SUNDAY, MARCH 10, 2013 • THE BULLETIN
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OMMENTARY
e ms alifornia now works on the principle of the mordida, or "bite." Its government assumes that it can take something extra from residents for the privilege of living in their special state. Gov. Jerry Brown made that assumption explicit in his latest backand-forth with Texas Gov. Rick Perry, who keeps luring Californians to lower-tax, higher-employment Texas. Recently, Brown said of Texas, "Who would want to spend summers there in 110-degree heat inside some kind of fossil fuel air conditioner'?" Translated, Brown's retort meant that despite California's sluggish economy, high taxes and poor services, it's still worth staying there to enjoy its beautiful climate — especially along the 1,000-mile-long coast, where most of the state's elites live comfortably without a need for highpriced air conditioning. In November, California approved a measure to raise its sales tax and its income tax rates on the wealthy. According to the California Taxpayers Association, the state now has the highest sales tax and the highest top income tax rate in the nation. The state also just upped its gasoline taxes by nearly 10 percent to make them the costliest in the United States — about 70 cents a gallon in combined federal, state and local taxes. The state already has among the most expensive refinery regulations in America. That means California pump prices, at well over
wor VICTOR DAVIS HANSON
$4 per gallon, are second only to Hawaii's. Yet, unlike Hawaii, California's wells still produce more than 500,000 barrelsof crude oileach day — behind only Texas and Alaska. Its newly discovered Monterey Shale Formation may hold some 30 billion barrels of oil and gas. Perhaps no state has so much recoverablepetroleum and yet such high fuel taxes and pump prices. California's record taxes are not reflectionsof the costs incurred ensuring superior California public education. In fact, its public schools, in some surveys of national performance tests in math and English, rank near the nation's very bottom. Nor do record gas taxes equate to wonderful freeways. The federal government concluded that only half of California's roads rate as acceptable. Private rankings put C a lifornia's roads near dead last. The problem is that California has exorbitant built-in costs unlike any other state and, in politically correct fashion, usually tries to keep mum about them. As the home to about a quarter of the nation's illegal immigrants, most from poorer areas of Latin America, California has public schools that enroll millions whose first language is not English. Some-
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day, the infusion of young, motivated new Californians may prove a fiscal plus, but for the foreseeable future, illegal immigration translates into years of soaring health-care, housing, transportation, education and law-enforcement costs — and billions of much-needed dollars lost from the state economy each year in remittances to Latin America. California public unions are among the highest-paid in the nation. While Brown may h ave balanced next year's budget through higher taxes, he cannot do much aboutthe more than $300 billion in unfunded pension fund liabilities and municipal bonds that were incurred, in part, to ensure the state and its localities could afford their public workforces. Elite environmentalists — who feel that to extend the conditions of their own affluent coastal enclaves to millions of others would tax the ecosystem — haveblocked new housing developments, cut off irrigation water to
farmland, and opposed new energy production. Yet if California has self-induced crises, it also has innate advantages. Aside from the best climate in North America, it has the richest farming area in the nation, along with huge natural endowments of gas, oil, minerals and timber. California also enjoys an extravagant inheritance. Universities such as Stanford, Caltech and UC Berkeley continually rate among the best in the world. For decades, Silicon Valley,
Napa Valley, Hollywood and Central Valley agriculture have earned hundreds of billions of dollars in the global marketplace. In short, California is a wonderful placeto live for Bay Area, 30-something Google executives; young, rich Stanford students; and Malibu celebrities — or recent indigents fleeing the abject misery of Latin America and needing generous public help. But it is not such an accommodating landscape if you are in the shrinking middle class and seeking a goodpaying job in energy, construction or manufacturing; a safe daily commute on good roads; reasonable taxes; an affordable house; or a good public school. The governor and the legislature believe that higher taxes, higher prices and more regulations are worth the pleasures of California's weather, natural beauty and chic culture. Who would leave all that for low-tax but scorching Texas or Nevada? They may be right. I am still here, writing this column in 70-degree March weather, gazing out at the snow-capped Sierra Nevada mountains, amid blooming almond orchards on the small farm of my ances-
tors — while computing my soaring taxes and picking up the daily litter tossed bythe roadside, after another near-death experience on an archaic California freeway. — Victor Davis Hanson is a classicist and historian at the Hoover Institution,
Stanford University.
