Thursday, June 30, 2011

What Does Newt Gingrich Know?

Sometimes a Question Just Answers Itself

In the New York Times

What Does Newt Gingrich Know?
Consulting the literature — all 21 books by the self-proclaimed ideas man of politics.

The answer, of course, is "not much".  No it was not a trick question, that really is the answer.

An excerpt from the article

The ghosts for that first book served him unevenly. They got him in metaphor trouble from the first sentence. “We stand at a crossroads between two diverse futures,” he wrote. This crossroads, it transpired, faced an open window. That would be the window of vulnerability, which is widening. Three paragraphs later, the crossroads, perhaps swiveling on a Lazy Susan, is suddenly facing another window, also open. The important point, Gingrich writes, is that this window of opportunity is about to slam shut. And if it does? “We stand on the brink of a world of violence almost beyond our imagination.”


 After “Window of Opportunity,” Gingrich lapsed into a prolonged silence, at least as a literary man. As a politician, of course, he was a dervish, and by the time his next book appeared, in 1995, he was universally honored as the architect of one of the century’s great political triumphs, the Republican takeover of the House of Representatives the year before. “To Renew America” was written in the headlong rush that followed Gingrich’s elevation to the speakership and international fame.
Once again America faced a crossroads, though the word itself wasn’t used. “There is virtually no middle ground,” Gingrich wrote. He later concluded: “To renew or to decay. At no time in the history of our great nation has the choice been clearer.” To avert disaster, Gingrich had no choice but to present many numbered lists. In addition to the Six Challenges Facing America — similar to the challenges we faced 11 years before — and the “five basic principles that I believe form the heart of our civilization,” there were the five forces moving us toward worldwide medicine, a seven-step program to reduce drug use, the nine steps we can take immediately to advance the three revolutions in health care and more. The futurism was still there, too: “Honeymoons in space will be the vogue by 2020.”

Pure jealously prevents The Dismal Political Economist from posting more from this article.  He believes no one should be allowed easy access to writing this good that is not his.

Republicans Desperately Want Free Trade Agreements; But Not if They Have to Provide Benefits to Workers Displaced by Them

Their Anti-Worker Attitude, Maybe They Just Cannot Help It

The U. S. has negotiated bi-lateral free trade agreements with South Korea, Columbia and Panama.  The treaties appear to be pro-growth, particularly with South Korea as reported by the Wall Street Journal.

The South Korea deal is by far the richest of the three, representing $11 billion a year in new U.S. exports. It would immediately eliminate Korean tariffs on nearly two-thirds of U.S. farm products, from corn to wheat. U.S. beef exports to Korea would more than double to $1.8 billion from $600 million. It would eliminate a 15% Korean tariff on U.S. wine and afford U.S. financial-services firms the same legal status as Korean firms.

The White House supports the treaties. The Republicans support the treaties.  The business community supports the treaties.  So why is there a problem?

Because in any free trade agreement there are winners and losers, the losers typically being workers who lose their jobs because of the increased imports.  To soften this suffering the Administration wants to link approval of the agreements

to the renewal in scaled-back form of the longtime Trade Adjustment Assistance program for workers hurt by foreign competition.

The Republican position is that any assistance to workers adversely affected by the agreements is so terrible that they would try to block the agreements rather than agree to such assistance.  In an attempt to appease Republicans, the Administration has already scaled down the program from $1 billion and

Business groups, including the U.S. Chamber of Commerce, backed Mr. Obama's efforts to revive the trade deals, which promise $13 billion a year in new export activity, far more than the trade-adjustment program would cost.

But apparently even $1 of aid to affected workers is too much.  The Republican leader of the Senate

Mr. McConnell said that "if the administration were to embed a TAA into the Korea trade agreement, I would be compelled to vote against it. I think this is making it needlessly complicated and contentious."

No what Mr. McConnell thinks is that it would benefit low and middle income workers  Can’t have that now, can we?  It wouldn't be cricket.

