Indian Prime Minister Manmohan Singh is in the United States for the first official state visit by any foreign leader since President Barack Obama took office this year. While the atmospherics are right, and the two leaders probably won't be looking as stilted as Obama and China's President Hu Jintao appeared to be during Obama's trip last week (for the Indians are rarely short on conversation), there is a sense of unease.

And much of it has to do with AFPAK - the war in Afghanistan and Pakistan which is very nearly at the top of Obama's foreign policy agenda and one that some fear may eventually consume the rest of his presidency. America's ally Pakistan worries about India's expanding assistance and links to Afghanistan, seeing it as part of a strategy to encircle it from the rear.  Ordinarily, Pakistani noises wouldn't bother India as much, but for signs that the Obama administration has begun to adopt those concerns as its own in its desperate search for a solution, as Fareed Zakaria writes in Newsweek.

And that is producing a "perverse view" of the region, he says adding it was a bit strange that India was being criticised for its influence in Afghanistan. India is the hegemon in South Asia, with a GDP 100 times that of Afghanistan and it was only natural that as Afghanistan opened itself up following the ouster of the Taliban in 2001, its cuisine, movies and money would flow into the country. The whole criticism about India,  Zakaria says, is a little bit like saying the United States has had growing influence  in Mexico over the last few decades and should be penalised for it.

But what about Pakistan's concerns, a country that was dismembered in the last full-scale war with India in 1971 with the creation of Bangladesh. The last thing it would want is a hostile regime in Afghanistan on its western flank on top of the Indian army, the world's third largest, massed on the eastern front, not to mention the Islamist militants whom it once nurtured turning on  the State itself.

Pakistan army chief General Ashfaq Kayani told the U.S. National Security Adviser General Jim Jones earlier his month that Indian presence in Kabul would hurt the war objectives.

And what about the Afghans themselves ? The India-Pakistan rivalry is probably a sideshow in the broader battle between a resurgent Taliban and the foreign forces, but perhaps one they can do without.

[Photographs of Afghan children and Indian and U.S. flags at the White House]

– This opinion piece was written by C.M. Sennot for GlobalPost. The views expressed are his own. It was originally published here on GlobalPost. –

The last time America had to borrow money to finance a war was during the Revolution and a cash-strapped Continental Congress took loans from France to fund a surge against the British.

That worked out pretty well.

But it’s hard to feel the spirit of 1776 in President Obama’s journey to China. He went as a representative of a borrowing nation to its primary lender amid a call for yet another costly military surge in the Long War that is escalating in Afghanistan even if it is hopefully winding down in Iraq.

As the president completes his journey to Asia, he returns to Washington to face what is the most consequential foreign policy decision of his presidency, a decision that this administration has not yet fully thought through.

That is whether to heed the counsel of his top commander in Afghanistan, General Stanley McChrystal, and call for a surge of 40,000 more troops in Afghanistan.

Obama is said to also be pondering a middle ground of calling up somewhere between 10,000 and 30,000 more troops.

Or, and this is shaping up as a long shot, he and his team of rivals in the Pentagon and the State Department could decide to rebuff McChrystal. In this scenario, Obama would refocus the mission but still hold to the general counterinsurgency plan that he originally spelled out in March and which increased U.S. troops by 21,000 to a total U.S. presence of 68,000 troops. That surge was just completed this fall.

From my experience talking with counterinsurgency experts and meeting with U.S. and coalition counterinsurgency leaders and trainers in Afghanistan over the summer, I am hoping Obama chooses to hold to the existing troops level. I am hoping he does that while refocusing his original plan to be more targeted on counterterrorism than the wider goal of classic counterinsurgency against the Taliban. He should stick to his guns and hold at the troop levels he has and make the troops who are there better and more effective and provided with better equipment and intelligence assets to get the job done. As I said in an earlier column, less is more right now in Afghanistan.

Every empire in history has regretted an escalation in Afghanistan and it is hard to see how America would be any different.

I do not envy the president and his team in making a very difficult and costly decision at a very hard time economically in America. Few presidents in history have had to face so many fateful decisions in their first year in the White House.

