Bloomberg Tackles Poverty: Will his plan work?

June/July 2007 Volume 41, No. 3

The Search for Common Ground

Howard Baker leads Plus: a bipartisan effort to Bob Michel break the political writes about logjam in Washington Congressional gridlock

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www.amerisourcebergen.com “Ideas that matter, since 1965.“ AmerisourceBergen Volume 41, No. 3, June/July 2007 Sections Politics & Perspective (cont’d.) 3 A Note from 13 Finding Consensus on an International the Chairman Emeritus Counter-Narcotics Strategy By Ileana Ros-Lehtinen 28 Ripon Profile According to the Ranking Republican of the Governor M. Jodi Rell House Foreign Affairs Committee, politics is a proud supporter is standing in the way of a plan to stem the flow of drugs into America. Cover Story 15 The AMT: Not Such a Minimal Tax 4 The Search By John W. Diamond for Common Ground The Alternative Minimum Tax is affecting Q&A with Howard Baker more and more moderate income taxpayers. The former Tennessee Senator discusses The solution does not lie in raising taxes on of the Ripon Society a bipartisan effort he is leading to break others, but rather in broader reform of the the political logjam and forge a consensus tax code itself. on some of the key challenges facing our Nation. 18 The Road to Immigration Reform By Demetrios Papademetriou 7 The Truth About Congress is on the verge of reforming an Congressional Gridlock immigration system that is 40 years old. By Bob Michel An assessment of the legislation, from He spent 40 years in Congress. Now, the the politics of the measure to what it will former House Republican Leader writes achieve. the institution is suffering from neglect and proposes some reforms that, he says, 21 Hoping for a Medicare Miracle are long overdue. By Matt Moore This year’s Medicare Trustees’ Report once again found the system in trouble. Because Politics & Perspective of a new law, however, the President now has to do something about it. 9 The Making of the President’s Health Care Plan 2008 23 Making Government Work By Tom Miller By David Walker Recent calls for universal health coverage In an excerpt from a speech delivered this remind some of similar proposals made past April, America’s Comptroller General during the 1992 presidential campaign. But discusses the need to transform the federal differences exist in today’s debate, and the bureaucracy so it better meets the demands chances for sweeping reform are slim. of 21st century life. 11 Bloomberg Tackles Poverty 27 Form Follows Function By Reid Cramer By Billy Pitts and Lou Zickar The Mayor of New York establishes a Senator Joe Lieberman’s decision to change public-private partnership to help his city’s the seating chart on his Committee drew less fortunate. His plan is bipartisan and chuckles. But it also served a purpose. innovative. But will it work?

Cover illustration by Deb Hoeffner

Publisher Editor The Ripon Society Louis M. Zickar One Year Subscription: Comments, opinion editorials and letters should be addressed to: The Ripon Forum, President Associate Editor $35.00 individuals 1300 L Street, NW, Suite 900, Washington, Richard S. Kessler Molly J. Milliken $10.00 students DC 20005 or may be transmitted electronically to: [email protected]. The Ripon Forum (ISSN 0035-5526) is Chief Administrative Officer published bi-monthly by The Ripon Society. George McNeill The Ripon Society is located at 1300 L Street, In publishing this magazine, the Ripon Society NW, Suite 900, Washington, DC 20005. Editorial Board seeks to provide a forum for fresh ideas, William Frenzel © Copyright 2007 Postmaster, send address changes to: well-researched proposals, and for a spirit of criticism, innovation, and independent William Meub By The Ripon Society The Ripon Forum, 1300 L Street, NW, Suite 900, Washington, DC 20005. thinking within the Republican Party. www.amerisourcebergen.com Billy Pitts All Rights Reserved

RIPON FORUM June/July 2007 1 45 Years of Public Policy

Founded 1962

1300 L Street, NW, Suite 900 Washington, DC 20005 (202) 216-1008 www.riponsociety.org THE RIPON SOCIETY HONORARY CONGRESSIONAL ADVISORY BOARD Senator Chuck Hagel (NE) Senate Chairman Senator Richard Burr (NC) Senator Norm Coleman (MN) Senator Susan M. Collins (ME) A Note from Senator Judd Gregg (NH) Senator Orrin G. Hatch (UT) the Chairman Emeritus Senator Pat Roberts (KS) Senator Gordon Smith (OR) Two hundred and twenty years ago this summer, fifty five Senator Olympia J. Snowe (ME) delegates from America’s thirteen states locked themselves in a room in Senator Arlen Specter (PA) Philadelphia to hammer out a new Constitution for our Nation. Senator Ted Stevens (AK) Four months later, in September, they emerged with an Representative Judy Biggert (IL) agreement. No one had been allowed inside the room during their Representative Roy Blunt (MO) deliberations. James Madison took notes; others shared their thoughts Representative Ken Calvert (CA) through correspondence. A transcript of the proceedings, however, does Representative Dave Camp (MI) not exist. Representative Eric I. Cantor (VA) But it’s safe to assume the debate wasn’t pretty. Egos were Representative Michael Castle (DE) involved. Fortunes were involved. Political futures were at stake. Yet Representative Howard Coble (NC) somehow, the delegates managed to put aside their differences and reach Representative Ander Crenshaw (FL) consensus on a framework for government that was revolutionary for its Representative Thomas M. Davis III (VA) time. Representative Vernon Ehlers (MI) Today, that same governing framework still exists. But Representative Jo Ann H. Emerson (MO) reaching that type of political consensus seems to be a thing of the past. Representative Philip S. English (PA) Clearly, there are exceptions. But increasingly, partisanship has become Representative Mike Ferguson (NJ) the coin of the realm in our Nation’s capital, and distrust between the Representative Vito Fossella (NY) parties abounds. Representative Rodney Frelinghuysen (NJ) In this edition of the Forum, we look at some of the reasons for Representative Paul E. Gillmor (OH) that, and some of the solutions being pursued. We gear our coverage of Representative Kay Granger (TX) this topic around two of the most widely respected former legislators in Representative Robin Hayes (NC) Washington – former Senate Majority Leader Howard Baker and former Representative David Hobson (OH) House Republican Leader Bob Michel. Representative Ray H. LaHood (IL) In a Q&A, Senator Baker talks about a bipartisan effort he is Representative Steven LaTourette (OH) helping lead to find common ground on some of the key issues facing Representative Jerry Lewis (CA) our country. In an essay that follows, Leader Michel discusses gridlock Representative Jim McCrery (LA) in Congress and some ideas he has to reform the institution. Representative Thomas E. Petri (WI) This edition of the Forum also looks at some other topics Representative Deborah Pryce (OH) that are making news or will be making news in the coming months, Representative Adam Putnam (FL) including the debate over health care on the presidential campaign trail Representative Jim Ramstad (MN) and the Bloomberg plan to fight poverty in New York. Representative Ralph Regula (OH) As with all editions of our journal, we hope you enjoy what you Representative Christopher Shays (CT) read, and hope you will not hesitate to write us at editor@riponsociety. Representative Fred Upton (MI) org with any comments you may have. Representative James T. Walsh (NY) Representative Edward Whitfield (KY) Bill Frenzel Chairman Emeritus Ripon Society

The Ripon Society is a research and policy organization located in Washington, D.C. There are National Associate members throughout the United States.

RIPON FORUM June/July 2007  Cover Story The Search for Common Ground A Q&A with Howard Baker

Howard H. Baker, Jr. served three terms as year the establishment of The Bipartisan Policy a United States Senator from Tennessee (1967- Center (BPC), a new organization whose sole 1985) and was Tennessee’s first popularly elected purpose is to find common ground between the Republican Senator. parties on some of the most pressing challenges Senator Baker gained national recognition in facing our country. 1973 as Vice Chairman of the Senate Watergate The Forum recently asked Senator Baker Committee. Three years later, he was keynote about the BPC, why it was established, and what speaker at the Republican National Convention and he hopes it will accomplish. was a 1980 candidate for the Republican RF: What is the p r e s i d e n t i a l purpose of the Bipartisan nomination. Policy Center? He concluded his HB: Too often, Senate career in 1985 partisanship poisons after two terms as our national dialogue. Majority Leader (1981 Unfortunately, respectful to 1985) and two terms discourse across party lines as Minority Leader has become the exception (1977 to 1981). He was - not the norm. To confront President Reagan’s this challenge, the Bipartisan Chief of Staff from Policy Center was formed February 1987 to July to develop and promote 1988. From 2001 – 2005, solutions that would attract he served as America’s the public support and 26th Ambassador to political momentum to Japan. achieve real progress. The Over the course BPC acts as an incubator of his long and for policy efforts that distinguished career, engage top political figures, Senator Baker’s advocates, academics and reputation for business leaders in the art straight-talk, candor of principled compromise. and honesty not In addition to advancing only earned him the specific proposals, the respect of his colleagues in Washington, but the BPC also is broadcasting a different type of policy admiration of the American people and countless discourse that seeks to unite the constructive center in others around the world. Moreover, his ability to the pursuit of common goals. bring people of different viewpoints together also won him a nickname – “The Great Conciliator.” RF: How do you hope to impact the public It was in the spirit of conciliation that Senator policy debate in Washington? Baker, along with former Republican Senator Bob HB: I’m a life-long and proud Republican. Dole and former Democratic Senators George Unlike some, however, I don’t believe loyalty to party Mitchell and Tom Daschle, announced earlier this precludes common sense decision and policymaking.

