanks again to Medicare, have been closely monitored by an attentive nurse and physical therapist putting me through the paces in the house. I now have follow-up Doctor appointments and have been given the green light to return to cardio rehab next week. While bypass surgery has relatively good prognosis, the fact that I had complications, new blockages, etc., results in some anxiety. I eat a healthy diet, exercise, have always been active, but as I said in my prior entry on the Widow Maker, hereditary factors seem to preside over everything. Will my therapy and new medications offset this deficit? That is the hope.

To friends and family who might be reading this, thank you for all your heartfelt support, for me, and my wife who has been valiant through all of this. Ann was calling, emailing everyone, coming home from the hospital near exhaustion. Her last email after my second (no, actually third) operation in a week is typical of the kind of attention she gave to everyone, in spite of the late hours she returned from the hospital:

Dear Friends and Family,
It's been a day from hell. All I can say is thank goodness Jonathan was here with me, or I would have lost my mind. In short, Bob was bleeding profusely during and after the operation this morning for the double bypass. We saw him very briefly in the critical care recovery room with a million tubes coming in and out. We were home less than an hour planning to return over the next visiting period when Bob's Surgeon, Dr. Katz, called and said he was going back in again, Bob was still oozing and he was reassembling his OR team. That meant cutting his chest open over the fresh stitches, undoing the wiring on the sternum, breaking it again and taking another look.

I thought Jon and I were going to pass out. Once we started reading all the literature on this procedure and all the risks involved, we were totally freaked. When it was finally over, we saw the Dr. and spent 20 minutes discussing everything.

The good news now is that Bob is stable. No profuse bleeding, holding his own. They can't take out the breathing tube yet, however, because he is still in critical care and because he may have suffered lacerations in his throat when it was originally inserted (with great difficulty) and they're waiting for an ENT specialist to examine him.

To update, Jon and I have just returned from our third brief visit at 9:00 this evening and although we are both bleary eyed, I wanted to send this quick, and I hope reassuring, note to you. He is completely stable, but still heavily sedated and was not aware of our presence. He has a dedicated nurse with him all night who is a gem. The ENT Physician had not arrived but was expected at any minute. His heart is strong now, the lungs are clear, all his other vital signs are good and we are confident that he will make a full recovery. .

Drip Your Way to Retirement

Give yourself the gift of a DRIP (dividend reinvestment plan). This advice was made more acutely real to me by a recent visit of my wife's cousins and their 43 year old son, Michael (and his fiancée). I haven't seen Michael in some time and he reminded me that when he turned thirteen I had given him a birthday gift of a few shares of Exxon, with some sound advice of something along these lines: cherish these shares and enroll them in Exxon's DRIP (reinvesting the dividends for more shares), and review their Annual Reports for an education regarding how a large, resource-rich, multinational corporation functions and grows. Now, I'm not sure whether he took the latter part of the advice, but he did enroll those initial shares in Exxon's DRIP and, now, after numerous stock splits and dividend increases along the way, Michael said he now has about 600 shares worth about $49,000! By the time he retires, shares and value should continue to grow, a mighty oak tree from a mere acorn.

I fail to remember why I choose Exxon at the time rather than other dividend paying stocks. Perhaps it was because Exxon was much in the news during the 1970s energy crisis and as that crisis turned to an oil glut in the early 1980s, when the shares were purchased, Exxon's stock price was in limbo. It must have seemed like a good opportunity to buy, but no matter when one does the math, almost any time would have been fine given a thirty-year time horizon. During such a long period DRIPs are subject to a number of compounding events, the reinvestment of dividends, capital appreciation, and the growth of dividends themselves (Exxon's dividend payments to shareholders have grown at an average annual rate of almost six percent during the period).

While always having been partial to dividend paying stocks, especially in this economic environment, I admittedly failed to heed my own advice when it came to DRIPs. I am glad Michael did.
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Engineering Failures and World-Wide Consequences

The similarities between the BP oil spill disaster in the Gulf of Mexico and the ongoing nuclear Fukushima Daiichi crisis in Japan are striking.

Both were unimaginable before they happened. Both the nuclear facility and the oil rig had what was thought to be containment and shut down protection, as well as redundancy features, in the event of a serious accident. In each case, these systems failed. The response to each event was similar, a series of improvisational Hail Mary attempts to mitigate the damage, resembling a disaster movie in slow motion. Each catastrophe has long term consequences to the earth's ecosystem and human health, way beyond the immediate geographic area of its origin. The lack of contingency planning in Gulf crisis is evident again in the Japan disaster.