For Mr. McConnell and Conservatives, government benefits are only supposed to be used for upper income folks and for business.  And if it takes blocking a deal that would add $13 billion in exports to the economy, well ideological purity must surely come before economic growth and more jobs.

Rick Perry’s Texas Economic Miracle Leaves Some Without Police Protection

Annie (and Albert), Get  Your Gun

Those proponents of a potential Presidential run by Texas Governor Rick Perry often point to the economic success of Texas compared to the rest of the country (although as The Dismal Political Economist has often pointed out, that fact that almost all of the oil in the continental U. S. is in Texas may have played a role in their economic prowess).  Now a story in the news section of the Wall Street Journal shines a spotlight on a small, but significant part of that low tax philosophy.

It seems the government of Alto, Texas had decided that in the interests of keeping taxes and government spending low they cannot afford a police department.

Reduced sales and property tax collections from the sluggish economy are putting pressure on the town.

What!  What “sluggish economy”?  This is Texas, the economic miracle!

"We had to do something drastic," said Jerry Flowers, councilman and hay farmer. "The police department, being a non-money-making entity, was the easiest to get rid of while we catch our breath and build up some cash."

Well withdrawing police protection from the town does qualify as drastic.  But was it really a surprise to the councilman that the police department was a “non-money making entity”?

 But maybe being a small town Alto does not have much crime.

Some in town, including Police Chief Charles Barron, say the city should have cut elsewhere, given local crime. Last year in Alto, where the per-capita crime rate exceeds the statewide level,

Any impact on the local economy?

Others worry that the absence of local police could dissuade businesses and visitors from coming to town

Yep, business is just dying to locate and invest in a community where there is no local police.  And surely visitors will be attracted to the city because of its low taxes.

Well don’t expect this negative aspect of the low tax, low service mentality of Conservative governing philosophy to reach the editorial pages of the WSJ from the news pages.  The people who write the editorials have made up their minds, the real news doesn’t really matter.

Republicans Want to Tax Unemployment Benefits at 100% Rate, Supreme Court Finds 1st Amendment Unconstitutional

And Other News That Did Not Happen, But Could Have

Republicans who are negotiating spending cuts with Democrats to close the budget deficit have acceded to Democratic requests that part of the deal come from increasing revenues.  Republicans have proposed that a special tax rate of 100% be placed on all unemployment benefit income.  “This will place the burden of paying for such programs squarely on the people who benefit from those programs” an anonymous spokesperson said.  President Obama, in an effort to promote bi-partisanship is said to be studying the proposal.

The Supreme Court today issued an opinion in which they found parts of the first amendment to be unconstitutional.  Speaking for a 5 to 4 majority, Justice Scalia said that first amendment rights guaranteeing free speech did not mean free speech for those disagreeing with Conservative proposals.  “Allowing such speech”, he said, “placed an undue burden on Conservatives to defend positions which are in many cases indefensible and thus the first amendment supresses speech”. 

Scalia also said that while authority for the opinion was not in the Constitution, and in fact violated the Constitution he was certain his opinion was what the Founders meant.  Justice Thomas, who was part of the majority wrote that he didn’t understand any of this but that Scalia had told him it was ok, and that was good enough for him.

Bank of America announced that they would be giving large bonuses to executives who caused the Bank to buy Countrywide Financial.  After paying about $4 billion for the Company, the Bank has also had to pay over $8 billion to settle claims of malfeasance in the operations of Countrywide.  The Bank explained the bonuses by saying the debacle with mortgage backed securities took a lot of attention away from the Bank’s other debacles, and so was well worth the money it lost on the deal.

John Kerry is quoted as saving he would have been a “great President”.(ok, that really happened).  Asked to name other people who felt he would have been a great President,  Kerry responded by saying he would “have my people get back to your people”.

The Republican National Committee said they did not expect anyone to be the winner of the Iowa Caucuses early next year:

The reason for this comes from Iowa’s Republican Governor.

My feeling,” Mr. Branstad said, “is Iowans like candidates who are humble and hard working and who will make the extra effort to see people in all parts of the state and be open and honest and share their plans and vision.”