 RIPON FORUM June/July 2007 Some of our Nation’s greatest triumphs have come called a “trans-partisan” or “post-partisan” model. when political leaders have not allowed partisan We believe that principled debate and compromise differences to deter their efforts to find solutions that does not require one to abandon his or her party. are in the Nation’s best interest. Throughout my time Moreover, we seek to encourage a return of comity as Senate Majority Leader, I took pride in seeking and to congressional debate that we believe has eroded in heeding the advice of my colleagues from the other the last decade. side of the aisle. Unfortunately, it would seem that nowadays in many instances, times have changed and RF: With the 2008 election season already partisan rhetoric upon us, are you in Washington concerned that any now often impedes effort to promote our public policy bipartisanship is making process. going to take a back seat to the RF: Aren’t rough and tumble partisan differences of the presidential – and the debate campaign? and discussion over HB: There these differences – will always be an essential part of partisan debate; our democracy? that is the nature HB: Loyalty of the presidential to one’s party is selection process. critical. Adlai I think both Stevenson once Democrats and called partisanship Republicans agree, Senator Baker, along with the other founders of the Bipartisan Policy Center: “the lifeblood of George Mitchell, Tom Daschle, and Bob Dole. however, that democracy.” the majority of the D i f f e r e n c e s American people between individuals should be civilly debated, but it are looking for pragmatic and principled leadership is critical one never loses respect for a colleague’s in their candidates. They want Congress and the opinion. It is important to note that the Bipartisan President to work with each other; not against each Policy Center does not espouse what some have other. In Their Own Words... George Mitchell “William Butler Yeats once said, ‘the center will not hold’—unfortunately that’s the situation facing our country right now. We believe that the center must not only hold, but must lead, if we are to set America on a successful course for the 21st century. The BPC will act as a bipartisan refuge where the best minds and ideas from both parties can be brought together to develop viable and sensible solutions that can gain political traction.” Tom Daschle “We don’t have Republican problems and Democratic problems, we have American problems. National security, economic competitiveness, fiscal responsibility, education, the environment—these are national challenges that affect all Americans. We need to solve them together.”

Bob Dole “Political parties are key to our democracy—but we have to work together more often. The challenges America faces are extremely serious, but they can be overcome. Earlier generations have confronted great challenges and met them with bravery and shared conviction. Americans are prepared to work together to solve the great problems we face today. It’s time for Washington to join them.”

RIPON FORUM June/July 2007  RF: Have you been in touch with any of new endeavor. the presidential candidates or the leadership in Congress to discuss what you are trying to do? If RF: Why is it in the best interests of Republicans so, what has been the reaction? to work cooperatively with Democrats at a time HB: The BPC has when many believe that several ongoing specific the best way for the policy projects; one GOP to reclaim their focusing on energy policy, congressional majority is one on agriculture policy, by sharpening political one on ways to reform differences between the national security and one on two parties and denying transportation. We select the Democrats any chance issues that we believe are of legislative success? ripe for partisan agreement. HB: Our most valued To this extent, the BPC public servants – whether conducts research and Democratic or Republican evidence-based surveys to – should be inspired by compose thoughtful and just such a sense of duty, a Senator Baker at the 1973 Watergate hearings. pragmatic solutions that are sense of service and a deep then passed on to current desire to do what is right members of Congress I don’t believe loyalty for our Nation, whether it for their consideration. to party precludes common sense is politically advantageous Furthermore, the BPC has or not. I believe the BPC recently formed a working decision and policymaking. will serve as an important relationship with the Senate mechanism in promoting Common Ground Coalition – a group of approximately common sense public discourse. I look forward to twenty sitting U.S. Senators who largely share the same working with my colleagues on issues that are vital to goals and vision as the BPC. We are excited about this this great country. RF

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 RIPON FORUM June/July 2007 The Truth About Congressional Gridlock …and ideas for reform.

Bob Michel

American politics is mostly about the personalities Congress needs reform. This venerable, great of the people who serve in office or aspire to it. parliamentary institution of modern times is suffering Personalities make good theater. They keep the press from fatigue and old age. It is moving more slowly into in profits. They keep people interested and entertained. the 21st Century than most other influences on American The people in politics embody the best and worst of our life, from cultural diversity to technology. And it is not American system of government. serving that fundamental responsibility envisioned by But our system isn’t just about the people who serve the Founding Fathers to be a check in a system of checks in the institutions of government; it is also about the and balances. Today, there are too many checks and not institutions themselves. enough balance. Congress, one of the pillars Congress should establish a of our political and governmental Joint Committee on Structural system, the seat of power in our Reform to examine the structural democratic republic, is an institution needs in both Houses and report suffering from age and neglect. Our recommendations to modernize the seat of government is losing its legs. Congress as soon as possible. The In this Presidential election year, first Article of our great Constitution public attention will be riveted on established the Congress while the personalities of the candidates, allowing, “each House to establish but more attention should be focused its own rules of proceeding.” From on the institutions in which those the very beginning, the two Houses elected will serve. used joint committees to resolve I spent 40 years in Congress, their differences and reform their and not in all of that time did I ever procedures. have the sense that the institution Here are several areas in the itself was incapable of handling the structure of the Congress, mostly people’s business. I believe that is internal, that need immediate the case now. attention: Complex issues such as energy Committee Jurisdictions: The independence, long-term health 911 Commission had it right care, retirement security, Congress, one of the when it recommended identical individual security, tax reform, pillars of our political and Homeland Security Committees and homeland security have in the House and Senate. Why not been passed over, glossed over governmental system, the seat all the committees? The garbled and treated cosmetically for of power in our democratic jurisdictional overlays breed so long, they have taken on republic, is an institution jealousy and protectiveness gargantuan and unmanageable so movement is stopped or dimensions. They have become suffering from age painfully slow. Authorizations chronic problems that defy and neglect. don’t get done and conferences comprehensive solution. The break down. Executive Branch legislative process can no longer handle the backlog of officials spend endless hours on the Hill running from issues and problems that have been building for years committee to committee to testify. Committee staffs — Social Security solvency, to name just one. The end up in tedious disputes, writing memoranda of institution resists change. It merely shifts the demand understanding to assert jurisdiction and control. for change from one Congress to another. The Appropriations process: The appropriations

RIPON FORUM June/July 2007  process is broken. Appropriations are unauthorized representatives could be at home with their constituents or contain authorizations contrary to House rules. in the spirit of the “citizen legislator.” Appropriations are often held hostage by ineffective Procedural Gridlock: In the House, the majority authorization and budget processes. The result is regularly and consistently violates the rights of the mammoth stop gap continuing resolutions, omnibus minority. In the Senate, the minority regularly and bills and bloated supplementals that attempt to solve too consistently violates the rights of the majority. The many problems in too little time, with too many players result is undemocratic, unfair and unproductive. in the game. As a former appropriator I am willing The abuse of procedures, most notably in the Senate, to at least discuss what some would call unthinkable stymies progress and makes it difficult to get legislation – appropriations folded into authorizing committees. to the President’s desk. In the modern Senate, it takes a The Congressional Budget Process: The Budget two-thirds vote to pass virtually any piece of legislation. Process is also broken. The scoring of emergency The threat of a filibuster on every possible motion has spending, the roles of enhanced rescissions and pay-go resulted in nameless holds on legislation and hour after budgeting, all need a second look. A two-year budget hour of an empty chamber conducting phantom quorum cycle should be considered, as election year budgets calls. For many Americans, the Senate on C-Span has have become mostly become nothing political documents. more than a classical The Budget music channel. Process hasn’t been These are basic, thoughtfully and i n s i d e - b a s e b a l l thoroughly reviewed problems that thwart since its inception in the process and leave 1974, and it won’t the American people be done correctly bewildered as to unless both Houses why more doesn’t sit down together to get done. The truth do it. is the American Congressional people have little O v e r s i g h t : knowledge of how Congress can’t seem Congress functions, to get its oversight or why and how it r e s p o n s i b i l i t i e s evolved over the right. It’s either not past 220 years. And enough or too much. At times, A joint committee until the people understand their it’s either political protectionism Congress, Congress will be or political retribution. Oversight – comprised of Republicans unable to address the critical, is best done in pursuit of a and Democrats, Members of complex issues of our time. legitimate legislative purpose, A joint committee – not a political point. Congress has the House and Members of comprised of Republicans and a constitutional and institutional the Senate – would go a long Democrats, Members of the obligation to conduct oversight way towards beginning the House and Members of the of the government, but for the Senate – would go a long way sole purpose of making the necessary public dialogue on towards beginning the necessary government function better. how our institutions should public dialogue on how our The Legislative Schedule: institutions should perform. The failure of the committee perform. It would also be a good system has left unproductive gaps in floor activity, and beginning towards undoing the structural gridlock that without votes on the floor it is harder to get a quorum to confounds our Congress – and our Nation. RF enable the committees to act. Time is wasted. There has to be a proper balance between the needs of the members to be back in their districts as well as in Washington. The Honorable Bob Michel served in the U.S. House The two Houses should explore options for meeting of Representatives from 1957 to 1995. He served times, possibly two full consecutive weeks a month as Republican Whip from 1975 to 1980, and as working, with Committees or Subcommittees meeting Republican Leader from 1981 to 1995. all five days. Two weeks would be off so that elected

 RIPON FORUM June/July 2007 Politics & Perspective The Making of the President’s Health Plan 2008: Will It Be Deja Vu of 1992?

