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Debt Ceiling Deal a Prelude to Ultimate Default

Already, foreign companies, unlike U.S. companies, are not taxed by their home governments on oil they produce outside their home country. If the U.S. follows Mr. Obama's prescription, even more exploration and development abroad will move to competitors like BP and Royal Dutch Shell. U.S. imports from non-U.S. owned corporations will rise, and future U.S. tax revenues will be smaller and budget problems worse.

Similarly, all U.S. businesses can receive some tax credit for domestically based production and employment. The president wants that taken from oil companies -- who are also refiners and manufacturers and undertake considerable R&D. Follow that Rx, and future domestic production, employment and tax revenues will be smaller and budget problems worse.

Health Care

On health care, many items Republicans are pushing merely shift costs to state governments and private insurers, who must raise taxes or premiums -- encouraging more offshore production, fewer jobs and less tax revenues, and worsening future budget woes.

The pricing system -- and signals prices give to consumers about health care choices -- along with bureaucratic costs, the patent system and torts burdens are widely out of control. Germany, Holland and the U.S. have private insurance systems, though government reimbursements are about 80% in Germany and Holland and only 55% here. Those competitors spend 12% of GDP on health care -- the U.S. about 19%.

Germany's per capita drug costs are $400 per year, while in the U.S. those are $800. That filters through to the cost of doing business -- whether through taxes or insurance premiums. No small wonder why Germany doesn't have nearly the problem competing in global markets the U.S. does.

Little being bandied by Republican budget cutters will fix that. Habitually Republicans say, "Who will pay for the R&D?" More accurate to ask, "Who will pay for unproductive tweaks in drug formulas to extend patents and big TV ad budgets to discourage use of generics?"

Social Security

Neither the president nor Republicans want to really fix Social Security.

Americans are living longer and could work longer, but the next big thing will be to change the consumer price index used to adjust benefits from a fixed weight formula, which is based on purchasing patterns several years old, to a chain weighted index, which accommodates changes in consumer behavior.

For the general population, the former overstates inflation, and the latter is more accurate. However, for the elderly, both measures understate inflation, because the elderly use disproportionately more health care services. This adjustment would victimize folks who live into their late 70s and 80s, and buys a few years' time, after which the growing burden of Social Security on the budget will be tougher to fix.

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