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Solution Thoughts

Implementing solutions to many of America's problems will be difficult when there is so much special interest group money in the system. But I am an optimist, so below is a discussion of some thoughts on solving the serious problems.

 

As a physicist, mathematician and financial analyst, I can bring a lot of expertise to solve our country's problems. 

Massive Budget Deficits

The CBO (Congressional Budget Office), a nonpartisan group which provides the U.S Government assistance for its budget preparation, probably knows government finance and ways to reduce the U.S. debt better than any institution. In its 2023 publication "Options for Reducing the Budget from 2023-2032," the CBO provides 19 different possible budget cut areas with great details. In fact, they determined that 10 such of the categories from the list below would result in $5 trillion in cuts over 10 years which would stabilize the debt and put it more in line with historical average % of annual GDP.  

Defense Spending Cuts

The defense budget seems excessive. The 2023 defense budget ($773 billion) was 260% more than China and Russia combined. China and Russia are our biggest threats. According to the CBO analysis, defense spending could be cut by $1.1 trillion over 10 years - primarily a reduction in manpower by 18%-21% . From the CBO report: "The three alternatives in this option provide broad examples of how a force structure might be reconfigured to implement different strategies that aim to deter military aggression under a smaller DoD budget and how the US would react should deterrence fail. The alternatives have not been subject to the analysis and planning that DoD puts into crafting war plans or building Future Years Defense Program (FYDP).  Only units in the active forces would be affected. Units in the reserve forces would remain unchanged. Preserving reserve forces would allow the military to retain the capacity and capability of a larger force at a lower cost. "

Possibly Reduction in some Itemized Deductions 

This would provide $500 billion to $2.5 trillion in savings over 10 years. This is a huge savings.  This would affect higher income earners more than lower income earners (See chart below)

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Below is a list of the itemized deductions. Of course, those that benefit from these deductions won't want to give some of these up. But in addition to cutting waste in government AND restructuring health care to save hundreds of billions in spending over a decade, reasonable sacrifices by Americans seems fair.  Reducing American deficits and debt will result in economic stability over the long run which we and our children will benefit from. Below is a graph of the itemized deductions.  

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Healthcare

Healthcare is one of the ugliest examples of how money in politics ($290 million in recent election) has hurt America and created an overly costly healthcare system (and lower quality)  - see chart below. Solving this problem would also partially solve the massive debt problems in this country. (Health Top Contributors • OpenSecrets).

So, what is the trick? How do other countries create a lower cost better quality healthcare system versus America. 

It is actually not that hard in theory:

1) Get rid of for-profit insurance companies (the U.S. government would buy out shareholders at market value). They do not add value. Simply create not-for-profits (with incentives to do a great job), have them compute the required premiums to cover predicated payouts (a well known problem in actuarial mathematics). If they are short the U.S. Government will cover it. Why would the government do this? For the same reason they do it for mortgages via GNMA, FNMA and Freddie Mac - reduces interest rate on mortgages and the result is huge economic stimulus. Additionally, with the government in essence providing for the guarantee, they can mandate standardization of the administrative process (the signicant cost of health care): a) treatments and procedures by diagnosis; b) fee; c) level of premiums; other. For example, the premium might be 14% (7% by employee and 7% for employer), similar to what it is in Germany. If one does not have a job, the U.S. government would cover. 

Not-for-profit insurance ("sick funds") is how it is done in Germany, and Germany is far cheaper.

2) The prices of medical procedures and drugs are negotiated by the government with the healthcare providers. Thus, with so much leverage, the drug and medical companies must negotiate with the government and as a result the prices come down.

In American, about 1/2 of medical costs are paid by the U.S. government (Medicare, Medicaid and Veterans Affairs). And the U.S. government gets much better pricing via these programs " Based on the reviewed studies comparing Medicare and private insurance rates for hospital and physician services, this brief (source below) finds that private insurance payments are consistently greater, averaging 199% of Medicare rates for hospital services overall, 189% of Medicare rates for inpatient hospital services, 264% of Medicare rates for outpatient hospital services, and 143% of Medicare rates for physician services."

3) All citizens must have insurance (for most of the OECD (37 democratic countries) all citizens must participate (young and older). The broader the base of insured, the lower the overall costs.    In many of the European systems, the wealthier citizens sometimes acquire supplemental insurance for better quality or more timely service. 

See these YouTube video for more details

The real reason American health care is so expensive (youtube.com)

Health care: America vs. the World (youtube.com)Good Statistics from this article

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