The RNC said that none of their candidates could meet that standard, and urged Iowa to change its standard to candidates that are

“arrogant quitters who make no effort to be open and honest and share their plans and visions.  Those”, the RNC said, “The Republican Party can provide.” 

The RNC went on to say that no, they were not pushing the candidacies of Sarah Palin or Newt Gingrich.

WP Columnist George Will on Free Speech

Like the Supreme Court, He Doesn't Want Wealthy People to Suffer From Electoral Competition

As expected, Washington Post columnist and supporter of unlimited amounts of wealthy people’s money in political campaign George Will weighed in on the Supreme Court decision that overturned an Arizona program that tried to keep candidates without access to personal fortunes and unlimited contributions competitive in elections.  The Arizona program allowed for increased public money to a candidate who took public funds when that candidate was being heavily outspent.

So, these matching funds were a powerful incentive for privately funded candidates not to speak — not to solicit funds to disseminate their advocacy


There is evidence supporting what is intuitively obvious — that the matching funds provision was intended to suppress speech by candidates relying on voluntary contributions, candidates who knew their speaking would trigger tax dollars for their subsidized opponents

Now it is possible to make a reasonabe intellectual case against public financing of elections.  One can argue that the state should not expend resources for advancing private political campaigns, even if the expenditures are voluntary on the part of its citizens.  Doing so, it can be said, forces citizens to support the candidacy of individuals they would otherwise oppose.  Such an argument is not unreasonable.

But Mr. Will's argument is, not to be kind, just plain idiotic. The idea that furthering public debate and providing candidates who are not wealthy or do not have access to Karl Rove type money will supress free speech is so far from having any intellectual basis that one wonders how individuals like Mr. Will can advance it without suffering near fatal embarassment.

Mr. Will, it is one thing to be in support of a position, but you do not help your cause with this moronic logic. What is intuitively obvious to anyone other than those like Mr. Will is that by increasing funding for the underfunded campaign the state promotes more and better dialogue and debate in a campaign.  It is intuitively obvious that allowing an underfunded candidate to compete with a heavily funded candidate supports and encourages speech

Of course, that is exactly what Mr. Will and his fellow conservatives who are on the Supreme Court do not want.

What Does It Take to Get a $430 million Manufacturing Investment

A Lot of Government Help, What Conservatives Call “Job Killing” Government Spending

Niagara Falls, NY is known for three things.  One is the Falls, another is the Love Canal environmental disaster and  the thirdr is a moribund economy that has been depressed since, well, probably since the Depression.  The Buffalo News reports the city getting a new paper mill that will cost its owners $430 million to construct.  Of interest here is what it takes in government assistance to get such an investment.

The Greenpac Mill project, . . .  will receive extensive government incentives, which Cascades executives valued at more than $100 million over a 10-year period.


More than half of the incentives will come from $60 million in brownfield tax credits over a 10-year period. The project also will receive $5 million in Empire Zone tax credits. The Niagara County Industrial Development Agency in December approved property tax breaks for up to 20 years


The project also will receive extensive energy subsidies. A 10-megawatt grant of low-cost hydropower from the New York Power Authority will cover about half of the mill's electricity needs


The project also will receive $3.5 million from the New York State Energy and Research Development Authority

And how many jobs will be created, a little over 100. 

The point: government assistance is an integral part of manufacturing investment, and it takes a lot of it to create jobs. In this case, about $1 million in public assistance per job.   Or as Conservatives would say, about $1 million of job killing government spending per job created. 

Wednesday, June 29, 2011

Fox News Parent Sells Myspace for $35 million

What a Deal!

In 2005 the News Corp, parent of Fox News bought up and coming internet sensation Myspace for $580 million.  Here is a report from the LA Times.