By Tom Miller

Today’s political conventional one, but expect some grudgingly election this time. Control of wisdom assumes that proposals modest progress – eventually. Congress switched to the opposition to address the chronic problems Current similarities to the party last fall. of U.S. health care will regain the dynamics of the campaign trail The common element that 1992 domestic policy spotlight in the fifteen years ago are limited. This and 2007 share is the electorate’s 2008 presidential campaign. time, a war in the Gulf has not gone unease, if not discontent, with the Steadily rising costs of health as well. Unlike its predecessor, it workings of the existing health care services, growing gaps in continues to dominate the overall care system. In each case, the access to care, and mounting increasingly less affordable strains on the predominantly cost of insurance coverage employer-based system of raised anxieties about its private insurance coverage current stability and future are not necessarily “new” availability. No single problems. However, they triggering political event like appear to have stimulated a the 1991 Pennsylvania Senate new round of more intensive race (when Harris Wofford upset political responses. Dick Thornburgh, relying on a Several dozen states health reform platform) stands are experimenting with out today that would make various stages of health nervous incumbents scramble reform plans. Multi-interest to address perceptions of a coalitions of business, labor, swiftly changing landscape. and advocacy groups are However, the cumulative probing and repositioning to effects of a widening gap in gain the high ground in the recent years between the price developing health care debate. of health coverage and what Accordingly, a number of many Americans are willing the leading presidential or able to pay for it, either candidates are staking out individually or collectively, their policy priorities and Are we in the early stages once again has reinvigorated perspectives, if not concrete of a replay of 1992, the last political impulses to “do solutions. presidential campaign to set the something.” As always, Are we in the early stages deeper disagreements over of a replay of 1992, the last stage for a comprehensive the degree of change needed presidential campaign to set health reform debate? and the problematic details of the stage for a comprehensive implementation remain. But health reform debate? Not exactly. some of the early parameters Not exactly. of today’s “soft consensus” In any case, will it be followed political landscape. The economy for health policy reform seem more by another whimper (like the is somewhat healthier, though not a clearly defined than the fuzzier unraveling of Clinton Care in 1994), political plus. Another incumbent concept of “managed competition” or a big bang that transforms U.S. named Bush has a low job approval tentatively voiced by the 1992- health care? The answer is neither ratings, but he cannot seek re- vintage Clinton campaign.

RIPON FORUM June/July 2007  In one form or another, most share the private market emphasis of tightening or restructuring of health of the leading 2008 Democratic his fellow Republicans, the former care entitlement programs before presidential aspirants favor moving governor is more heavily invested in the inevitable becomes inescapable. more aggressively toward universal the future success of his Massachusetts Whereas more observers have coverage within the context of model, which combines an individual questioned the proposition that U.S. a mixed public/private system. mandate, income-based subsidies, and health care is the best in the world, John Edwards would do so most a “connector” insurance purchasing the bedrock belief of middle-class comprehensively, by conspicuously mechanism to aim for near-universal voters that they should continue endorsing higher taxes and imposing insurance coverage. to have their own opportunity to more binding coverage mandates on The traditional cut and thrust of consume American-style health care employers. Barack Obama pledges presidential politics suggests that less a la carte, as long as they don’t see generically to achieve universal is often more on the campaign trail. the full price tag directly, helped sink coverage within four years. Hillary One should not expect more detailed an earlier Clinton plan for universal Clinton, reflecting the hard-earned blueprints of a health system overhaul coverage and health security, and it lessons of overreaching hubris in her until the winner answers the question, remains quite resilient today. first White House tour, suggests now “What do we do next,” in mid- to Hence, the unexploited that it might take her “second” term late-2009. Substantial evidence of opportunity thus far to transform the as president to finish the job with a a successfully implemented state- national health care debate involves step-by-step strategy. level health reform would make a offering voters new mechanisms The Democratic frontrunners difference, but don’t hold your breath to gain access to higher-value care also support creation of large public/ waiting for it. The recurring cycles and improve their overall health. It private pooling mechanisms to of our health reform debates usually doesn’t mean promising the illusion supplement, if not replace, employer- peak with broad agreement on what of as much as you want, whenever group coverage, along with you want it, from whomever you expansion of more traditional choose to provide it, at less cost, public insurance coverage The traditional cut and based on magical assumptions. through Medicaid and S-CHIP. thrust of presidential politics It would start with leveling a bit Similar to their Republican suggests that less is often more more with voters that we will need competitors, they would also to develop and disseminate better place faith in the as-yet unproven on the campaign trail. measures of the effectiveness and virtues of information technology, efficiency of more accountable electronic medical records, and health care providers, provide preventive care to lower costs and we do not like, or wish could be stronger incentives and tools for improve quality. different, but break down over what consumers to make smarter choices, At this stage of the presidential settling for second-best compromises promote healthier behavior away campaign, health care issues have might entail. from the doctor’s office, target public figured much more prominently in The gravitational pull of subsidies more narrowly on the Democratic candidates’ appeals to universal coverage nostrums and basis of income and health status – potential primary voters. Republican stylized bipolar disputes between regardless of age – and acknowledge presidential frontrunners Rudy national health insurance and free it’s time to reconcile better the limits Giuliani and John McCain have been market medicine tends to distract of public resources with needs, not less vocal, let alone detailed, thus our national political debate from wants. far in addressing health care reform confronting more serious matters Defining better choices in the (compared to national security issues that need greater attention. The gray zone between “you get what such as terrorism). Nevertheless, unfunded future liabilities of both you pay for” and “you’ll get what one might predict their preferences: Medicare and Medicaid pose more we decide to pay for,” might not fit favoring tax-based subsidies more pressing fiscal threats to the national within a 60-second campaign spot than increased public spending to economy’s balance sheet today or the paragraph of a stump speech, expand access to insurance, bolstering than they did in 1992. Although but it could begin to move us past private forms of insurance coverage, Republican candidates can point to the dead end of 1992 and beyond the and limiting the expansion of publicly some promising inroads in delivering initial teases of 2008. RF administered health programs. They new drug benefits to seniors through would not make universal coverage private plan choices, neither party’s Tom Miller is a resident fellow at the per se their foremost health policy standard bearers are likely to American Enterprise Institute. goal. Although Mitt Romney may highlight the need for significant belt-

10 RIPON FORUM June/July 2007 Bloomberg Tackles Poverty His plan is innovative. But will it work?

Reid Cramer

Even for public servants with While it is too early to predict the formed city office, called the Center for the best of intentions, the seeming ultimate fate of this effort, it has Economic Opportunity (CEO), which intractability of poverty in America already unleashed an unprecedented is designed to operate as a combination can be awfully discouraging. public-private partnership that just of a philanthropic foundation and a Its causes are complex and might create a model for future anti- venture capital fund. This office will past efforts have met with limited poverty initiatives across the country. be charged with seeding innovation success. Until Hurricane Katrina hit Rather than identifying by supporting a range of experimental land, poverty had been absent from amorphous targets or unattainable programs. But in addition to investing the public agenda in R&D, the CEO for so long that there will be in charge of was little consensus evaluating the results, among policymakers so programs that in how to respond. demonstrate success Not only was the in reducing poverty toolbox of effective can be built upon and antipoverty proposals those that don’t can be empty but partisan shut down. This results gamesmanship often and evidence-based seems to block approach is gaining innovative, good faith momentum in other efforts to address it. areas of government, Yet persistent, increasingly influencing concentrated, and budget decisions at i n t e rg e n e r a t i o n a l the federal and state poverty remains a level, but the funding scourge upon our While it is too early to predict the of policy innovation, prosperous society, an especially in anti- enduring challenge for ultimate fate of this effort, it has already poverty programs at the policymakers of all unleashed an unprecedented public-private local level, is breaking persuasions. One of partnership that just might create a model new ground. the more remarkable Emblematic of the efforts to meet this for future anti-poverty initiatives search for innovation challenge is being led across the country. is the decision to by New York City implement and test one Mayor Michael Bloomberg, who has goals, Mayor Bloomberg committed of the more remarkable anti-poverty decided to make tackling poverty himself to remaking the toolbox. And tools developed in recent years — one of the core priorities of his he pledged $150 million a year to conditional cash transfers. Piloted second term. With Democrat Charlie do so, some of it to be raised in the in demonstrations throughout the Rangel looking on, Mayor Bloomberg private sector. world but largely untried in the U.S., announced this past December one Much of the money will be used conditional cash transfer programs of the most innovative anti-poverty to try and test out new approaches. (CCTs) provide money directly to efforts to emerge in recent years. At the center of the effort is a newly- recipients when they meet specific