Surely, given the facts of Chernobyl and Three Mile Island there are commonalities with Fukushima Daiichi. No doubt the first line of defense in the construction of a nuclear facility or a deep water drilling rig has to be containment and redundancy features and bulletproof regulatory oversight, first at the national level, but perhaps with international participation as well. Too bad the UN is not a more effective institution. It needs to be in this area.

Any country that constructs these engineering marvels, for drilling oil in the deepest of oceans, or generating nuclear power, facilities that have world-wide consequences when they fail, should be required by the world community to maintain a national task force with readily available and deployable equipment to deal with catastrophic failure (rather than totally relying on the company responsible such as Tokyo Electric Power or BP). How much time was lost in dealing with Fukushima Daiichi when the tsunami destroyed its redundant pumps and power generating equipment?

Perhaps this may be oversimplification, but if we have the technology to create these engineering leviathans, we should also have the resources for a nuclear (and deep water drilling rig) immediate response task force, a small army trained for this once in a generation disaster, with the necessary deployable equipment (such as generators that could have been airlifted immediately to the Fukushima Daiichi site allowing the resumption of core cooling systems). We only need the universal will. Meanwhile, we all helplessly watch this terrible disaster unfolding in Japan.

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Why Johnny Can't Compete

The horrendous images of the Japanese earthquake and tsunami haunt my consciousness. We have friends there and as I said in an earlier post, our son is presently traveling there (he is safe and has been able to move south more out of harm's way).

Our prior travels in Japan are cherished memories. We developed the greatest respect for the Japanese people, a nation which seemed to reach its economic zenith during our stay as the New Year dawned in 1990. The Nikkei Dow touched 40,000 and Japan was booming. Our domestic press was full of stories about the Japanese having an unfair trade advantage and consequently how America was no longer able to compete with this economic juggernaut. Japan was said to be destroying American industry and would be buying up all our assets. Only a couple of months before the iconic Rockefeller Center complex was purchased by Japan's Mitsubishi Group. "Made in Japan" went from a joke in the 1950s to an economic threat by the end of the 1980s.

The dire forecasts concerning Japan faded over the next two decades as boom turned to bust and it fell into an ongoing deflationary spiral. But today we are saying the exact same things about China's unfair trade advantages, China buying up our assets and holding our debt, almost as if we are victims of outside forces and bear no responsibility for our own economic predicament.

While in Japan in 1990 I was invited to deliver a speech to the Rotary Club of Tokyo Koishikawa on the subject of US - Japan trade relations. When I returned home, I was asked to write an article about our experience, which for one reason or another was not published, probably because its contents did not blame Japan for our own failures.

I think the Japanese economy will recover from this tragedy, although it will take years. Our heartfelt hopes for recovery are with the Japanese people, and for a minimal loss of life and containment of what is appearing to be a serious threat from damage to several of its nuclear facilities. Please consider a donation to the Red Cross for those devastated in Japan.

I recently came across that unpublished article and was not surprised about how little has changed. One now only has to substitute "China" for some of the examples I used for Japan. Our fundamental problem about successfully competing remains: education. The irony is our best graduate schools are attended by some of the finest minds from overseas, but upon their graduation, we give them a diploma without a green card and send them on their way home. But the primary failure here is our public school system, the same failure I decried twenty plus years ago. Nothing has changed and it could be argued that they have worsened.

Given the folly in Wisconsin and the rhetoric of some of our politicians, one would think that our nation is going broke because we overpay our teachers. Of course the converse is true. Why go into teaching when one can become a master of the universe at an investment bank and rake in bonuses? We need great teachers and a better public education system to begin to reverse a continuing decline in our students' performance. "The three-yearly OECD Programme for International Student Assessment (PISA) report, which compares the knowledge and skills of 15-year-olds in 70 countries around the world, ranked the United States 14th out of 34 OECD countries for reading skills, 17th for science and a below-average 25th for mathematics."

The following is what I wrote in January 1990, in many ways as relevant today as it was then:

Why Johnny Can't Compete

In my capacity as president of an academic and professional book publishing company I have had the opportunity to visit Japan from time to time over the past 20 years. Even though our publications are in English, Japan has become our largest market outside of the United States. It has been an interesting sideline of these trips to be able to compare the economic, social, and educational progress of Japan with what I observe at home.

My most recent trip to Japan occurred over the Christmas and New Year holiday season, when many westerners who live in Japan return home, and Tokyo's hotels are given over to craft exhibits and festivals in celebration of the New Year. The Japanese New Year holiday is a major one: people stop working for nearly a week to greet the new year at shrines and temples, and to pay respect to their families. I made the trip this time with my wife and 13-year-old son, and we felt privileged to be there at this special time of year.