But despite all the pondering the president has given to whether to increase troops, it seems he has given far too little consideration to the overall cost of escalating the war and how it will undercut his ability to fund the ambitious domestic policy agenda he has set out from bank bailouts to health care reform.

With all the debt piling up, it seems to me there is a clear connection between his trip to China and these war costs in Afghanistan.

If you think about it, the hundreds of billions we borrow from China every year will go at least in part to fund the enormous cost of an escalation of troops in Afghanistan, a cost — in terms of lives and treasure.

The war in Iraq will end up costing this country more than 2 trillion dollars, according to the conservative projections of Linda Bilmes, an economist at the Harvard’s Kennedy School of Government. The cost is higher still if you include interest on the debt, interest which will in a large measure be paid to China.

Bilmes has worked closely with the Nobel Prize-winning economist Joseph Stiglitz to do the long math on the wars in Iraq and Afghanistan, to factor in not just the military budget and the interest on the debt but also the extraordinary high cost on every level of soldiers who are wounded physically and mentally by war.

Bilmes is credited with highlighting the failure of the administration of President George W. Bush to give an accurate cost assessment of a war that escalated several hundred times beyond the original projection of just $50 billion to $60 billion made by the Pentagon at the start of the war in 2003. She’s been proven right and she’s worried that the Obama administration may be fatefully making another miscalculation on the cost of war in Afghanistan.

And we’ve hit a profound turning point in Afghanistan. In this new budget year, which started Oct. 1, for the first time, the war in Afghanistan will cost Americans more than the war in Iraq.

And, as Bilmes points out, fighting in Afghanistan is more costly than it is in Iraq because of the terrain and the difficulty in supplying troops and evacuating the wounded. She estimates that Afghanistan is as much as 1.6 times more expensive per soldier than Iraq.

“While this administration has brought great military expertise to thinking this through, there needs to be a greater focus on the cost. How are we going to pay for this? People are still not looking at the long term costs,” said Bilmes.

And so as the president stares out the window of Air Force One pondering the dark skies in the long journey back to Washington, one can only hope that he has thought through the extraordinary cost — on every level — of calling for an escalation of troops in Afghanistan.

More on Afghanistan from GlobalPost:

America’s farmer-soldiers in Afghanistan

Afghanistan’s only pig quarantined? Must be bad

Afghanistan: Waiting for the dust to settle

Troops’ deaths shatter trust in Helmand

Pictured above: U.S. President Barack Obama tours the Great Wall of China at Badaling, November 18, 2009. REUTERS/Jason Reed

In the wake of President Obama's decision to scrap the U.S. missile defence shield in eastern Europe, many are pondering Russia's response. The relationship will remain in the spotlight this week, when President Medvedev heads to the U.S. for the G20 summit. Although the precise nature of Russia's reaction remains to be seen, it has a big incentive to improve relations. It badly needs American investment and co-operation to help solve serious economic problems at home.

Critics of Obama's decision worry that it will "embolden" Russia, causing more aggressive behaviour abroad. Yet they forget that the Bush administration's antagonistic policies failed to provide security to Russia's neighbours. These policies didn't prevent Russia's war with Georgia, the repeated gas disputes with Ukraine, and a serious cooling of relations with countries such as Poland. Far from being restrained, Russia's confrontational attitude had a lot to do with its perception that the U.S. was busy encircling the country with missile bases and alliances.

The critics also imply that Russia is preoccupied with external expansion, but that hardly seems appropriate today. Russia's GDP is set to plummet by 8 percent this year. Russian analysts estimate that the country needs up to $2 trillion to renovate its dangerously clapped-out infrastructure. In major industrial cities, Russia's dilapidated factories are mulling huge job losses. For the foreseeable future, Russia's leaders are likely to be preoccupied with thorny domestic problems.

Faced with such daunting challenges, it's entirely logical that both Medvedev and Putin say they are keen to kick-start American trade and investment. Responding to Obama's decision -- which he described as "brave and correct" -- Putin immediately linked it to economic issues. He called for the U.S. to back Russia's entry into the World Trade Organisation (WTO), and scrap Soviet-era trade restrictions against Russian companies, especially those that regulate technology transfer to Russia.