RIPON FORUM June/July 2007 11 criteria. It’s an incentive program that family size. Initially, incentives will household incomes less than $30,000. makes the social contract explicit. focus on the areas of education, health, It is estimated that this proposal would Families are rewarded for their and work, but poverty advocates are cost the city $42 million a year and actions, so they may qualify for a already identifying promising areas to benefit almost 50,000 families. transfer when they complete a training expand the effort. This initial round of investments program or make sure their children Another set of early investments is ambitious in both its scale and go to school and get vaccinated. will focus on increasing the financial breadth — a testament to a driven, The idea behind CCTs is to capacity of lower-income households. second-term mayor committed to replace the traditional welfare model A first-of-its-kind Office of Financial forging new ground in some difficult of donations of aid with one that Empowerment is being formed to terrain. And yet, Mayor Bloomberg is allows recipients to invest in their ensure that families have access to not alone in his decision to focus on future. It has already been proven information that can maximize their combating poverty or in his search to work in other places. One widely financial health and minimize the for new, effective ways to confront studied program in Mexico, one likelihood that they will be subject to it. Across the country, mayors are replicated internationally in over 20 predatory schemes. This will include increasingly turning their attention to countries, has been credited with coordinated information campaigns to these issues. improved health outcomes that have publicize the availability of tax credits Los Angeles Mayor Antonio been linked to improved educational and public benefits which families Villaraigosa recently convened a task outcomes in young children force of mayors to develop a and a reduction in poverty at forward-thinking anti-poverty the family level. The incentive-based strategies action plan. The mayors To implement and acknowledged that reductions evaluate this approach in New of the program will focus not on in poverty are unlikely to come York City, Mayor Bloomberg developing new social services, from expanding subsidies formed a public-private but on increasing participation and entitlement programs, partnership in March of this but from revising the way year. The first of its kind in in certain existing programs and we use public resources to the U.S., Opportunity NYC is taking actions that have already create a lifelong ladder of a $50 million effort that has learning and opportunity. raised support from a number been proven to reduce poverty Specifically, Villaraigosa has of foundations, including the among children and families called for a revitalizing system Rockefeller Foundation, the now and in the long run. of work skills and training, Open Society Institute, AIG, an expanded EITC to make and the Starr Foundation. work pay, and the provision Designed with input by of children’s savings accounts MDRC, a leading national evaluation can get and save financial resources. to provide a platform to build assets and research firm, the Opportunity The idea is to provide and coordinate over a lifetime and learn the basics of NYC program will include a sample access to asset building activities, financial education. of approximately 5,000 families such as basic bank accounts, financial Like Bloomberg, these mayors throughout the city — half of which literacy help, and matched savings recognize that there are no quick fixes. will be part of a control group. account programs. This current crop of politicians may The incentive-based strategies An additional plank of the effort be long gone before we realize what of the program will focus not on is designed to help families with works, making these efforts all the developing new social services, but young children enter and stay in the more laudable. But they have launched on increasing participation in certain work force. Recognizing that child a necessary first step, which is an existing programs and taking actions care costs often impede labor force active search for policy interventions that have already been proven to attachment, the Mayor has taken up that can work over the long term. RF reduce poverty among children an earlier proposal of his Democrat- and families now and in the long led City Council to create a local child Dr. Reid Cramer is Co-Director of run. Participants may receive $50 to care tax credit that could help offset the Next Social Contract Initiative $300 for meeting specified targets or these costs and make work pay. The and Research Director of the Asset completing a conditional activity, and proposed credit, still pending before Building Program at the New families may be eligible to augment the council and state legislature, would America Foundation in Washington, their income by $3,000 to $5,000 per target families with children three D.C. year depending on the activities and years old and younger which have

12 RIPON FORUM June/July 2007 Finding Consensus on an International Counter- Narcotics Strategy

Ileana Ros-Lehtinen

In Michigan, a high school the fourth decade of a murderous conflict forces, begin an aerial spraying program basketball coach was charged in May pitting the central government against to eradicate thousands of acres of coca with supplying cocaine and ecstasy to a drug traffickers and their allies. plants, ease U.S. trade restrictions to 17-year-old who died after ingesting the By 1998 an area in Colombia promote alternative sources of income drugs. equal in size to the state of California for the people of Colombia, and fund In Illinois, two men await trial for was effectively off-limits to the central other economic and social development their role in selling heroin to a 26-year- government as left-wing insurgents programs to revive an economy in free- old who later died of an overdose. allied with drug cartels created a rival fall. For months, police in Ohio have government in the jungle. By then, What has been achieved by searched for the whereabouts of an Congressional Republicans and then- Colombians with assistance from the 11-year-old missing after her mother President Bill Clinton were sufficiently U.S. is truly remarkable. Since 2001, overdosed on drugs. alarmed about sky-rocketing drug use cocaine production in Colombia is In one small Texas town, police have in America and the specter of a heavily- down by 22 percent; seizures of cocaine made more than 200 drug bound for the U.S. are up by arrests of high school-age two-thirds; Colombian opium students, and since January, poppy cultivation is down by two teenagers have died of 68 percent, from 6,540 hectares heroin overdoses. in 2000 to 2,100 in 2004; Everyday, tragedies like kidnappings in Colombia are these are playing out with down by 76 percent; terrorist horrible consequences for attacks are down by 61 percent; families and communities and the homicide rate — an all across our country. More astonishing 14,000 last year — Americans die annually as is down 40 percent. Economic a result of drug overdoses growth averaged 5 percent over than the number of those the period and hit a high of 6.8 killed on 9/11. Just as percent in 2006. The poverty worrisome are the links rate is down from 60 percent to between violent crime and 45 percent. the drug trade. Thousands more Without an effective Despite these successes, Plan Americans — mostly the young Colombia is encountering growing — are murdered and maimed counter-narcotics strategy in the resistance from the new Democratic in gangland-style disputes over Western Hemisphere, the number majority in Congress. Critics on the deadly narcotics, disputes that of U.S. deaths from overdose and left oppose U.S. funding for security spill into the streets of our cities assistance to beef up capabilities of and towns with bloody results. drug-related killings will the Colombian police and military. The ease with which again rise... With more than $5 billion in U.S. international drug traffickers have assistance since 1999, the central access to our country to peddle these armed narco-state developing in this government has steadily and effectively deadly narcotics also has significant and hemisphere that together we forged a extended its reach into the countryside adverse consequences for our neighbors new counter-narcotics policy. and driven the paramilitary units and the in the Western Hemisphere. An estimated What emerged was something left-wing insurgents out of their former 90 percent of the cocaine and 50 percent called Plan Colombia. This ambitious strongholds. Many of those that remain of the heroin consumed here is produced multi-year program sought to help have retreated into the jungles and in Colombia — a country now entering Colombia beef up its police and military continue to terrorize the population and

RIPON FORUM June/July 2007 13 provide security for drug cartels, albeit on help it through the process of rebuilding. to protect trade unionists will undermine a smaller scale. As Democrats in Congress move Colombia’s economy and begin the As the central government has forward in the months ahead to make downward spiral of America’s closest ally regained control of the country, something changes to Plan Colombia, they would in South America. very important has begun to happen. do well to keep in mind that reducing We will feel the effects of these Thousands of Colombians are feeling safe our commitment to Colombia has disastrous policies on our streets. Without enough to publicly speak out about the implications on our home front. Denying an effective counter-narcotics strategy atrocities they endured in years past and the Colombian navy the assistance to in the Western Hemisphere, the number to seek justice against the perpetrators. purchase maritime patrol aircraft will of U.S. deaths from overdose and drug- Dozens of powerful Colombians, undermine its ability to interdict drug related killings will again rise, and the including members of Congress, high- shipments bound for America, such as the floodgate of narcotics will open even ranking officials, and others have been seizure in April of 17 tons of cocaine off wider with a deluge of heroin and cocaine implicated in testimony with having ties to its Pacific Ocean coastline, the largest in aimed squarely at our kids. Let us hope paramilitary groups. President Uribe and history. Denying the Colombian National that Congress will put behind it the the military command have repeatedly Police access to helicopters and other U.S. ideological disputes of the past and act said that they will not tolerate collaboration equipment will only benefit the violent to protect us here at home by helping the between military officials and members of left-wing insurgents and their paymasters people of Colombia protect themselves paramilitary organizations. Unfortunately, in the drug cartels and undermine the and their country. RF U.S. critics of Plan Colombia have eagerly successful efforts to eradicate opium seized on these scandals as proof that U.S. poppies in the high altitudes of this Ileana Ros-Lehtinen represents the 18th policy has failed. But exactly the opposite mountainous country. Holding hostage District of Florida in the U.S. House of is true. Rather than push away the the pending Free Trade Agreement with Representatives. She serves as Ranking Colombians during this difficult period, Colombia because of what critics claim Republican on the House Foreign Affairs America should embrace our ally and is a failure by the Colombian government Committee.

