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In the Wall Street Journal today, Alan Murray writes a strange column. He acknowledges that the drug industry, abetted by Republicans in Congress, corruptly influenced the Medicare prescription drug bill in favor of Big Pharma.
The most conspicuous example of overreach was a line inserted in the Medicare Modernization Act of 2003 that prohibited the U.S. government from negotiating prices directly with drug companies. That prohibition was unnecessary; the law created a structure in which private insurers and health plans did the negotiating on the government's behalf.But someone allied with the drug industry -- it's still a little unclear who -- insisted on making the implicit explicit, and in the process, created a campaign issue for Democrats.
But he doesn't think anything should be done about it.
As a result, the industry's big bet has now gone bad. Allowing the government to negotiate prices directly with drug companies has become Democratic dogma. And a few moderate Republicans are toeing the line as well.That doesn't make it a good idea.
Truth is, drug companies can't really "negotiate" with the government, any more than a backwoods hiker can negotiate with a 900-pound grizzly bear.
With a market share of about 46%, the government would set drug prices, not negotiate them, and then establish "formularies" telling seniors which drugs they could use and which ones they couldn't. Would that make seniors feel better off? I doubt it.
For someone who frets a lot about the deficit, and about the need to cut entitlement benefits, this is a very strange argument indeed.
Posted by dan at 10:09 AM
Fascinating divergence in the way the Wall Street Journal and the Financial Times play economic news out of the U.S. and Europe.
Here's Marcus Walker of the Journal on Euro-zone growth:
BERLIN -- Economic growth in the euro zone slowed in the third quarter, suggesting the region's buoyant economy has finally peaked. But how much the region slows in coming quarters is an open question; the answer will likely hinge on the U.S.The economy of the 12-nation euro-currency area grew by 0.5% in the latest quarter, lower than the 0.7% expansion that many economists had forecast, and down from strong growth of 0.9% in the second quarter. France's surprise stagnation dragged down the third-quarter figure, but growth in Italy and Germany, at 0.3% and 0.6%, was also less than expected.
And here's Ralph Atkins of the FT on Euro-zone growth:
Eurozone growth lost pace in the third quarter but remained robust and just outpaced the US again, official figures showed yesterday.Gross domestic product in the 12-country region rose by 0.5 per cent in the three months to September, after a 0.9 per cent rise in the previous quarter. That suggested that the best of the eurozone's recent economic recovery might have passed, but without any dramatic slowdown having yet taken place.
Here's Mark Whitehouse in the Journal on consumer-spending:
American consumers maintained their spending in October, leading economists to hold out hope that robust holiday sales will help insulate the U.S. economy from a sharp downturn in housing.
Here's Krhisna Guha, Eoin Callan, and David Pilling in the FT on consumer spending and other economic data:
"A slew of economic reports yesterday showed the US economy feeling the strain from the sharp slowdown in the housing sector, while offering hopes that inflation pressures could be easing."
Posted by dan at 10:02 AM
In the Wall Street Journal today, columnist Holman Jenkins rips into the New York Times and, in particular, into an un-named business reporter, whom he accuses of intellectual laziness and poor judgment.
Under the headline "The Boss Actually Said This: Pay Me Less," a lead story appeared in the business section a year ago lauding a CEO who turned down an offer of stock options. "After hearing the amount from my boss," the executive wrote in a letter to his board, recalling a sizeable bonus at an earlier job, "I immediately called my father with the news. The first words out of his mouth were 'don't ever feel that you are worth it.' I don't want him to say that to me again."Now it happens that a well-meaning source had first shopped this story to me. Though the letter had some good ideas about compensation, the personal note struck me as regrettable, an impression only strengthened by lunch with the CEO, who seemed anguished that his income was bigger than his children's nanny's. . .
I waved the story off -- knowing the source's next stop was the Times -- for another reason: The "father" not named or described in the letter was, in fact, a long-serving board member of Tyco, from 1967 to 2002, who mentored Dennis Kozlowski and was dragged through the legal mud in Kozlowski's downfall. Anyone in-the-know, as surely some of the son's board members were, would have seen in the letter an allusion to his father's searing Tyco experience (a fact the reader would have to be told too), which seemed an additional reason not to offer the letter to the world as an uncomplicated upwelling of revulsion against CEO pay.
Not a word about any of this made it into the Times's lengthy rendition, which simply quoted from the letter at length, treating it as a deus ex machina from the corporate world, a CEO spontaneously decrying the greed of his kind. . .