On the same day, at an investment summit in Sochi, Putin held well-publicized meetings with the CEOs of General Electric, Morgan Stanley and Texas Pacific Group -- all major U.S. companies. When it comes to the economic sectors that Russia says it is most eager to develop, American investment will be especially crucial. The crisis has underscored the need for Russia to wean itself off dependence on natural resources, and develop new high-technology sectors, such as IT and nanotechnology, where U.S. companies are at the cutting edge.

This means that the U.S. still has plenty of bargaining chips left as it seeks to gain Russia's cooperation on global issues. The bigger problem could be persuading U.S. investors to come. No matter how much Russia's leaders appear to welcome foreign investment, there remain huge obstacles, including corruption and bureaucracy, which they seem largely powerless to deal with.

Nor does the tentative thaw mean an end to diplomatic tensions. Russia's relations with its immediate neighbours may well remain stormy, potentially causing renewed strains with Washington. Still, it's hard to argue that by extending his olive branch to Russia, Obama increases the likelihood of such upsets. The evidence of the last few years implies just the opposite. The frostier Russia's relations have been with the U.S., the more determined Russia has been to resist U.S. encroachment in nearby countries, increasing regional tensions.

Now, Obama's gesture has opened up the possibility of a fresh start, creating prospects for mutually beneficial economic cooperation. The Russians would be foolish not to jump at that opportunity.

The rising costs of Medicare and Medicaid threaten to destroy the nation's fiscal future, but President Obama is pushing for healthcare reform that would increase costs. Instead, he should refocus his presidency on paying down debt.

America's obligations over the next 75 years now surpass $62 trillion, up 8 percent since last year. And a new report released today by the Peterson Foundation suggests that total will go even higher if the House's health care legislation is passed.

(Click table to enlarge in new window)

With today's pliant bond market, it's easy to pretend we can have things that can't be paid for. But that's the kind of attitude that led California into the fiscal abyss. We have to get serious about bringing our expenses in line with our income. Now.

Unfortunately Republicans and Democrats alike are more concerned with winning elections than passing good public policy. Republicans told us "deficits don't matter," signed a prescription drug benefit for Medicare that created a bigger fiscal hole than Social Security, waged two very expensive wars financed with debt, and borrowed to bail out banks.

For their part, Democrats complain about the deficit they "inherited," then proceed to expand the bailouts, pass hundreds of billions worth of "stimulus," and try to increase our health care liabilities over and above already unsustainable levels.

Partisan economists on both sides provide intellectual cover for this foolishness, but most Americans know better. They know our spending is unsustainable. They see what's happened to California and know intuitively that government can't deliver services it can't pay for. Not forever.

Unfortunately, and this is what happened to California, the longer we wait to solve our fiscal mess, the more expensive it will be. The more we borrow today, the less we'll have in the future.

If we wait, by the year 2040, Social Security will have gone from a small surplus as a percent of GDP (0.13 percent) to a substantial deficit (-1.34 percent). Medicare's hospital insurance plan will have gone from a small deficit (-0.08 percent) to a huge one (-3.23 percent).

The Medicare trustees don't provide estimates for the shortfalls of the two other Medicare programs, including for prescription drugs since, technically, there's no shortfall: Congress has promised to fund the programs out of other government revenues.

But at that point there won't be other revenues to spare. If nothing changes, by 2040, income taxes will be enough to cover only Social Security and interest on debt. National defense, education, Medicare, and everything else will all be unfundable. At that point income taxes would have to be doubled to put us back on a sustainable path.

But we won't get that far. Long before most economists care to admit, foreign lenders will decide it's no longer prudent to buy our bonds. That will be enough to cause interest rates to rise, hammering asset values and forcing the economy into a far deeper contraction.

The good news is that this problem can be solved a lot less painlessly if we confront it today. Unlike publicly-held debt, the unfunded obligations of Medicare and Social Security are promises that can be taken back.