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14 RIPON FORUM June/July 2007 The AMT: Not Such a Minimal Tax

John W. Diamond

Acronyms come and go in America. in 2004 to $108 million in 2010. A temporary AMT “patch” was Take the ATM. Of course, as with most everything approved that increased the exemption Twenty five years ago, few people else related to the American tax system, amount for taxable year 2006 to $62,550 had heard of Automated Teller Machines. the whole thing is rather complicated to for married tax filers (who file a joint Today, they are found on just about every figure out. return) and $42,500 for unmarried tax street corner, and ATM is one of the For example, the tax base of the AMT filers. However, under current law, for most widely recognized acronyms in the – referred to as alternative minimum taxable years beginning after 2006 the world. taxable income, or AMTI – is calculated exemption amounts revert to $45,000 Over the next few years, Americans by adding deductions and other tax for married tax filers and $33,750 for will begin hearing more about unmarried tax filers. The tax rates on another acronym with those same net capital gains and dividends are the three letters. But rather than being same as under the regular income tax. known as something that puts money The most popular deductions (and the into people’s pockets, this acronym most significant in terms of revenue) could soon become known for the that are not allowed under the AMT money it removes. include deductions for state and local It’s the Alternative Minimum taxes, personal exemptions, and the Tax – or AMT for short. As it stands standard deduction. In addition, a now, the AMT is a mandatory second host of other tax preferences and method for calculating a taxpayer’s deductions are reduced or not allowed tax liability under the current income under the AMT. tax. Because of the AMT, taxpayers The net result of all of this is are required to pay the larger of not only confusion, but an increasing the taxes calculated under the two number of taxpayers who are affected methods. by the AMT. This is primarily The original objective of the because the AMT exemption amount AMT was to ensure that the highest and the AMT rate bracket are not income taxpayers were not able to indexed for inflation. Consequently, avoid paying taxes by using large purely inflationary increases reduce amounts of exclusions, deductions the value of the AMT exemption and credits. Over time, though, the amount in relation to personal number of taxpayers affected by the income and push taxpayers into the AMT has steadily increased – from higher tax bracket. By comparison, 140,000 in 1987 to more than 3 million preferences back to the taxpayer’s taxable such “bracket creep” is not much of a in 2004. income under the regular income tax. problem under the regular income tax, At the same time, the AMT has AMTI in excess of the AMT exemption as the personal exemption, the standard increasingly come to affect moderate amount is taxed at a rate of 26% on the deduction, and rate brackets are all income taxpayers while leaving many of first $175,000 and 28% on the remainder, indexed for inflation. the highest income taxpayers unscathed. with the exemption amount phased out As one might imagine, questions According to the Joint Committee on over the income range from $150,000 abound regarding the AMT. Is the AMT Taxation, 30 million taxpayers will be to $420,000 for married taxpayers and a serious problem that needs to be fixed? affected by the AMT by 2010, and AMT $112,500 to $282,500 for unmarried If so, should the AMT be repealed or liability will skyrocket from $13 million ones. reformed? What are the most efficient

RIPON FORUM June/July 2007 15 reform options and how much revenue that the AMT should be made permanent effective tax rates for married taxpayers must be raised to pay for reform? These and the regular income tax should be under the AMT are 26% up to $150,000, are important questions that must be repealed because the AMT is an efficient 32.5% from $150,000 to $175,000, 35% addressed in the very near future. broad-based tax with a virtually flat rate from $175,000 to $420,000, and 28% for The first question has a structure. However, by taxable year taxpayers with incomes above $420,000. straightforward answer. The AMT is 2010 most taxpayers who are affected Given this, it is unlikely that adopting unquestionably a problem that needs the AMT would increase economic to be fixed. The AMT imposes Given current budget efficiency. significant costs on taxpayers and The AMT also raises equity the economy. The most obvious projections, it is reasonable to concerns. The highest income cost is the added complexity in assume that any AMT reform taxpayers, currently subject to a calculating taxes since the AMT 35% rate, would pay a lower 28% requires a substantial number of would have to be paid for by marginal tax rate under the AMT. In taxpayers to calculate taxes under either increasing revenues from addition, married couples are more two different tax systems. Note other taxes, adopting new likely to be subject to the AMT than that many taxpayers who are not unmarried couples since the AMT affected by the AMT must also taxes, or reducing federal does not distinguish between married calculate their AMT liability. More spending. and unmarried taxpayers in terms of subtle but arguably more important the size of the exemption amount or is the problem that individuals and the size of the rate brackets as under firms must predict whether they will be by the AMT would face higher tax rates the regular income tax. This implies that subject to the regular income tax or the under the AMT than the regular income large marriage penalties result under the AMT in all their long term economic tax because effective tax rates under the AMT. Furthermore, larger families are decision making. AMT are increased by the phase out of the more likely to be affected by the AMT Some commentators have argued AMT exemption amount. For example, since the AMT exemption amount does 4–2007.

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Date: 5/15/07 4:25 PM Pub: Ripon Forum Inks: CMYK Fonts: Whitney (Semibold, Medium, Book) Client: Visa dential Job Number: VIS000207 Bleed: None File Name: Financial-Literacy-HalfPg_A.indd Trim: 7.375 in x 4.875 in Notes: None Description: 4C Half Page Ad Live: None Insertion Date(s): None Gutter: None Scale: None Client Confi Print Scale: 100%

Date Initials OK Date Initials OK Date Initials OK Mechanical Version: Traffi c: Nancy Gutierez Designer: . Project Mgr: Proofreader: John Mikulenka Creative Dir: Ted Bluey Product Mgr: Studio: Cindy Peterson Account Mgr: Jill Levinsohn Editor: Client Eleven Production: Joni Wittrup Account: Legal: 1 Copy Writer: . Round #: not differ by family size. All of these federal spending. This raises complicated by limiting deductions almost always features are arguably undesirable on political issues. dominates increasing statutory tax rates equity grounds. In my view, AMT reform should in terms of creating efficient economic There are numerous options for be consistent with the following three incentives. Sweeping reforms like those reforming the AMT. Several of the principles. First, any new reform put forth by the President’s Advisory most common suggestions include should include inflation indexing of Panel on Federal Tax Reform should also repealing the AMT, increasing and key structural tax parameters to avoid be considered. indexing the AMT exemption amounts the problems associated with bracket However, there is currently a lack and rate brackets, allowing personal creep. Second, our goal should be of political will to implement sweeping exemptions under the AMT, or allowing to create a simple tax that minimizes reforms that are necessary to deal with the state and local tax deductions under the compliance costs for taxpayers. Third, problems presented by the AMT and the AMT. However, such reforms would be we should avoid increasing tax rates regular income tax. This is unfortunate associated with a significant decline in in a manner that will induce taxpayers given the imminent budget crisis facing revenues. For example, JCT estimates to make behavioral changes or devote the U.S., which increases the importance that repeal of the AMT would reduce more resources to avoiding taxes. This of implementing a simple, efficient and federal income tax revenues by $872 is especially important for the taxation fair tax system that could help stimulate billion from 2007 to 2017 and that of capital income given the increasing U.S. economic growth over the next allowing personal exemptions against the globalization of world capital markets. century. RF AMT would reduce federal income tax Haphazard reforms, such as revenues by $509 billion from 2007 to proposals that would raise tax rates on Dr. John W. Diamond is the Kelly 2017. Given current budget projections, some taxpayers to finance tax relief Fellow in Tax Policy at the James A. it is reasonable to assume that any AMT for others under an inherently flawed Baker III Institute for Public Policy reform would have to be paid for by tax, are unlikely to create a simple, fair at Rice University in Houston. He either increasing revenues from other and efficient tax system and should be previously served on the staff of the U.S. taxes, adopting new taxes, or reducing avoided. In fact, broadening the tax base Joint Committee on Taxation. Did you know…

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RIPON FORUM June/July 2007 17 The Road to Fundamental Immigration Reform The bipartisan agreement is under attack from both sides of the political aisle. Can the center hold?

Demetrios Papademetriou

The U.S. Senate is in the midst In return — a “trade off” to many Finally, Democrats and a variety of a raucous debate on an issue that serious advocates but a “Faustian of stakeholders are asked to agree to the U.S. Congress avoids until it has bargain,” and worse, to many of the several temporary worker programs absolutely no choice but engage it — Democratic party’s more unyielding mostly for low skill/wage work in reforming the nation’s immigration constituencies — enforcement would configurations intended to prevent laws. be ratcheted up enormously and family them from developing roots in the The legislative vehicle is a lucid relationships beyond the nuclear U.S. and explicitly prohibit them from if imperfect bipartisan compromise families of U.S. citizens and U.S. gaining green cards automatically — negotiated painstakingly over permanent residents (albeit in highly unless, of course, they can earn their countless hours of face-to-face restricted ways) would no longer gain way to such status through the points- meetings and has been denounced by automatic if greatly delayed access to based system. both extremes. green cards. Instead, such relatives If the Senate bill presents a The proposed bill is fundamental challenge to a radical departure from Democrats, its Republican the present system, put authors face a much uglier into place over 40 years challenge: a total and loud ago — a vastly different renunciation by some political and economic of their colleagues and era. It challenges the more extreme wing Democrats and their of the party’s chattering allies by giving them class. Those ideologues’ their number one brightest line in this immigration reform debate — “no amnesty” goal: a legalization — has been breached program that offers in the fullest and most virtually every illegally direct way. Vigorous resident person who explanations by those who was here on January 1, Republican Senator Jon Kyl and Democratic Senator Edward Kennedy, at are committed to the bill’s 2007, a nearly automatic a May 17 news conference announcing the bipartisan agreement on the approach, which includes temporary work permit immigration reform bill. Homeland Security Secretary Michael Chertoff and the President, that the Senator Mel Martinez (R-FL) are in the back. lasting for 18 months bill is not an amnesty is and the opportunity to merely throwing fuel to gain permanent legal status (a “green would need to negotiate successfully an already raging fire. card”) between eight and 13 years later. a points-based merit system that So, how should reasonable people In the interim, between three and four awards permanent status only to regardless of party affiliation think of million relatives of U.S. citizens and those with the “right” occupational this bill? permanent residents who had been characteristics, significant labor First, the compromise bill has a languishing on massive waiting lists market experience and connections deep inner logic and meets a crucial would get their green cards — hence in the U.S., education, and English. political requirement — mainly, that honoring the political mantra that Only if applicants earn 55 out of 100 only a bipartisan bill that “draws some legalizing immigrants would have to possible points can they gain access blood” from both sides can pass this wait their turn for green cards until to up to 10 bonus points for their or virtually any Congress absent some the infamous “queue” empties out. family ties. truly dramatic political realignment.