Budget CutSand a PlethOra Of bambs By Walter Plncus The Washington Post
WASHINGTONeneral b elt-tightening, f o llowed by more belt-tightening with sequestration, is forcing the nation's multibillion-dollar nuclear weapons complex to realize that the free-spending days of the Cold War are over. "The job of delivering nuclear defense was a job everybody took seriously.... And in a given year we spent our time concerned with achieving that and less with, I would argue, understanding the cost of things because of the imperative to deliver during the Cold War." That's how Neile Miller, acting administrator of the National Nuclear Security Administration, explained the almost cavalier attitude over the past 20 years toward spending on nuclear weapons during her appearance at a Feb. 14hearing of the House Appropriations energy and water development subcommittee. Miller told the panel: "So you might rightly ask, 'It's been a long time since the end of the Cold War. What
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gives?'" What gives is that for the most part the NNSA, and to a degree the Defense Department, must get serious about how they look at the nuclear threat since they are not going to have unlimited cash for nuclear deterrence. It's not just that money for nukes is no longer unlimited — it's also that policymakers are realizing the nation doesn't need as many nuclear weapons as it has. In the crazy Cold War days, we and
the Soviets made it a numbers game, both sides building up to some 30,000 bombs and warheads for intercontinental strategic delivery systems and shorter-range weapons, supposedly for the tactical battlefield. Bilateral treaties between Washington and Moscow have lowered both nations' stockpiles by more than 85 percent. But as Don Cook, NNSA deputyadministratorfordefense programs, told the Exchange Monitor's Fifth Annual Nuclear Deterrence Summit on Feb. 21, the last official number released by the U.S. government in 2009 was still 5,113 warheads and bombs. Cook said that the U.S. total has dropped to "a bit under 5,000 warheads" as the nation works towardthe limit set by the New Strategic Arms Reduction Treaty of 1,550 deployed warheads by 2018. The treaty sets no limit on non-deployed warheads. Remember, 68years ago just two very low-yield — bytoday's standards — atomic bombs all but destroyed two Japanese cities and ended a war. At the Exchange Monitor session, Ellen Tauscher, former undersecretary ofstate for arms controland international security affairs, said her opinion was that 1,000 deployed warheads and an additional 1,500 as a hedge would be "enough for deterrence or threats." But she said she had been out of government for a year and did not know what President Obama has approved in his asyet unreleased interagency study, completed last fall. One thing she said she was certain of, given the atmosphere here and
abroad: "No reductions with Russia at least through 2014." Another Exchange Monitor speaker, retired Gen. Larry Welch, former Air Force chief of staff, explained how the number of nuclear warheads needed for deterrence has gone down over theyears because of "smarter targeting." Welch said at one time four nuclear bombs or w arheads were aimed at one target, what he called "overkilL" Now it is two weapons to one target. Welch also said the 12 types of older warheads and bombs are being reduced to five as part of the stockpile's life extension program. Most of today's nuclear weapons were designed in the 1970s and produced in the 1980s. Some arebeing retired and eventually will be dismantled. The same facility that assembles weapons, the Pantex plant in Texas, also dismantles most of the old ones. Safety and security require a slow process in which only 100 warheads or bombs go through the system in a
year. For example, Miller noted that warheads retired as of fiscal 2009 will not all be dismantled until fiscal 2022. Speaking of safety, Cook made a point of telling the Monitor Exchange that by a " p r esidential directive" made before the Obama administration, the NNSA is undertaking researchthat pursues "technologies that render their nuclear weapons' unauthorized use impossible without their remanufacture." Many nuclear weapons have locks to prevent them from being armed without a code, but given terrorist threats, this study appearsto be a remote way to make them useless if stolen. The NNSA's overspending has been criticized for years. Its major capital construction projects traditionally have cost multiples of original estimates. The new uranium-processing facility at Oak Ridge, Tenn., whose design is nearing conclusion, has estimates that range from $4.2billion to $6.5 billion, according to Cook, because of the scientific unknowns that remain. It needs $120 million reprogrammed from fiscal 2012 funds to make up for delaying a new plutonium facility and faces the need for $100 million to store uranium from retired Navy propulsion reactors. For the first time, according to the NNSA's Miller, "we are maturing the budget processes and the program-
ming and planning processes," but they won't be ready until the fiscal 2016 budget. — Walter Pincus reports on intelligence,
defenseand foreign policy for The Washingon Post.
