by Tom Brokaw
Personally I have long believed we have to apply greater means testing to Medicare, and based on informal surveys of well-to-do recipients the time to do it is now, given the stark financial consequences of not taking bold action soon.
We’re rapidly approaching the time when handwringing, debate, and anxiety give way to paying the balance due for the crush of elderly boomers coming into the system.
Without reform, the American middle class, which represents the heart and arteries of the American economy and political culture, will be in a constant state of financial stress and anxiety. Elizabeth Warren, a Harvard law professor and architect of President Obama’s Consumer Financial Protection Bureau, has another set of concerns about the continuing pressures on the middle class. Warren was chief adviser to the National Bankruptcy Review Commission and is the author of eight books on credit and economic stress.
Warren was a sharp critic of the original Troubled Asset Relief Program (TARP) initiated by Treasury Secretary Henry Paulson and approved by a bipartisan vote of Congress in the closing frantic days of the Bush administration, when it seemed the world financial systems were about to collapse. To be fair, Paulson was operating without a net in emergency circumstances as he tried to keep some of the world’s largest banks afloat with infusions of cash to be paid back once the crisis passed. The specter of a worldwide depression was not an exaggeration.
Paulson, the former CEO of Goldman Sachs, received high praise from most of the leading corporate and financial experts, who credited him with keeping the recession from tipping into a worldwide depression. Warren saw the bailout as one more example of rewarding the top while ignoring the middle, especially in the banking industry where most of the failures were small- and middle-sized banks.
Large financial institutions, such as Citibank, she argued, were not forced to go through bankruptcy or fire the people who made the mistakes in the first place, while taxpayers, who had their own economic stress, were made to bail out the big boys.
It is that kind of uneven treatment that arouses the ire of Warren, a native of Oklahoma who watched her middle-class father go broke because of predatory lending practices. It is not surprising that many powerful members of the financial services executive ranks are not fans of Warren, who constantly asks, “Why should the middle class, traditionally the heart of American society, undergo such strain?”
She’s extensively studied two-income middle-class families and concluded that they have been trapped, first by the inflation that robbed the primary wage earner of any real gain, and then when the other parent or partner went to work they still couldn’t keep up with the rising costs of housing, education, transportation, and big-ticket health care.
“When a middle-class family files for bankruptcy,” she found, “it was often medical bills that forced the decision, not credit card debt.”
Warren would like to see health care reform and more socially responsible banks and corporations on the U.S. landscape. So would one of the most powerful women in that rarefied world of paneled offices, chauffeured limousines, and private planes at the ready.
THE PROMISE
Indra Krishnamurthy Nooyi is a prominent member of the growing population of women breaking the old-boy culture in the executive offices of American corporations. Born and educated in India, she came to America to attend graduate school in business at Yale University. She worked first for business consulting firms before joining PepsiCo, where she ascended to the dual role of chairman and chief operating officer of the global soft drink and food powerhouse.
In that position she created a strategy called Performance with Purpose, a business plan for growth based on a healthier planet and healthier products.
Speaking to the Economic Club of Chicago, Nooyi got right to the crux of the problem that almost sank America during the Great Recession. “Capitalism,” she said, “went right to the edge because of an excess of risk taking. Our capacity to understand the risks was outstripped by our ingenuity in devising new ones. Why were the risks taken? Because many were chasing short-term goals, short-term profitability, and short-term compensation. Many CEOs forgot they were trustees of an economic system.”
That’s a succinct summary of a disastrous course that almost ended with a calamitous crash.
Nooyi’s solution?
“The first and most important thing we can do is to change our narrative about what companies are for and what they exist to do. As capitalists, we need to rediscover a higher calling.”
She went on to explain how companies became simply instruments to make money, lots of money, as swiftly as possible. “That’s not a description of a company,” she said, bluntly. “That’s a caricature. A company is not an engine for the short term. It is a complex organism, and it does not float free of society, free of long-term obligations.”
Turning to corporate leadership, Nooyi challenged corporate CEOs to “stress long-term gain even if it means short-term pain. We live in an age when trust has to be earned, not demanded. Institutions, public and private, now relate to individuals in a wholly new way.”
Nooyi offered a new universe for the corporate world, which had become accustomed to being the sun god. “Today,” she said, “the public are the golden globe at the center of the system. We, politicians and corporations, encircle them, trying to gain their attention and win their trust. We have to set out a clear path to a long-term future … to measure sustainable performance and capture the sense of a wider purpose.”
Curiously, America’s two largest soft drink companies—Coca-Cola and Pepsi—are run by foreign nationals. Muhtar Kent, the chairman and CEO of Coca-Cola, is a native of Turkey, a suave, international businessman who breathed new life into the many Coke enterprises after a succession of CEOs failed to maintain the success of the late Roberto Goizueta, a Cuban-born entrepreneur who guided the soft drink behemoth for the final years of the twentieth century.