18 RIPON FORUM June/July 2007 Second, the bill gets many legalization is being met — period. deploy its resources to finding the more things right than it gets wrong. • The legalization date is “needles” that should be of concern Foremost among the things it gets virtually current and the program’s to us all. right is that legalization is just as initial requirements are clear and • Finally, the bill widens the President says: an imperfect but intended to get full participation. and deepens the channels for legal pragmatic response to a problem that is That means that, taken together with immigration dramatically — and in simply too massive and too imbedded the enforcement build up, there will line with most estimates of the size of into our society and economy to the “demand” for new workers. address with the musings of the ...only a bipartisan bill Does this all mean that this “just say no” crowd. But this bill is the exact bill that can take us to gets a whole raft of other good that “draws some blood” the promised land of good public governance ideas essentially right from both sides can pass policy and better governance? — most notably, by reflecting Not really. The bill’s blemishes the key lessons from the 1986 this or virtually any Congress are many and they will need to legislation that all sides criticize absent some truly dramatic be fixed through amendments so fluently. political realignment. and in the negotiations with the • Enforcement is front House of Representatives. Three and center. In fact, by requiring areas are in need of particular that a variety of very robust attention. triggers be in place before legalization be no nucleus of illegally resident First, the point system is inflexible commences, and considering the persons left behind around whom — thus missing a key reason why massive control and enforcement the next wave of illegal flows will point systems are being adopted by so efforts already in place, the demand of be built. It also means that by thus many high and even middle income so many Americans and Republican reducing the proverbial haystack of countries. As conceived, it cannot be legislators that enforcement precede the unauthorized, the government can changed for at least five years after it

RIPON FORUM June/July 2007 19 takes effect, virtually eons in the fast do two things. Allow amendments immigration a few years from now. changing U.S. (and global) economy. that will support the unification of They should focus instead on the This means that some of those who nuclear families, period. That means terms and conditions under which meet the points requirements will that green card holders must be able these workers will be employed not meet true labor market needs. to bring their spouses and minor and on making the point system Furthermore, the bill takes away children with them or reunify with “friendlier” to them. Republicans, in from U.S. employers the ability to them after the fact. This makes sense turn, should drop their “temporary is attract the best workers anywhere demographically (we will need their temporary” mantra. by offering them a U.S. green card youth) while avoiding starting a new The objective of reform must at a time where the competition backlog of those whose (re)unification remain focused on legality, order and for the most skilled and talented is is most consistent with what we stand competitiveness — and those who becoming intense. Why hobble our for when we speak of family values. play by the rules and can demonstrate most competitive firms when one of In addition, family relationships must that they can make long term the proposed bill’s basic thrusts is to be given more points in the point contributions to our country should align our immigration system better system while the attributes they bring be allowed to earn their way to green with our economic interests? — hard work and entrepreneurship cards through a more thoughtful Second, some of the restrictions — are properly recognized. allocation of points. RF on family go beyond the stated aim The final area that needs fixing, of reducing chain migration and the proposed temporary program, contravene most common sense will need help from both sides of the Dr. Demetrios G. Papademetriou principles of fairness and family aisle. Democrats should stop trying is co-founder and President of unity — even if they are in the bill to kill it or relegate it to numerical the Migration Policy Institute, primarily in order to be traded for insignificance. It is an essential part a Washington-based think tank other things. To stand on principle of overall reform if we do not want dedicated exclusively to the study of on this issue, Republicans must to have another ugly standoff about international migration.

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20 RIPON FORUM June/July 2007 Hoping for a Medicare Miracle This year’s Trustee’s Report won few headlines. Yet it included a trigger for possible reform.

Matt Moore

In May, the U.S. Treasury year’s report required the trustees to almost a quarter of federal income tax department published the annual reports officially sound the alarm. revenue. By 2030, about the midpoint for Social Security and Medicare. The Now what? Under the trigger rule, of the baby boomer retirement years, two volumes — all 460 pages, five President Bush must propose a plan Medicare will take more than a third. pounds worth — were once again to deal with the imbalance as part of That means the government will have largely ignored by the national media his next budget for 2009. Congress is to raise income taxes by a third or stop and Congressional leaders. required to “fast track” consideration doing about a third of what it does Not much changed since last year, of the president’s plan. today. so what’s the big deal, right? Both the president and Maybe we won’t miss NASA or Social Security and federal education funding Medicare are hurtling or subsidies for farmers. toward a cliff like But maybe your favorite lemmings. $88 trillion program will be the one in unfunded promises. on the chopping block. Disaster, death, E v e n t u a l l y , destruction. We’ve Medicare spending will heard it all before. drain nearly every tax But this time, just dollar the government maybe, it will turn out raises. In all, we’re different. This time the talking about an unfunded President and Congress liability somewhere in have to do something the neighborhood of about it. $75 trillion. (That is the An obscure amount we would need on provision in the hand today, invested and 2003 law that added earning interest outside prescription drugs to Congress’ reach.) Throw Medicare (which came, Secretaries Leavitt, Chao, and Paulson, at the release of the Social in Social Security and by the way, with a Security and Medicare Trustees Report this past April. the total soars to more $17 trillion price tag) than $88 trillion. And requires the Medicare trustees to raise congressional leaders should take the that doesn’t even include the impact of a flag if two consecutive reports predict warning to heart: Medicare is growing the retiring baby boomers on Medicaid, Medicare will draw excessive revenues really fast. Due to the retirement of which is almost as big as Medicare. from the general budget within the next the 77 million Baby Boomers — and According to Tom Saving, one of seven years. The measure is generally the soaring costs of medical care — the Medicare trustees, we could fully referred to as a “general revenue Medicare will start sucking big bucks fund Medicare for the foreseeable trigger.” away from other treasured federal future by siphoning off 60 percent of all In short, if Medicare is projected programs. federal income tax revenue — starting to drain too much income tax money In just five years, Medicare will today and continuing forever — and from the federal government within the drain the equivalent of one in every setting it aside for Medicare benefits. next seven years, the trustees have to ten income tax dollars from the federal But that’s just not going to happen. alert Congress. The 2006 report was government’s general fund. Within the So, what should we do? First, the first to cross the threshold, and this next fifteen years, Medicare will drain our leaders should take the hint:

RIPON FORUM June/July 2007 21 reform is needed. Traditional actually force Congress to do Republicans nor Democrats seem piecemeal “solutions” like raising anything real about these very real to have the stomach for — or much the retirement age, bumping up the problems. It requires that a debate interest in — getting the job done. tax rate and so forth might alleviate take place, yes, but conveniently it Medicare’s soaring costs the current crunch for a couple doesn’t require Congress to actually constitute the single biggest domestic years, but won’t do nearly enough pass anything. policy issue facing the nation today. to plug the long-term drain. Thus, instead of embracing a real We can pretend the problem doesn’t We need to rethink how exist, or pretend that we can Medicare works. For one thing, wait for the next president or people should be allowed and Under the trigger rule, the next Congress to fix it. But encouraged to save money very soon, as Medicare draws while working to fund future President Bush must increasing sums of money away elderly health care benefits. In propose a plan to deal from other federal programs, the addition, we could combine all with the imbalance as pet projects of the next president the parts of Medicare, including and Members of the next the prescription drug benefit and part of his next budget Congress will have to compete individually-purchased Medigap for 2009. with Medicare for scarce dollars. policies, into a single plan with Maybe then our policy makers a single premium, which would will notice the problem we have help hold down some of the soaring solution that prevents the indentured seen brewing for decades. Maybe costs. servitude of an entire generation, then they will finally fix it. RF Sadly, there is a caveat to Congress may well pass something this whole story. We know it is painless — for themselves and for Matt Moore is a senior policy vital that we address Medicare’s the retiring Baby Boomers — but analyst with the National Center unsustainable growth — and we also something that will do nothing for Policy Analysis. know the Medicare trigger will at to alleviate the plight of today’s least force Congress to talk about it. younger workers. After all, with But, the Medicare trigger doesn’t a few notable exceptions, neither