Myspace, once the dominant social networking site on the Internet but now an afterthought to Facebook, will be sold to Specific Media in a deal worth $35 million in cash and stock, a person familiar with the matter said. 
The acquisition by the Irvine-based advertising network is expected to be completed Wednesday.
News Corp., which acquired Myspace in 2005 for $580 million as part of a bold digital strategy, plans to retain a small stake in company. The media conglomerate had hoped to fetch as much as $100 million for the site, which has been steadily shedding users and advertising revenue over the last several years.

Next Question:  Can anyone tell us why Fox Business Channel is not doing all that great?  Anyone? There must be some reason.

Huge, Huge Crowd, Rallies to See Bachmann,

Wow, That Must be Headline News

A lead story in Roll Call has this headline

The rally took place just outside of Columbia a pretty big city and contained, get this, 200 people.  Of course as the story reports, only about 100 were actual Bachmann supporters.  Hey Roll Call, this kind of misleading reporting is not Pulitzer material.  It’s not even bird cage material.

The Dismal Political Economist expects to see Roll Call also to report that an overflow crowd of more than 20 people was present at a Waffle House in Spartanburg for the candidate.

[Disclosure Alert:  The Dismal Political Economist often eats at Waffle House and means no disrespect to the restaurant, only disrepect to Roll Call]

Rep. Heath Shuler (D, NC) Has a Third Option

About to be Gerrymandered Congressman May Just Quit

Earlier The Dismal Political Economist speculated on the idea that North Carolina’s 11th District Congressman and former Tennessee football star Heath Shuler would switch parties.  Mr. Shuler faced huge opposition from the Republicans who were going to try to change his district so that he would be defeated, and given his Conservative views a switch to the GOP seemed like a likely option.

Now reports are coming out that Mr. Shuler may become the next Athletic Director at the University of Tennessee.  So Mr. Shuler apparently has three options, (1) run as a Democrat, (2) switch parties and run as a Republican, or (3) quit.  If he takes number 3, which seems likely at this point the “I quit when things get tough” is not going to be an easy speech to give to rev up the football and basketball teams.

Republican reaction, as reported by Roll Call

National Republicans were nearly gleeful at the report of Shuler eyeing another job. Paul Lindsay, communications director at the National Republican Congressional Committee, sent out a blast email Wednesday with the subject: “Heath Shuler has updated his LinkedIn Profile.”

“Heath Shuler can see the writing on the wall, Blue Dogs don’t have a home in [Minority Leader] Nancy Pelosi’s party and voters are fed up with his fake moderate breed,” NRCC spokeswoman Andrea Bozek said in a statement.

Mr. Shuler was recruited to his position by former President Bill Clinton who also campaigned for him.  The Dismal Political Economist is not certain that Mr. Shuler’s potential quitting is what is meant by “the third way”.

Senators Lieberman and Coburn Learn Nothing, Know Nothing on the Politics of Medicare

Are They Really That Dense?

Senator Joe Lieberman (I, Ct) and Senator Tom Coburn (R, Ok) unveiled a Medicare Plan that appears to be identical to the one Sen. Lieberman put forth earlier.. The Dismal Political Economist commented favorably on that proposal, based on its major parts which would increase payroll taxes on high income wage earners and require higher Part B premiums for higher income retirees.  Unfortunately Mr. Lieberman also included increasing the eligibility age, which set off a firestorm of criticism that drowned out any discussion of the merits of the major parts of the plan.

Now Mr. Lieberman and Mr. Coburn seem to have learned nothing from that trial balloon, and have included the same incendiary increase in eligibility age.  Again the reaction has been highly negative largely due to that one point, and again the merits of the rest of the proposal have been lost for discussion purposes.

Good grief. Mr. Lieberman and Mr. Coburn, you are supposed to be highly skilled politicians.  Start acting like ones.  And Democrats, get in the real world, where Medicare cost increases are making the current program unsustainable for the long term. The belief on the part of Democrats that Medicare can continue as is for decades just provides ammunition to people like Paul Ryan who want to end the program.

Who Does Not Pay Federal Income Taxes?

Here is the Answer

In the NY Times Bruce Bartlett has a table showing the composition of the approximately 47% of households that doe not pay income taxes.