Kent stepped up Coke’s recycling program and expanded its product line, significantly improving the profit margins. He also worked hard at good corporate citizenship. When Japan was devastated by the earthquake and tsunami, Kent immediately ordered thousands of cases of safe drinking water and other supplies shipped to the shattered areas, and he personally visited Japan to meet with Coca-Cola bottlers and other partners to see what they needed.
The most successful corporations of the twenty-first century will be those who recognize they’re dealing with a global customer base that will measure the value of their products by more than the old standard of “Did I get a good deal on this?” A good deal will go well beyond price.
It will no longer be enough for a multinational corporation to put up a large, self-congratulatory billboard on the road between the airport and the city center of, say, Bangkok. Companies will have to be better citizens socially, environmentally, and culturally to go head-to-head with their competitors from around the globe. I have no illusions that this is a “Kumbaya” moment for my generation and boomers. Despite the election and publicity victories of Tea Party activists, there will be no Reverend Moon–like ceremonies in basketball arenas and football stadia around the country with mass declarations to invoke Medicare more prudently and to delay activating Social Security payments until the age of seventy-five. The hotly engaged debate on government spending and taxes will not eradicate impulse shopping or spending beyond a family’s means.
However, the Great Recession did force us to think anew about these issues, and for all the over-the-top rhetoric, the country came out of the painful downturn ready to put these questions on the table and act on them in a way that was not possible just a few years ago.
A place to begin: The more you have, the less you should get from the government in the way of entitlements. I have heard several well-off conservative friends say, “Look, I’ve worked hard and made enough money to take care of myself and my family. I don’t think I should be running the bank on Medicare; I’ve made other arrangements for my health care.” The
time for an elevated means testing of Medicare, pegging benefits to income, is overdue.
Staggering retirement ages for Social Security benefits is also an idea whose time has come. What grandparent of the future wants to explain to a granddaughter and a handful of her friends they have to work harder and contribute more so he can play golf every day at the age of sixty-two?
Furthermore, if this generation of grandparents wants to live up to its earlier promises and ideals it should also lead a new kind of wellness revolution. It would encompass not just a healthier lifestyle but also a more aggressive attitude toward the cost of health care.
I’ve taken to asking audiences and friends if they have any idea how much they spent last year on their personal health care. The reaction is almost always a sheepish, mumbling reply, “Er, uh, oh God, I have no idea.” One prominent sports executive said to me, “I wouldn’t even know where to ask.” It is perpetually bewildering to me that in a society in which we haggle over automobile prices to the last decimal point, rush to catch the early bird special, show up only at happy hour, and tick off to friends and strangers alike how much we spent on a trip to New Orleans, for all of that, we have not a clue on how much we spent as a family out of pocket for health care.
Maybe every physician and clinic should have a sticker price in the window so we’d be forced to know.
As memories of the Great Depression died off with the generations that had lived through it, so did thrift as a badge of honor. “Spend today and who knows about tomorrow” became a national mantra. Magazines such as the Robb Report competed with one another in the celebration of personal wealth and the extravagant luxury it could buy. Bumper stickers popped up: “He who dies with the most toys wins.”
That same attitude took hold in the public sector, from the highest levels of the federal government to the village green, fueled by boom times and careless stewardship. Republicans and Democrats alike treated public treasuries as bottomless ATMs, scattering cash across pet projects and buying off public employees unions and special interest groups with sweetheart deals, especially when it came to pensions. One of the many startling examples I came across in a casual survey of municipal retirement benefits involved the city of Los Angeles.
According to the Los Angeles Times, ten retired city water and power, fire and police employees will draw from $200,000 to $317,000 annually until they die. General David Petraeus, who commanded forces for a decade in Iraq and Afghanistan, will retire with a smaller pension than the bottom retiree on that Los Angeles Times list.
As a result of the public profligacy and the painful measures required to bring the budgets back into balance there is a rapidly expanding movement in the country with the shorthand PPP, which stands for public-private partnerships.
They take many forms, from private companies or nonprofit foundations helping individual schools or school systems by underwriting charter schools and community colleges to much larger projects such as funding transportation systems and roads.
Illinois and the neighboring state of Indiana are now connected by a privately run toll road. Two companies, one Australian and the other Spanish, teamed up to bid $1.8 billion to operate the Chicago Skyway toll road for ninety-nine years. They’re responsible for operation and maintenance of the highway, which is a key link on the South Side of Chicago to expressways running east into Indiana.
For its part, Indiana sealed a deal with the same two companies for a 157-mile stretch of state highway running into the Chicago area. Indiana realized more than $3 billion in the deal, which has a seventy-five-year life span.
In both cases, the increases in tolls are limited to formulas governed by the consumer price index or the gross domestic product.
There are similar projects planned in Virginia, Colorado, and Texas and my guess is that more are coming, not just in transportation but also in water districts, public safety, technology, and economic development.