22 RIPON FORUM June/July 2007 Making Government Work To meet the challenges and opportunities of the 21st Century.

David Walker

I’m sure I don’t need to tell any Jones companies survives today, and strategies. Many agencies have been of you that the world has changed that’s GE. The rest couldn’t adapt slow to adopt best practices. While a significantly in the past 20 years. to changing conditions and either few agencies have begun to rethink But the truth is, we’re going to see merged with competitors or went out their missions and operations, even greater changes in the next 20 of business. many federal policies, programs, or 30 years. To avoid irrelevancy, At the start of the 21st century, processes, and procedures are businesses, nonprofit entities, and our country faces a range of hopelessly out of date. Furthermore, federal agencies will all need to sustainability challenges: fiscal, all too often, it takes an immediate adapt to this accelerating pace of health care, energy, the environment, crisis for government to act. change. Stated differently, we can’t Iraq, and immigration, to name a Efficient and effective just be concerned with today, we few. These challenges are complex government matters. Hurricanes need to focus on the future. and of critical importance. Katrina and Rita brought that point To capitalize on home in a painful way. our opportunities and The damage these storms minimize related risks, inflicted on the Gulf all organizations must Coast put all levels of be mindful of the big government to the test. picture and the long While a few agencies, like view. Organizations that the Coast Guard, did a endure tend to periodically great job, many agencies, rethink their missions and particularly the Federal operations. World-class Emergency Management organizations understand Agency (FEMA), fell far that innovation requires short of expectations. change. One must change Public confidence in in order to continuously the ability of government improve. The simple to meet basic needs was truth is an organization severely shaken — and that stands still today is Efficient and effective government understandably so. If our going to get passed by government can’t handle and, ultimately, it may not matters. Hurricanes Katrina and known threats like natural survive. Rita brought that point disasters, it’s only fair to It’s useful to remember home in a painful way. wonder what other public at the end of the 19th services may be at risk. century, the original Dow T r a n s f o r m i n g Jones Industrial Average consisted Unfortunately, our government’s government and aligning it with of 12 stocks. These were all powerful track record in adapting to new modern needs is even more urgent companies, the leaders in their fields. conditions and meeting new because of our nation’s large and Names like National Lead, U.S. challenges isn’t good. Much of the growing fiscal imbalance. Simply Rubber, and Tennessee Coal and Iron federal government remains overly stated, America is on a path were the Microsofts and Wal-Marts bureaucratic, myopic, and narrowly toward an explosion of debt. And of their day. It’s sobering to realize focused, clinging to outmoded that indebtedness threatens our only one of the original 12 Dow organizational structures and country’s, our children’s, and our

RIPON FORUM June/July 2007 23 grandchildren’s futures. With the same time, growing numbers of continents and oceans is now looming retirement of the baby retirees will be claiming their Social instantaneous. This new reality was boomers, spiraling health care Security, Medicare, and Medicaid made clear by the recent drop in the costs, plummeting savings rates, benefits. Chinese stock market, which had and increasing reliance on foreign Many of these retirees will live immediate ripple effects on financial lenders, we face unprecedented far longer than their parents and markets from Tokyo to London to fiscal risks. grandparents. Today, there are about New York. Long-range simulations from 55,000 Americans who are 100 years Clearly, U.S. consumers my agency are chilling. If we old or older. By 2050, as many as a have reaped many benefits from continue as we have, policy makers million Americans may have reached globalization. From clothing to will eventually have to raise taxes this milestone. In a nutshell, the computers, you and I can buy a dramatically and/or slash government retirement of the baby boomers, range of foreign-made goods that services the American people and I’m one of them, is going to put are cheaper than ever. But there’s a depend on and take for granted. Just unprecedented demands on both our catch. In many cases, lower prices pick a program —student loans, the public and private pension and our have been accompanied by losses in interstate highway system, national health care systems. U.S. jobs. parks, federal law enforcement, and The problem is that in the Globalization is also having an even our armed forces. coming decades, there simply aren’t impact in areas like the environment Lately, I’ve been speaking out going to be enough full-time workers and public health. The truth is publicly about our nation’s worsening to promote strong economic growth that air and water pollution don’t financial condition. Beginning stop at the border. And with in 2005, I started going on the today’s international air travel, road with a bipartisan group Transforming government infectious diseases can spread that includes representatives and aligning it with modern from one continent to another from the Concord Coalition, the literally overnight. Brookings Institution, and the needs is even more urgent With the end of the Cold Heritage Foundation. We call because of our nation’s large War, we face new security ourselves the “Fiscal Wake-Up threats, including transnational Tour.” and growing fiscal terrorist networks and rogue So far, we’ve held town imbalance. nations armed with weapons of hall meetings at public venues mass destruction. September in 20 states across the country. 11 brought this reality home At every stop, we’ve made in a painful way. Stronger it a point to lay out the facts in or to sustain existing entitlement multinational partnerships will be a professional, nonpartisan, and programs. I should point out while essential to counter these diverse non-ideological manner. We’ve Social Security has a problem, our and diffuse threats. also been raising ethical and moral Medicare and health care challenges Other challenges come from concerns, particularly when it comes are many times worse. technology. In the past 100 years, to shifting huge debt burdens onto At the same time, American but especially the last 25 years, future generations of Americans. companies are cutting back the spectacular advances in technology I’m now going to discuss some retirement benefits they’re offering have transformed everything from of the other major challenges facing to workers. To live well during your how we do business to how we our nation. Some of them have “golden years,” all of you are going communicate, to how we treat been around for a while. Others are to have to plan better, save more, and cure diseases. Our society has emerging problems. At the top of that invest more wisely, and resist the moved from the industrial age to the list — demographics. To put it simply: temptation to spend those funds knowledge age, where specialized our population is aging. Despite before you retire. knowledge and skills are two keys to increased immigration, growth in Beyond demographics, the success. Unfortunately, the United the U.S. workforce is expected to United States confronts a range States — which gave the world slow dramatically during the next of other challenges. Globalization Benjamin Franklin, Thomas Edison, 50 years. Like most industrialized is at the top of that list. Markets, and Bill Gates — now lags behind nations, the United States will have technologies, and businesses in many other developed nations on fewer full-time workers paying various countries and in various high school math and science test taxes and contributing to federal parts of the world are increasingly scores. social insurance programs. At the linked, and communication across In many respects, our quality

24 RIPON FORUM June/July 2007 of life has never been better. We’re government transformation is also eternal life we’ll ever see on this living longer, we’re better educated, essential. Every federal agency earth.” This is a key reason our and we’re more likely to own our own and every federal program is going government has grown so large and homes. But as many of you already to have to rethink its missions and so expensive. know from your own families, we operations. American families regularly also face a range of quality-of-life The problem is that much of clean out their closets and attics. concerns. These include poor public government today is on autopilot, Surplus items are either sold at schools, gridlocked city streets, based on social conditions and yard sales or given to charity. inadequate health care coverage, spending priorities that date back Unfortunately, when it comes to and the stresses of caring for aging decades. I’m talking about when federal programs and policies, our parents and possibly our own Harry Truman, Dwight Eisenhower, government has never undertaken an children at the same time. and John Kennedy were in the White equivalent spring cleaning. Our very prosperity is also House. The fact is, the Cold War is We need nothing less than a placing greater demands on our over, the baby boomers are about to top-to-bottom review of federal physical infrastructure. Billions retire, and globalization is affecting programs, policies, and operations. of dollars will be needed to Congress and the President need modernize everything from to decide which of these activities highways and airports to water remain priorities, which should and sewage systems. The demands be overhauled, and which have for such new investment will simply outlived their usefulness. increasingly compete with other Entitlement reform is national priorities. especially urgent. Unless we At both ends of Pennsylvania reform Social Security, Medicare, Avenue and on both sides of the and Medicaid, these programs political aisle, we need leaders will eventually crowd out all other who will face these facts, speak federal spending. Otherwise, by the truth, work together, and 2040 our government could be make tough choices. We also need doing little more than sending leadership from our state capitols out Social Security checks and and city halls, from businesses, paying interest on our massive colleges and universities, national debt. charities, think tanks, the GAO has been doing its best military, and the media. So far, to bring attention to the problem. there have been too few calls for To get policy makers thinking, fundamental change and shared we published an unprecedented sacrifice. report that asks more than 200 probing questions about A Way Forward David Walker mandatory and discretionary Obviously, a return to fiscal spending, federal regulations, tax discipline is essential. We need to We need nothing less policy, and agency operations. impose meaningful budget controls The report is called “21st Century on both the tax and the spending than a top-to-bottom Challenges: Reexamining the Base sides of the ledger. Members of review of federal of the Federal Government,” and is Congress also need more explicit programs, policies, available free on GAO’s Web site at information on the long-term costs www.gao.gov. of spending and tax bills — before and operations. Last November, I sent a letter they vote on them. For example, to congressional leaders suggesting the Medicare prescription drug bill everything from foreign policy to 36 areas for closer oversight. came with an $8 trillion price tag. international trade to public health. We also recently updated GAO’s But that fact wasn’t disclosed until Unfortunately, once federal list of government areas at high after the bill had been passed and programs or agencies are created, risk of waste, fraud, abuse, and signed into law. the tendency is to fund them in mismanagement. But if our government is to perpetuity. As President Ronald Our hope is that policy makers successfully address the range of Reagan once quipped, a government and the public will think more challenges I mentioned earlier, program is “the nearest thing to strategically about where we are,