Yes, you are reading that correctly.  Conservatives who are opposed to raising taxes make an exception for those who do not pay taxes, meaning they want to impose taxes on 40.7 million taxpayers making less than $16,800 per year.
Why?  Well where exactly did you expect them to get funding for more tax cuts for the wealthy?  Ok, that's not fair.  They cannot get enough tax revenue from tax increases for  the lowest income groups, they are going to have to cut government spending that benefits those groups also.
And finally, for those of  you who think the people who do not pay federal income taxes are getting away with paying no taxes, there is this article here.

Europe and Greece: Who is Running This Show

Are They Trying to Make Things Worse?

The Greek Parliament has approved a new set of programs and policies designed to contract the Greek economy even more than it has already suffered in order to win approval of another round of bailout funding from the IMF and the European community.  The Dismal Political Economist previously described the European/IMF policy as Non-Lethal Suicide.

The upcoming $17 billion loan from the IMF and Greece’s European neighbors is the latest tranche in a longer-term, $160 billion emergency program approved for the country last year, when it also faced a possible default.

That program was intended to restore the confidence of private investors, and allow the country to begin borrowing money on its own again as early as next year.

It didn’t work, as the economy continued contracting, and the Greek government stumbled in implementing the broad set of reforms promised to the IMF and Europe. Many of those measures, along with additional cuts and economic policy changes, have been rolled into the program lawmakers approved on Wednesday.

Why are the Greeks even accepting this program?.  The problem now is that the previous policy has been so destructive that the Greek government cannot, in the terms of business bankruptcy, meet payroll.  If it does not accept the European bailout money civil society in Greece could well collapse into violent anarchy.  Even with the bailout it does not look all that good. (see pic)

So what we have is continuation of a policy that didn’t work.  This leads to a question on the International Finance final exam:

17.    Exactly who is leading the European program to deal with the financial and economic crisis in Greece?

A.     Groucho, Harpo, Chico, Gummo and Zeppo.
B.     Larry, Curley and Moe
C.     Homer and Jethro
D.     Gilligan and the Skipper
E.      Those two guys in Dumb and Dumber

Don’t answer.  It’s a trick question.  Based on what has happened a case can be made that any and all of the above are involved.

In Defense of Michelle Bachmann Against Salon On-Line Magazine

Yes, That’s Correct

Republican Presidential candidate and conservative activist Michelle Bachmann has recently come under fire for accepting government funds from programs she has denounced.  Ms. Bachmann has invited much of the ridicule on herself by trying to talk her way out of this, instead of just saying “Yes, we benefited from those programs, but I oppose them as policy and will work to end them”.  The programs included assistance from the Agriculture Department for a family farm in which Ms. Bachmann is a partner, and for employee training support for her husband’s clinic.

Also included in the charges is the fact that Ms. Bachmann’s husband received payments from Medicaid,

Bachmann clinic got $137,000 in Medicaid funds

The GOP presidential candidate's claims that her family received no federal support are unraveling “


the above headline being from Salon for a piece written by the usually intelligent and articulate Joan Walsh.  In this case Ms. Walsh is dead wrong. 

Payments for health care services for Medicaid patients are not a government handout.  Furthermore given the low reimbursement rate that Medicaid provides, the health care providers that treat Medicaid patients are to be commended, not condemned.  Ms. Walsh, there is plenty to charge Ms. Bachmann and her family with in the issue of right wing hypocrisy.  This is not one of them.

[Disclosure alert:  The Dismal Political Economist has a disabled adult dependent.  He is intimately familiar with Medicaid issues and the fact that Medicaid is a vital program for the health of low income and disabled persons. That anyone would imply that by accepting Medicaid payments health care providers are somehow getting "federal support" is one of the more highly offensive ideas he has seen, at least so far today.]

Yes We Are Afraid of Michelle Bachmann, Bank of America May Have Made a Mistake in Buying Countrywide . . .

And Short Takes on the News

From Taegan Goddard we have this

"I think clearly what this demonstrates is that the president of the United States is afraid of my candidacy. He fears me."