No-bid Medicare's sticker shock is rampant By Charles Lane The Washington Post
he publisher of The Wall Street Journal and others are suing to gain detailed accessto Medicare billing records through the Freedom of Information Act. Off-limits to the public since 1979, such data could hold the keyto billions of dollars in savings, once journalists armed with modern technology sift through it for evidence of waste, fraud and abuse. Doctors are fighting the lawsuit, claiming that their taxpayer-funded earnings are none of the public's business. There's still no ruling in the case, but readers I heard from unanimously backed the Journal. I didn't receive one email supporting the doctors. What I did get was a flood of firstperson testimony about outrageous Medicare bills. One reader in Northern Virginia told me a supplier to his doctor had billed Medicare almost $230 for a hand brace that retails for $30.99. Another — Michael April, a specialist in physical medicine and rehabilitation in Montgomery County, Md. — wrote that Medicare reimburses power-wheelchair suppliers between
$4,000 and $5,000 for a basic chair that costs the supplier $700 and sells for a retail price of $2,500. I decided to checkthese stories with the Centers for Medicare & Medicaid Services and other sources. What I found was a classic Washington good news/bad news story. The federal government is addressing some problems that readers noted, with significant results to show for its efforts so far. But the time and political effort it's taken to get to this point does not bode well forfuture Medicare reforms. Most reader complaints revolved around inflated reimbursements for wheelchairs, oxygen tanks, beds and diabetes test strips, known in Medicare-speak as"durable medical equipment, prosthetics, orthotics and supplies" — DMEPOS. In fact, as a slew of inspector general and Government Accountability Office reports attest, excessive DMEPOS costs have plagued Medicareforyears. Part of the problem was Medicare's lax screening of suppliers, which attracted hundreds of swindlers to the business. But the real scandal was howmuchyou couldcharge Medicare legally. Congress drew up the DME-
POS reimbursement schedule in 1989 based on mid-1980s economics and left it unchanged thereafter, except for sporadic inflation adjustments. In short, the law required Medicare to overpay. The obvious solution was competitive bidding. But Washington doesn't do obvious solutions, at least not immediately. Congress authorized two small five-year pilot projects in 1997. After those ended, it approved wider trials, to begin in 2007, in nine notoriously expensive metropolitan areas. Medicare didn't start taking bids for this program until 2009, however, because industry complaints about inevitable operational hiccups caused Congress to vote for a delay. Meanwhile, between 2000 and 2010, Medicare spent $69.4 billion on DMEPOS, almost all of it based on the old, inflated reimbursement rates. Oneman's absurd waste of taxpayer funds, however, is another man's rice bowl. Organized into an effective lobby, medical equipment manufacturers and distributors resisted change. Some of the lobby's arguments made sense and have been incorporated into policy.