RIPON FORUM June/July 2007 25 where we’re headed, and what we public service. two best examples are Australia and need to do to get on a more prudent and Public service can take several New Zealand. Like the United States, sustainable path. Fortunately, concern forms: military or civilian government they have aging populations. Unlike seems to be growing. Members of service, faith-based or other charitable the United States, these two countries Congress on both sides of the aisle have organizations, or in community and have stepped up to the plate and dealt started asking some pointed questions other public interest groups. Lots of with some of their serious long-term about where we are and where we’re jobs in various sectors, from nursing challenges. Among other steps, they’ve headed. Even the Administration now to teaching to social work, also reformed their overburdened public acknowledges that deficits matter. In provide wonderful opportunities to pension and health care systems. The recent statements, the President has serve others. efforts by policy makers in Australia pledged not just to balance the budget One person clearly can make and New Zealand show it’s politically but also to start tackling our large and a difference in today’s world. My possible to make difficult decisions growing entitlement promises. favorite 20th century president, that require short-term pain in the The American people need to Theodore Roosevelt, is proof of that. interest of long-term gain. become more informed and involved TR, as he’s often called, was someone What’s needed now is leadership when it comes to the problems facing with character, conscience, and — the kind that leads to meaningful our country. They also need to become conviction. and lasting change, and that is both more vocal in demanding change. As our 26th and youngest bipartisan and broad-based in nature. Younger Americans like you need president, he was an optimist who Leadership can’t just come from to speak up because you and your firmly believed in the potential of Capitol Hill or the White House. children will ultimately pay the price government to improve the life of Leadership also needs to come from and bear the burden if today’s leaders every citizen. As a trustbuster, TR Main Street. fail to act. took on some of the nation’s more It’s time for the three most The good news is younger powerful words in our Constitution — Americans turned out in large numbers Government “We the people” — to come alive. The for November’s midterm election. American people are going to have to From Iraq to immigration, from ethical transformation isn’t become better informed and involved lapses to fiscal irresponsibility, the possible without as we head toward the 2008 elections. public’s dissatisfaction with the status And the next President, whoever he or quo was abundantly clear. But looking a first-rate federal she may be, and whichever party he or toward 2008, it’s essential that the workforce. she represents, should be prepared to public and the press hold candidates use the bully pulpit of the Oval Office of both parties accountable for their to push needed reforms. If these things position on our large and growing happen, we have a real chance to turn fiscal challenge. powerful and ethically challenged things around and better position Transforming government won’t corporate interests. And he won. As ourselves for the future. happen overnight. Success depends on an environmentalist, TR left us with By facing the facts and making sustained leadership that transcends a legacy of great national parks like sound policy choices, I’m confident the efforts of a single person or a single Yosemite. As an internationalist, he led we can fulfill our stewardship administration. Public officials will peace talks to end the Russo-Japanese responsibilities to your generation and also need to partner with other federal War. In fact, TR is the only American to future generation of Americans. As agencies, businesses, universities, and to have won both the Congressional TR said, “fighting for the right [cause] nonprofit groups, both domestically Medal of Honor and the Nobel Peace is the noblest sport the world affords.” and internationally. The bottom line: Prize. I would encourage each of you to pick we can succeed with enlightened and TR firmly believed that it was your cause, and do your best to make a sustained leadership. And unlike with every American’s responsibility to be real and lasting difference. RF global warming, we can solve our active in our civic life, and so do I. fiscal challenge on our own! Democracy is hard work but it’s work David Walker is the Comptroller worth doing. How America looks in General of the United States and head A Call to Public Service the future is largely up to us. “We the of the Government Accountability Government transformation isn’t people” are ultimately responsible Office. This article is drawn from a possible without a first-rate federal for what does or does not happen in speech he delivered at the New School workforce. In my view, whatever Washington. in New York City on April 25, 2007. your career, everyone should consider Other countries with similar The complete text is available at www. giving at least a couple of years to challenges have already acted. The GAO.gov.

26 RIPON FORUM June/July 2007 Form Follows Function It’s true in architecture. Is it true in politics, too?

BILLY PITTS AND LOU ZICKAR

Earlier this year, Senator Joe an Independent, “It’s Lieberman (I-CT) made some news because Lieberman when he convened a hearing of the Senate can’t decide what side 1946 photo of the “Mead Committee,” the successor to the Homeland Security and Governmental he’s on anymore.” Truman Committee which investigated the defense industry in Affairs Committee. This was a good the 1940s. Photo courtesy of U.S. Senate Historical Office. The news didn’t have to do with soundbite, for sure. any bill or issue the Committee was But in putting forward a plan designed No longer would a Senator draft a bill at considering. Rather, it had to do with to bring Republicans and Democrats his desk on the Senate floor surrounded by where the members of the Committee closer together, Lieberman was likely not his colleagues, only to have it debated in were sitting. Tossing tradition aside, looking for soundbites. Rather, he was Committee by Members who were seated Lieberman – the Committee’s Chairman trying to encourage the members of the at a table. Now, members were free to – decided to seat the Committee members Committee to look beyond the cameras come and go as they pleased, writing together in alternating fashion, according and focus instead on the work that was pieces of legislation in private, then having to their party affiliation. at hand. Put another way, he was asking their proposals debated by Members of a As a result, instead of having them to forget they were divided along a Committee who were perched on a dais Republicans seated on one side of the dais and imagine instead they were seated with TV cameras staring them in the dais and Democrats on the other, the together at a table. face. Committee members were now side by In fact, this is the way committees One of the maxims of architectural side. In putting forward this unorthodox used to meet. It was only in the mid-20th design is that form follows function. If seating arrangement, Lieberman released Century that Congress moved away from that is true, then perhaps the design of a joint statement with the Committee’s this tradition. According to Dr. Betty the House and Senate office buildings Ranking Republican, Susan Collins (R- Koed with the U.S. Senate Historical on Capitol Hill has contributed to some ME), that said: Office, the change became instituted of the partisanship that seems to have “In the last election, the voters said with the construction of the Dirksen gotten worse over the last generation. they were sick of the partisanship that Office Building in the 1950s. The The buildings are splendid – Cannon, produces gridlock. They want us to work committee rooms in Dirksen were built to Longworth and Rayburn on the House together and get things done. So, as a accommodate television cameras. One of side; Russell, Dirksen and Hart on the start, instead of sitting on opposite sides the accommodations was to do away with Senate side. But in their own way, they of the room like a house divided, we want the tables members used and have them have forced members of Congress apart, the American people to see us sitting side sit on an elevated dais. No doubt, this instead of bringing them together. by side as our Committee members work helped bring members closer to viewers That’s why Joe Lieberman may be on together to make our nation more secure who may have been watching. But it to something. It’s also why his proposal and our government more efficient.” also served to create a separation among to seat Republicans and Democrats side The reaction to the plan ranged from Committee Members that didn’t exist by side on his committee might produce the expected to the predictable. Good before. chuckles in the short term but dividends government types loved it, while cynics In some respects, a similar down the road. RF simply sneered. In searching for some thing happened earlier in the century sort of deeper meaning behind the plan, with the construction of new House and Billy Pitts is a former longtime the Washington Post quoted an unnamed Senate Office Buildings. Whereas before staff member in the U.S. House of Hill staffer as saying, in reference to the Members would spend more time in the Representatives and current member of Connecticut Senator’s 2006 decision to House and Senate chambers, they now had the Editorial Board of the Ripon Forum. leave the Democratic Party and become their own personal office across the street. Lou Zickar is the Forum’s Editor.

RIPON FORUM June/July 2007 27 Name: M. Jodi Rell Hometown: Brookfield, Conn. Occupation: Governor, State of Connecticut

Previous Jobs: Lieutenant Governor, January 1995 – June 2004 State Representative (107th District), 1985 – 1995

Individual(s) who inspired me as a child: I have always had a great deal of admiration for my step-mother: Anyone who could manage a large, blended family and keep house so well was a hero in my book.

Historical figure(s) I would most like to meet: I would love to meet Amelia Earhart and ask what drew her to aviation. Being married to an airline pilot (now retired), I understand the thrill of flying. But she must have been a The impact of healthcare innovation remarkable woman to have entered into such a career in an age when women pilots were all but unknown. is measured in lives. A single life saved has an impact on generations of lives that follow. Baxter Issue facing America that no one is talking about: The growing use of employees around the world are connected by their enduring commitment alcohol and drugs among the very young. It isn’t just teen-agers we have to worry to save and sustain lives. It is this higher purpose that binds us as a company about anymore – these days it’s 7- and 8-year-olds as well. and as global citizens.

What the GOP must do to reclaim its

congressional majority: The party must Baxter’s 45,000 employees around the world apply their expertise in biotechnology, medical devices move to the center – cease polarizing and specialty pharmaceuticals to develop innovative treatments and therapies that help patients like every issue – and listen more closely to Matt Olovich lead healthier and more productive lives. An eight-year-old from Fishers, Indiana, Matt everyday people. has hemophilia A and uses Baxter’s clotting factor to prevent bleeding episodes that might otherwise keep him from playing baseball.

baxter.com

28 RIPON FORUM June/July 2007 The impact of healthcare innovation is measured in lives. A single life saved has an impact on generations of lives that follow. Baxter employees around the world are connected by their enduring commitment to save and sustain lives. It is this higher purpose that binds us as a company and as global citizens.

Baxter’s 45,000 employees around the world apply their expertise in biotechnology, medical devices and specialty pharmaceuticals to develop innovative treatments and therapies that help patients like Matt Olovich lead healthier and more productive lives. An eight-year-old from Fishers, Indiana, Matt has hemophilia A and uses Baxter’s clotting factor to prevent bleeding episodes that might otherwise keep him from playing baseball. baxter.com be BOLD

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