-- Rep. Michele Bachmann, in an interview on
Fox News, suggesting the Obama campaign's attack against her campaign launch is evidence of their trepidation.

Uh, Ms. Bachmann, we all fear your candidacy, just not for reasons that you think.

Bank of America has agreed to pay more than $8 billion to investors who bought loans from its Countryside mortgage company as part of setting aside $14 billion to cover its problems in mortgages and mortgage banking.   Bank of America had purchased Countrywide for $4 billion.  Hey BOA, how did that work out for you guys?  the NYT has a polite answer to that question.  That $14 billion charge also includes a $2.6 billion write-off in the value of its home lending business — a move that tacitly suggests the bank vastly overpaid for Countrywide.  You Think?

In the interests of fairness, The Dismal Political Economist presents an opposing view to allowing same sex marriages.  This is from a good, solid Conservative columnist, Jeff Jacoby,

The essential, public purpose of marriage is to unite male and female — to bind men and women to each other and to the children that their sexual behavior may produce.

And in the further interests of fairness it must be pointed out that citing as your source an article in The Weekly Standard, a rabidly intellectually vapid Conservative magazine means that both your argument and its sources cannot stand.  Marriage, Mr. Jacoby, can be whatever we say it is, that is what a free society does.

President Obama’s views on same sex marriage are said to be “evolving”.  We all know what this means.  He will soon come out for support of same sex marriage.  Please Mr. Obama, everyone knows how this ends, just go ahead and do it so we can get on to other things. 

There is an old joke about Economists (whose are pre-disposed to assume away any real world issues that conflict with economic theory).  "How does an Economist get off a desert island?  Well, assume there is a boat . . ."  So how does California close a budget deficitThe budget that passed Tuesday night assumes that the state will collect $4 billion more from existing taxes than previously predicted.  The old joke is not quite as funny anymore.

A story in the New York Times explores the background of the 150 year prison sentence given to 71 year old financial con artist Bernard Madoff.  Mr. Madoff commented for the story,

Explain to me who else has received a sentence like that,” Mr. Madoff said. “I mean, serial killers get a death sentence, but that’s virtually what he gave me.”

“I’m surprised Chin didn’t suggest stoning in the public square,” he added

Mr. Madoff destroyed the lives of hundreds, maybe thousands of people, not physically, but emotionally and financially.  His actions resulted in the suicide death of his son. Yes, it would have been wrong to stone Mr. Madoff in the public square, but no one should feel remorse for thinking about that.  A life sentence in prison seems more than appropriate.


North Carolina Legislator Was For Usury Before He Was Against It

On June 2, the North Carolina Legislature voted on a bill to allow interest rates of up to 50% on short term loans from Consumer Finance companies.  Most Republicans voted for the bill (surprised?) including Assembly Speaker Pro Tem Dale Folwell.  Then two weeks later Mr. Folwell caused his vote to be changed (That did not effect the outcome, the bill died a well deserved death. )

Mr. Folwell saidHe just felt bad about his original vote and wanted to change it.”  In the same story a reporter said “Folwell is widely rumored to be considering a 2012 run against Democratic State Treasurer Janet Cowell”

You do the math.

Cutting Spending is Not Better Policy Than Raising Taxes

Why Michael Boskin is Wrong, Again

Earlier The Dismal Political Economist commented on a WSJ op/ed piece by former Bush economist Michael Boskin who provided five, count em, five lessons for deficit busters.  His first recommendation, cut spending $5 for every $1 in tax increases.

To justify his positon Mr. Boskin said

In a comprehensive study of post-World War II fiscal consolidations in developed economies published last year by the National Bureau of Economic Research, economists Alberto Alesina and Silvia Ardagna conclude that successful deficit reduction averaged $5 to $6 in spending cuts for every $1 of tax hikes. Higher taxes more often led to recession.