So instead of making new promises he can't pay for, Obama should co-opt the Republican platform of fiscal restraint. That worked pretty well for Bill Clinton after his own health care proposal died. By the end of his presidency, we were running substantial surpluses for the first time in generations. That's the kind of change that overindulged Americans truly need.

But don't expect that to happen. Obama and the Democrats will push some sort of health reform through Congress. Then they'll congratulate themselves for expanding coverage -- for getting more passengers on board a Titanic healthcare system that's heading straight for an iceberg.

Swelling deficits and an aging population leave few palatable options when it comes to taxes.

The best choice by far would be the creation of a new value added tax -- a "money machine" that can bring in huge sums with relatively little effort. America is alone among rich nations in not charging a VAT, and its continued unwillingness to do so will make it harder to cope with the fiscal challenges ahead.

Giving birth to a new tax will certainly not be an easy sell. The stunning 1980 reelection defeat of Al Ullman, the powerful chairman of the House Ways and Means Committee who had advocated a VAT, is still a warning to American politicians.

The timing of a new tax on consumption may also seem suspect. Aren't we supposed to be getting Americans back into the malls?

VAT, however, is worth the risk. It could yield enough money to pay for healthcare reform, as well as a meaty cut in income tax and a reduction in the deficit. It could also be done without destroying Obama or the Democrats.

Unlike taxing the rich -- which has emerged as a favorite strategy of many Democrats -- a VAT is extremely easy to collect. This is partly because it is gathered from each producer in a chain.

Take bread. The farmer, miller, baker and grocer all pay their share of the tax. If the grocer cheats, the government loses only a quarter of its tax. Furthermore, each producer has incentive to make sure its suppliers have paid VAT. The miller becomes liable for the farmer's share of VAT unless he can prove the tax has already been paid. VAT collection polices itself to a large extent. The sums of money that could be raised are immense, making it easier to strike a political compromise. Exactly how lucrative VAT would be depends largely on which goods are exempt.

Canada, for example, gives up about a third of potential revenue by excusing food, drugs and transportation from the tax. Even if the United States did the same, a 10 percent tax rate could raise $500 billion a year, according to Eric Toder, an analyst at the Tax Policy Center.

Raise the rate to 15 percent and you get $725 billion. (In comparison, income taxes are expected to yield $968 billion this year.)

This might be hard to square with President Obama's commitment not to raise taxes on anyone making less than $250,000 a year. VAT is a regressive tax -- eating up a larger share of the income of lower wage groups.

This could be offset through the income tax system. In addition, there would be a natural counterbalance if the tax were used to fund an expansion of healthcare. With current health proposals expected to cost around $100 billion a year, there would be plenty of money to spare.

Obama could also borrow a trick from Margaret Thatcher, who used the proceeds from almost doubling VAT to slash British income taxes. A 15 percent VAT would give Obama tremendous leeway to simplify a Byzantine income tax system and to cut rates.

And introducing a VAT need not derail economic recovery. Indeed, if the tax were introduced with a six-month delay it could even provide Americans with an incentive to bring forward spending.

America cannot temporize forever. The aging population will demand both painful spending cuts and tax increases. If the burden is placed on income taxes alone then any increase in rates will be monumental.

When politicians finally confront the looming fiscal crisis, a VAT would be an invaluable tool.

At first glance this week's budget projections paint President Obama as a spendthrift. The White House itself offered a grim glimpse of a future in which U.S. debt more than doubles to $17.5 trillion in a decade -- an increase of nearly $10 trillion.

Merely servicing the U.S. debt will cost more than America currently spends on either defense or social security.

But the yawning deficit can't be blamed on Obama -- or for that matter, on Bush or on the financial crisis. Instead the government's finances are locked on autopilot, with entitlement programs driving the country towards a fiscal crisis.

Spending on three giant programs -- Social Security, Medicare and Medicaid -- will account for three quarters of the extra borrowing over the coming decade. By 2019, it will more than double to $2.5 trillion -- more than the U.S. government expects in total tax revenues for next year.

Washington needs to address the deficit soon. To avoid pointless political wrangling, it is first important to make clear what is not causing the fiscal meltdown -- including the economic stimulus.