There are appropriate concerns that private companies managing or owning public sector enterprises will concentrate on the high end, leaving poor neighborhoods and their families to fend for themselves. Public labor union advocates raise questions about private labor practices in terms of wages and benefits. Thus far, most public-private partnerships seem to have addressed those issues in their contracts.
The savings and the efficiencies can be stupendous in some areas. Sioux City, Iowa, and neighboring communities—an area called Siouxland, in a corner of the country where Iowa, Nebraska, and South Dakota run together—had a common problem with wastewater from agriculture, food processing plants, and disconnected municipalities.
Enter Veolia Environmental Services, a nationally recognized water treatment company. Veolia has state-of-the-art systems and a profit incentive to stay atop the latest trends in technology and equipment. It entered into a compact with five communities representing a half million people in Siouxland to manage their wastewater discharges, and so far it has been a model of success.
The municipalities have saved almost $10 million since Veolia took over, and that doesn’t count the additional revenue from the capture and reuse of methane gas from the discharges or the development of a local fertilizer industry from converted biosolids.
From wastewater to books, the trend is spreading. Dallas, Texas, approached the Kroger grocery store chain about a joint development in a library system in a Kroger-occupied shopping center. Kroger paid for the architectural design of the building and financed much of the construction.
It’s paid off for the library system and for the grocery store chain. Library usage jumped almost 80 percent in the first two years of operation, and that increase in traffic was obviously a benefit at the Kroger checkout stands as well.
Southwest of Houston, in Fort Bend County, Texas, one of the fastest-growing areas in the country, the local economic development council has developed a keener understanding of what they have because of the Geographic Information System Technology, a system to map the area and provide instant access on a large touch-sensitive screen. Developers, companies, and government officials can stand together and get an immediate portrait of geography, demographics, tax structure, roads, utilities, and hazards in any given area.
As the Great Recession demonstrated, too often painfully, there are many areas of the country that need to be reinvented—or at least renewed—and public-private partnerships on several levels and in a variety of forms will be a necessary and welcome part of positioning the country for the future.
CHAPTER 16
Failure Is an Option
FACT: In this age of “everyone knows everything about everyone,” failures are hard to hide. Just ask former New York governor Eliot Spitzer, Nevada senator John Ensign, New York congressman Charles Rangel, former North Carolina senator and vice presidential candidate John Edwards, South Carolina governor Mark Sanford, evangelist Ted Haggard, actors Mel Gibson and Lindsay Lohan, or any number of other high-profile personalities who were outed for their indiscretions.
QUESTION: When was the last time you heard a prominent public or private leader who failed personally or professionally candidly acknowledge the mistakes and pledge to make the lessons learned a central part of the remainder of his or her life?
When the Great Recession hit and three of the most prestigious firms on Wall Street—Bear Stearns, Merrill Lynch, and Lehman Brothers—either disappeared or were rescued by other financial services companies, the men who ran them and got rich doing so became very defensive. They were seemingly incapable of saying, “Look, this happened on my watch. I screwed up and made some terrible decisions. I’m going to spend the rest of my days and a big chunk of my fortune helping those less fortunate than me. I’ve had the helicopters and country club memberships, the private plane awaiting me on the tarmac and the fifteen-hundred-dollar-a-night hotel suites. None of that gave me the judgment I should have had to head off these economic calamities.”
THE PRESENT
Those executives and so many ot
her politicians and celebrities caught in their own mistakes could use the lesson that played out across America in June 2010, from the playing field of the Detroit Tigers. Detroit pitcher Armando Galarraga was one out away from pitching a perfect game—no hits, no runs, no errors—one of baseball’s most difficult feats.
A Cleveland Indians player hit a grounder to the Detroit first baseman, who made a quick throw to Galarraga, who rushed over to cover the bag. As he caught the ball, Galarraga broke into a big smile—a perfect game, a pitcher’s dream!
But wait. Umpire Jim Joyce called the runner safe. Galarraga was stunned but walked back to the mound and retired the next batter as all the television replays showed that the batter on first had clearly been out.
After the game, umpire Joyce reviewed the video and knew that he made the wrong call. A veteran and highly respected ump, Joyce unconditionally acknowledged his error, saying, “I cost the kid a perfect game.”
For the next twenty-four hours the blown call was replayed on all the cable channels and network news programs, re-watched on the Internet, and discussed on talk radio with a lot of intemperate comments about what should happen to umpire Joyce.
The following night at Tiger Stadium, Detroit manager Jim Leyland made a great call of his own. He asked Galarraga to present the night’s lineup card to Joyce at the beginning of the game. Galarraga put his arm around Joyce and smiled as he handed over the card. Joyce teared up and the Detroit fans gave both men a standing ovation.
Once again our national pastime gave us a moment to remember and a simple but profound lesson in the virtues of acknowledging a mistake, forgiveness, and redemption.
It is not easy. We’ve all made large and small mistakes. None of us is perfect but again and again we fail to embrace the healing power of admission and the radiant effect it can have on those around us.