It struck me then and strikes me now that the problem here wasn't just journalistic gullibility or a failure to ask the obvious question. It was a lack of any real feel for human beings or messy reality on the part of a reporter known for relentless but unanalytical execrations of CEO pay.
It was no surprise when the same byline turned up again a few weeks ago above a front-page story airing allegations that John Mack, now the head of Morgan Stanley, had helped a hedge fund engage in insider trading. . ."
The reporter he's talking about is, of course, Gretchen Morgenson, who has relentlessly chronicled the sort of excesses in executive compensation and poor corporate governance that Jenkins has, just as relentlessly, defended and waved away as so much anti-capitalist noise.
So why does Jenkins refuse to name the name of the journalist he's calling out as a gullible, a failure, of having "any real feel for human beings or messy reality"? It could be chivalry. More likely, it's wussery.
The guys at the Journal's op-ed page are like a bunch of puny schoolyard bullies--they snarl awfully tough and mean in print. But get them on the phone, or talk to them in person, or appear with them on a television show, and they're courteous, eager-to-please pussycats. That could mean they're well-mannered. Or it could just mean they're wimps, unwilling to back up their rhetorical nastiness when confronted.
Posted by dan at 09:47 AM
Yesterday, the House approved a measure to grant normal trade relations to Vietnam, but not by a sufficiently large margin. The final vote was 228-161. Many analysts saw the vote as a sign of how the victorious Democrats, many of whom campaigned against the impact of free trade agreements, would make the expansion of free trade difficult in coming years. See, for example, this AP analysis, via the New York Times:
''Quite frankly, we were shocked,'' said Nicole Venable, director of international trade for the U.S. Chamber of Congress. ''It does leave us wondering what this means for the new Congress in terms of trade.''
Of course, 66 Republicans--a number equal to more than one quarter of the existing caucus and equal to about one-third of the incoming caucus--voted against the bill. And their defection supplied the margin of defeat. All these pieces that warn the new Democratic majority not to abandon free trade are 100 percent right, and 90 percent wrong. In the last several years, which party has done the most damage to the cause of free trade in this country? Hint: it's not the Democrats. It wasn't Democrats who cynically enacted temporary protective tariffs on imported steel. No, that was another one of Karl Rove's genius political tactics to cement a permanent Republican majority in places like Pennsylvania and Ohio. It wasn't Democrats who introduced, passed, and signed a farm bill that continues to subsidize American farmers at the expense of farmers in the developing world. Again, that would be Rove and the Republicans. And it wasn't Democrats who were almost willfully unconcerned with the impacts of free trade and globalization--the income, job, and benefits volatility that is steadily climbing the value chain. That makes a trifecta.
American voters don't oppose free trade agreements and globalizaiont because they're xenophobic and don't like buying cheap foreign goods. In fact, they love buying cheap foreign goods. The data on the current account proves that every month. They oppose free trade and globalization because they associate the expansion of these trends with some rather unwelcome trends at home: stagnating wages, disappearing pensions, more expensive health insurance. Are the Republicans single-handedly responsible for these woes? Of course not. But in the past six years, they really haven't shown any signs that they take such issues seriously.
Posted by dan at 05:00 PM
An interesting side effect of the boom in ethanol and alternative fuels: more expensive chicken and beef. Doug Cameron and Eoin Callen report in the Financial Times:
Tyson, the world's largest protein producer, warned yesterday that ethanol-driven corn prices would push up the cost of beef and chicken for US consumers.Corn prices have already hit record highs in spite of two good harvests, fuelling fears that ethanol will squeeze out the availability of grain for animal feeds.
Dick Bond, Tyson's president and chief executive, called on Washington to recognise the competing claims when drawing up a proposed farm bill next year, amid support on both sides of Congress for ethanol production to rise as part of its renewable fuels strategy.
I believe that the American consumer is going to have to pay more for protein," he told analysts as the company reported a full-year loss as rising costs combined with sluggish sales.
Thank goodness selfless companies like Tyson are willing to absorb inflation in raw materials.
Posted by dan at 04:46 PM
The Treasury has reported figures for the federal deficit for October 2006. The good news: revenues are up 12.17% from October 2005. The bad news: spending is up 10.27% from October 2005. The net result: a monthly deficit of $49.29 billion, up more than four percent from October 2005. Regardless of what the Wall Street Journal says in today's editorial, the short-term deficits do matter.
Posted by dan at 04:42 PM