Even if you add in interest payments from the $789 billion recovery bill, the stimulus accounts for only a tenth of the rise in debt up to 2019, according to calculations by Chris Edwards at the Cato Institute.

Three years of weak tax receipts, courtesy of the recession, will cost the country about $1.3 trillion if interest costs are included. This represents just 15 percent of the borrowing binge.

And there is little the government can do with the other spending it has under its control. Indeed Obama is assuming that he will have little money to play with.

The White House forecasts have discretionary spending falling slightly in real terms from $1.26 trillion to $1.12 trillion. This includes a hefty real cut in defense from $687 billion to $559 billion in 2019. Spending on all other departments, including energy, education, labor and agriculture, is also set on a downward trajectory.

Failure to act could have a number of severe consequences. The first would be that debt servicing will swallow up an ever greater share of tax revenue. By the time current teenagers are working, around 36 cents for every dollar of income tax they pay will go to interest payments, according to White House figures. This compares with about 19 cents now.

Then there is the threat of a buyers strike on U.S. bonds. Berkeley economist David Romer argues that investors can quickly pivot from being eager to lend to governments at low rates of interest to being unwilling to buy Treasuries at any price. This may never happen, but the dangers increase along with the deficits.

Time is running out. Powerful as the United States is, the country continues to accumulate debt at this rate at its peril. The focus must be squarely on the real problems -- medical spending and social security.

On healthcare this means ensuring that the costs to Americans are no longer hidden by employer-provided schemes. A more transparent system would put the brakes on rising costs more effectively than any other measure.

On Social Security the United States should gradually start to ratchet up the retirement age until it reaches 70. Social security was not designed to cope with an average retirement that now lasts more than 20 years.

The first step to preventing a looming fiscal disaster is to have a non-partisan discussion about the source of the problem.

The financial crisis has brought forward crunch time. Political procrastination on entitlement reform is now even more dangerous.

On healthcare, the White House is struggling with a political riptide that threatens to drag it into deep water.

Americans, as they contemplate change, have suffered a weakness of nerve. The main reason is that nearly two thirds of Americans are apparently happy with their healthcare coverage, for all its deficiencies. Repeated reassurances from President Obama that those who like the existing set-up will not be forced to change, have had little effect.

A change of tactics may be in order. The administration must do a better job of underlining the glaring defects of the existing system. The genius of the U.S. healthcare is in providing the illusion of value and security. For their own sake, Americans must be encouraged to set aside jingoistic claims about having the best care system in the world and look more honestly at its short-comings.

Let's start with value. Most Americans are blissfully unaware that their healthcare system provides appallingly little value for their money. This is because when it comes to costs, they see only the tip of the iceberg. While companies typically pay about three-quarters of an employee's family premium -- on average $12,680 a year -- individuals ultimately bear the burden. In a free market, companies do not hand over to their workers more than they absolutely have to. Money spent on healthcare is carved out of take-home pay or other benefits.

"We pay for healthcare in considerably lower salaries," Uwe Reinhardt, a Princeton University economics professor, said in a telephone interview. "The system seduces people into thinking care is pretty cheap. We are kidding ourselves if we think that the shareholder pays."

One measure of this financial sacrifice is that employer premiums are now 17 percent of median household income -- up from 15 percent in 2003. From 1999 to 2008, family health insurance premiums rose by 119 percent.

With healthcare costs rising fast, it is small wonder that middle-class Americans have failed to wring real pay increases out of employers. The drag on pay will increase further, according to research by the Commonwealth Fund. The foundation estimates that without reform, the cost of premiums could double again by 2020 -- gobbling up still more take home pay.

The second big healthcare mirage is security. If the current downturn has demonstrated one thing, it is the fragility of an employer-based healthcare system. Lose your job -- as more than 6.5 million have in this downturn -- and your insurance can disappear with it. (COBRA provides only a temporary patch and can be expensive.)