M edicare's easy money for distributing diabetes test strips, power chairs and thelike spawned mom-and-pop operations across the country. Now some of them are going bust. That's what happens when you stop subsidizing inefficient, low-volume dealers. That's not good enough for the DMEPOS lobby or its allies on the Hill, including some ostensible foes of federal waste. A group of House members, led by such tea party stalwarts as Tom Price, R-Ga., and Joe Wilson, R-S.C., have filed an industry-backed bill to revamp the whole process until it's more to the liking of these "small businesses" that live off government. Enough already. Congress should accelerate the planned introduction of nationwide competitive bidding on DMEPOS to 2014, and extend it to medical devices, lab tests and advanced imagingservicesby 2015, as recommended ina recent Center for American Progress report. The savings could total $38 billion over the next decade. Medicare is supposed to be ahealth care program forseniors, not a cash cow. — Charles Lane is a member of The Washington Post's editorial board.
DAVID BROOKS
Living with 'brutality cBscBdes et's say you were a power hitter during baseball's steroids era.You may have objected to steroids on moral and health grounds. But many of your competitors were using them, so you faced enormous pressureto use them too. Let's say you are a student at a good high school. You may want to have a normal adolescence. But you are surrounded by all these junior workaholics who have been preparing for the college admissions racket since they were 6. You find you can't unilaterally withdraw from the rat race and still get into the college of your choice. So you alsoface enormous pressure to behave in a way you detest. You might call t hese situations "brutality cascades." In certain sorts of competitions, the most brutal player gets to set the rules. Everybody else feels pressure to imitate. The political world is r ife w i th brutalitycascades. Let's say you are a normal person who gets into Congress. You'd rather not spend all your time fundraising. You'd like to be civil to your opponents and maybe even work out compromises. But you find yourself competing against opponents who fundraise all the time, who prefer brutalism to civility and absolutism to compromise. Soon you must follow their norms to survive. Or take a case in world affairs. The United States is a traditional capitalist nation that has championed an openseas economic doctrine. We think everybody benefits if global economics is like a conversation, with maximum openness, mutual trust and free exchange.But along comes China, an economic superpower with a more mercantilist mindset. Many Chinese, at least in the military-industrial complex, see global economics as a form of warfare, a struggle for national dominance. Americans and Europeans tend to think it is self-defeating to engage in cyberattacks on private companies in a foreign country. You may learn something, but you destroy the trust that lubricates free exchange. Pretty soon your trade dries up because nobody wants to do business with a pirate. Investors go off in search of more transparent partners. But C h ina's c y bermercantilists regard deceit as a natural tool of warfare. Cyberattacks make perfect sense. Your competitors have worked hard to acquire intellectual property. Your system is more closed so innovation is notyour competitive advantage. It is quicker and cheaper to steal. They will hate you for it, but who cares'? They were going to hate you anyway. C'est la guerre. In a brutality cascade the Chinese don't become more like us as the competition continues. We become more like them. And that is indeed what's happening. The first thing Western companies do in response to cyberattacks is build up walls. Instead of being open stalls in the global marketplace, they begin to look more like opaque, rigidified castles. Next, the lines between private companies and Western governments begin to blur. When Western companies are attacked, they immediately turn to their national governments for technical and political support. Pretty soon the global economy looks less like Monopoly and more like a game of Risk, with a Chinese military-industrial complex on one part of the board and the Western military-industrial complex on another part. Brutality cascades are very hard to get outof.You can declare war and simply try to crush the people you think are despoiling the competition. Or you can try what might be called friendship circles. In this approach, you first establish the norms of legitimacy that should govern the competition. You create a Geneva Convention of domestic political conduct or global cyberespionage. Then you organize as broad a coalition as possible to uphold these norms. In his effort to fight what he regards as Republican zealots, President Barack Obama is caught between these two strategies. He never quite pushes budget showdowns to the limit to discredit Republicans, but he never offers enough to the members of the Republican common-sense caucus to tempt them to break ranks. Clearly the second option is better for dealing with the Chinese. Unfortunately, standard-setting is a dying art these days, so we are living with these brutality cascades.
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— David Brooks is a columnist for The New York Times.