By prior arrangement with my Japanese host (the head of the company that distributes our books in Japan), I was to give a speech to the Rotary Club of Tokyo Koishikawa on the subject of U.S.-Japan trade relations as perceived by the American people -- a subject of great concern to the Japanese. I was aware of the symbolism of making such a speech at the end of this past decade. Japan has emerged as a leading economic power, while we, ourselves, perceive our own position to be in decline. While I made an effort to put what America had accomplished in the 1980's in the best possible light and to emphasize how the U.S. and Japan can become equal trading partners with the new opportunities in the 1990's, particularly those created by the decline of communism in Eastern Europe, in retrospect my words seem hollow. I returned with the realization that if we are to truly compete with Japan as the 21st century approaches, our nation will have to undergo radical changes by rediscovering many of the values embraced by Japan.

There is a cultural basis for Japan's success. The resolve to work hard, to be productive, to be well-educated, to respect one another, to be part of the team, and to be patient in attaining goals is the very essence of their culture. It little matters what one does, it only matters how well the work is done. In Japan, the marked contrasts to minimal working standards we have become conditioned to accept are everywhere. Is it no wonder we have difficulty in competing with a society that prides itself in being the best it possibly can be?

In a discussion with my host about such issues he asked, "Why is there a drug problem in the U.S.? Japanese people do not understand why such a problem should exist." "A feeling of-hopelessness," I replied. Thinking about that discussion, I believe that our future success or failure in restoring hope might be at the very core of competing with Japan. This can only be done by completely restructuring our educational system and giving it our highest societal priority.

Quality education is truly available to all in Japan and it is widely perceived to be desirable. Japanese teachers occupy a high status in society and are well paid. Illiteracy is virtually unknown. Even peasants were able to read and write by the nineteenth century. Japan ranked among the most advanced countries of western Europe in educational excellence.

Contrast this to our present situation. Our minimal educational standards have led to wide-spread illiteracy and millions are basically unemployable. The recently released report by the Secretary of Education estimates that 60% of our nation's 11th graders are barely able to read the most rudimentary documents. How and why does our society tolerate this perversion? Only by radically improving our educational system will we be able to ultimately remove the pervasive hopelessness that corrodes our land, drugs our children, and produces the type of wide-spread violent crime that is virtually unknown in Japan.

So, while we are urging Japan to make cosmetic changes to facilitate better U.S.-Japan economic relations, we must make mammoth changes to compete in the long run. What is needed is the equivalent of President Kennedy's pronouncement in the early 1960's that our national objective was to put a man on the moon by the end of that decade. Do we have the moral fortitude to declare that, as a national goal, we can and will create a public education system which is second to none by the end of this decade?

Only until we restore hope, the expectation that one generation can be better off than the previous one and people can find meaningful employment opportunities -- the very ideals which made this country the great melting pot of the 19th and early 20th centuries -- will we be able to successfully compete with Japan in the 21st century.

Things are by no means perfect in Japan. Their dedication to work borders on workaholism; individuals may not have the same degree of freedom to which we have become accustomed. However, for years Japan has been accused of copying the best of western business ways and technology and then improving upon them. In dealing with our economic dilemmas, the time has come for us to adopt some aspects of Japanese culture and, in so doing, rediscover many of the values that once made our country great.

Japan Needs Our Help

Here is the Red Cross site for helping Japan deal with a catastrophe of unimaginable enormity.

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Forces of Nature and Us

We woke up this morning to the news and videos of the powerful earthquake in Japan and the ensuing tsunami and our first thoughts were of our son who is presently traveling in Japan. We were not even sure where in Japan he was at the time. I reached for my phone hoping he would have the good sense to email or text knowing we would be concerned and there it was: "Re: I'm Fine." He is in Tokyo and although he felt the quake, he is in a new building, built to code, so we were relieved.

We were in a 4.8 earthquake once, staying at Tokyo's Okura Hotel, no comparison of course to the horrific magnitude of the one that just hit north of Tokyo, but enough to frighten most hotel occupants from their beds and into the hallways. A quake of 8.9 is unimaginable.

Life is such a series of about-faces. Yesterday as a cold front swept through Florida, we briefly had high winds and torrential rains. It blew our patio furniture around. Then came an amazing tranquil sunset right out our back door. All is well with the world. And, now, a catastrophe of still unknown dimensions in the Pacific. Always hoping for the best, but while nature can invoke its beauty it also underscores life's fragility.

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