It also means that you can lose your coverage if you get very sick. "Get so sick you can't work, you can also forfeit coverage," Gary Caxton, an analyst with Kaiser Family Foundation, said in an interview. The very idea of insurance is to protect you during a crisis. Instead Americans are getting insurance that works only when the sun shines. "The American system is least good at the worst times," as David Cutler, a Harvard healthcare economist, puts it.

The final illusion is that the healthcare system can be relied on in the longer term. In reality it is taking on water fast. This is most obvious in small companies. Less than half of companies with fewer than 10 employees now offer insurance, down from 57 percent in 2000, according to the Kaiser Family Foundation. For all companies, the percentage is down from 69 percent to 63 over the past 8 years. Companies are also starting to unload a growing share of costs onto employees anyway.

Deductibles for most employees have more than trebled since 2000 -- a trend that looks almost certain to continue. This is all before you take into account the prodigious quantity of tax dollars soaked up by healthcare.

As the private sector has faltered, the state has been forced to step in. The result is that America is stumbling toward nationalization.

A recent Gallup poll found the share of Americans dependent on the state for healthcare -- including Medicare, Medicaid and VA benefits -- had climbed to 29 percent from 26.5 since the start of 2008. If you include the 17 percent of U.S. workers employed by the state, then closer to 40 percent are covered by the government.

Americans need to take a good look at their existing healthcare system, warts and all. It is the administration's job to hold up a mirror to U.S. healthcare. If they fail to do so, the U.S. will pass up an opportunity to build a system that's fair, sustainable and offers better value.

The Obama administration's plan for reining in derivatives leaves unchecked one of Wall Street's dirty little secrets: the ability of a derivatives dealer to redeploy cash collateral that gets posted by one of its trading partners.

On Wall Street, this practice of taking collateral and reusing it is called rehypothecation. In essence, it's a form of free money for derivatives dealers to use as they please -- even to repost it as collateral to finance their parent company's own borrowings.

And we're talking big bucks. The International Swaps and Derivatives Association recently reported that derivatives dealers have taken in $4 trillion in collateral from their trading partners. That's an 86 percent increase over the $2.1 trillion in cash collateral those same dealers reported having on their books in early 2008.

Now it's not surprising that investment firms took in more collateral from their trading partners over the last year, when the financial markets were in turmoil. Cash collateral is one way for derivatives dealers to protect themselves against the risk of a trading partner defaulting on one of these sophisticated financial contracts.

There's nothing wrong with a dealer taking legitimate steps to insure an orderly unwind of a busted trade.

But Wall Street firms should not have free license to reuse this collateral any way they see fit. The Obama administration should revise its proposal to require derivatives dealers to hold all cash collateral in segregated escrow accounts that can't be reused or touched by the dealer.

The same rule should also apply with any collateral that is posted with a regulated exchange on which a derivative contract gets traded.

Right now, a party to a derivatives contract can request that any collateral be held in an untouchable, segregated account. But most derivatives traders don't do this because dealers often charge higher fees for keeping cash in segregated accounts.

A measure banning the redeployment of collateral by dealers would not only bring fairer pricing to the derivatives markets but would also eliminate another source of leverage for Wall Street firms.

And here's another thing a ban on rehypothecation would accomplish: it would make it easier to deal with the fallout from the collapse of a major derivatives dealer.

It has been estimated that Lehman Brothers, before it collapsed in September, redeployed tens of billions in collateral it took in as a derivatives dealer.

Nearly a year later, hedge funds, banks and other financial institutions that entered into derivatives transactions with Lehman are still trying to determine just where the cash they posted as collateral for those trades went. The litigation over those collateral disputes could take years to resolve.

Michael Greenberger, a former director at the Commodity Futures Trading Commission who teaches law at the University of Maryland, says rehypothecation benefits no one but the derivatives dealer. Worse, he says, allowing investment firms to reuse and redeploy collateral only complicates the "unwinding and resolution' of a collapsed dealer.

The goal of regulatory reform should be to minimize risk and take away any incentive for Wall Street firms to engage in the kind of hanky-panky that brought about the financial crisis. Barring derivatives dealers from redeploying collateral is a good place to start.

Is it anybody's business how much money you make?

When it comes to Wall Street and the meltdown that whacked financial markets and emptied investors' pockets, the normal rules of etiquette don't seem to apply.

Wall Street salaries seem to be everybody's business lately. Nevertheless, the Obama administration's pay czar may try to keep a large portion of the compensation plans he is reviewing under wraps.

It's Kenneth Feinberg's job to review salaries at the biggest corporate recipients of government bailout funds.

How much of his report will become public is the multimillion dollar question.

Privacy laws and fears that highly compensated executives will become targets for an angry public argue for limiting disclosure.

"One of my clients makes $25 million a year and drives a Honda," said Steven Eckhaus, of Katten Muchin Rosenman LLP. "He tries to lead a fairly modest life and he would be horrified if what he makes appeared in the paper. Not only would his neighbors know, but his kids would know, and it would affect his ability to raise his kids. These are people, not a circus sideshow."

Congressman Alan Grayson told Reuters he is unsympathetic to that argument.

"If this is the same top talent that caused their firms to be destroyed and put the entire U.S. economy at risk, I wish they would leave the firms and leave the country," he said.

What's your view?

Should top earners keep their privacy, or does the public have a right to know? Leave your opinion in the comment section below.

More:

• U.S. pay czar says he can "claw back" exec compensation
• Wall Street ponders pay czar's move on clawbacks
• Oil trader under scrutiny for phenomenal success
• AIG chief's salary structured to reflect risk
• 'Pay Czar' Feinberg has tackled tough tasks before

– Peter Morici is a professor at the Smith School of Business, University of Maryland School, and the former Chief Economist at the U.S. International Trade Commission. The views expressed are his own. –

Healthcare reform is in trouble, because President Obama and congressional leaders are not adequately addressing issues that trouble many Americans.

House of Representatives Speaker Nancy Pelosi and Health and Human Services Secretary Kathleen Sebelius caution Americans to ignore terrorist claims about death panels. Reasonable enough—unseemly critics on both the right and the left seek to stir up unwarranted hysteria.

Sebelius defends end of life counseling from physicians as a benefit families need when facing difficult treatment choices for elderly relatives. However, what worries people is such counseling in the context of government rationing.

All health insurers ration care—private insurers in the United States and government-run health services in Canada and Europe face tough choices and limited resources. U.S private insurers generally don’t deny or delay critical care that could cause death—officials implementing such a policy would land in jail.

Foreign public systems are noted for long waits for specialists and critical procedures like hip replacements and bypass surgery. In Sweden, for example, delays result in suffering and deaths that would not occur in the expensive, but more humane, U.S. system. No one is held accountable, the elderly are particularly vulnerable, and that is euthanasia, de facto if not de jure.

President Obama promises Americans they won’t lose private health insurance if they want to keep it. However, legislation moving through the House requires businesses to pay an 8 percent payroll tax if they don’t provide healthcare and creates a government-run alternative to private insurance. Moderate senators would like to create non-profit cooperatives instead but to gain support from liberals in Congress, those non-profits would operate much like government agencies.

It won’t be long before businesses that pay employees an average of $50,000, or even $75,000, annually figure out it would be cheaper and easier to pay the tax than continue providing private insurance. Many people who work in small businesses would be forced by employers to purchase insurance from a government or non-profit agency. Most Americans don’t want to rely on the Post Office or the United Way for their healthcare.

Healthcare costs at least 50 percent more in the United States than in Canada and Western Europe. Important factors include expensive malpractice suits, inefficient insurance company bureaucracies, poor staffing practices and dangerously low standards at many hospitals, and doctor fees and drug prices much higher than abroad.

Early on President Obama gave the tort lawyers a pass, and is busy cutting deals with drug companies and other healthcare businesses that won’t appreciably bring down U.S. costs. That is why his healthcare reform will require $1 trillion in new taxes.

The president promises to soak the rich to raise that cash, but he proposes to tax them for all his other initiatives too. Unless he wants all wealthy Americans to move to Switzerland, that is simply impossible.

Americans are losing patience. They want healthcare fixed but the president is not delivering what they want.