To spare readers the agony of plowing through the technical aspect of the study cited by Mr. Boskin, The Dismal Political Economist did not provide a review of that study.  Now we do have an analysis by the Congressional Research Service which concludes the following about a study that is part of the intellectual basis of Conservative policy on deficit reduction.

The International Monetary Fund, however, correcting problems they perceived in the Alesina and Ardagna study, found spending cuts to be contractionary, consistent with mainstream views. Moreover, while the IMF found cuts in spending to have smaller effects than tax increases, those effects were generally ascribed to offsetting monetary policy which was more significant with spending cuts than tax increases.

The findings in the Alesina and Ardagna study that successful debt reductions were associated with higher growth when spending cuts were used was based on 9 observations out of 107 instances of deficit reduction, or less than 10% of the sample. In addition, most of the countries where debt reductions were successful were at or close to full employment, while the United States remains well below full employment, raising questions as to whether this evidence is applicable to current U.S. conditions. Thus, both methodologic l questions and questions of applicability to current circumstances can be raised for the Alesina and Ardagna, and similar, studies.

So the world order in Economics is now back where it should be.  Cutting spending is highly contractionary, and the policy of huge cuts in spending relative to raising taxes to cut the deficit is again determined to be bogus economic policy, just as economic theory says it should be.

Furthermore, instead of stimulating the economy, as Conservatives would have you believe, cutting spending is going to reduce growth and employment in the economy just as economic theory says it would.  From the above study.

The claim based on the evidence of Alesina and Ardagna (and similar studies) that policies traditionally viewed as contractionary, such as cutting spending, will increase growth in the shortrun in the United States, can be questioned on at least two grounds. First, when a methodology that looks to intentions was used to select instances of deficit reduction, as in the IMF study, the empirical results were consistent with traditional fiscal policy. Second, the deficit reductions in the Alesina and Ardagna study that were successful by the authors’ measures were associated with economies generally above, or close to, full employment in most cases. The United States is still operating considerably below potential output.

Why is this important?  Well the Paul Ryan Budget Plan passed by the House was based on the assumption that huge cuts in federal spending would immediately create hundreds of thousands of jobs. It  Creates nearly 1 million new private-sector jobs next yearAnd both Republicans and Democrats are currently negotiating huge spending cuts to cut the deficit, and they believe in part that this will result in a stronger economy.  The above cited study is just additional support for the argument that it won't, that

Will this information slow the race to contract the economy by massive cuts in government spending?  Well no, the issue for Democrats is trying to appease Republicans, the issue for Conservatives  is Political Philosophy, not the economic well being of the country.

Avastin: The Economics and Politics of a Prescription Drug

A Case Study in What is Wrong with Health Care in the U. S.

[Disclosure Alert:  The Dismal Political Economist has no connection with cancer, has no clinical knowledge of cancer and is not qualified to offer an opinion on the efficacy of anti-cancer drugs.]

The cancer fighting drug Avastin is on trial this week.  At issue is whether or not the FDA will continue to certify the drug as effective in combating breast cancer.  The history of this issue is as follows.

The drug Avastin was developed by Genentech and has been approved by the FDA to treat various cancers.  One of those cancers is breast cancer.  The FDA gave conditional approval to the drug, pending studies on its effectiveness.  In July 2010 an independent advisory committee voted 12 to 1 against approval of the drug as a treatment for breast cancer.  After agreeing to revoke approval in December, the FDA scheduled

a trial-like hearing Tuesday and Wednesday at the FDA at which an agency official with no ties to the controversy will preside over testimony about the drug and its test results. FDA scientists from the Center for Drug Evaluation and Research will argue their case, while Genentech and a group of researchers, some of whom have received company support, will defend its use.

with a final decision up to FDA Commissioner Margaret Hamburg. 

Some other relevant facts

1.      The sales of the drug for fighting breast cancer are about $1 billion per year.  An annual treatment costs the patient, Medicare or an Insurer about $88,000 per year.

2.      Genentech won accelerated conditional approval in 2008 based on a study that showed the drug could keep women with breast cancer tumor-free for an additional five months. But two follow-up studies funded by Genentech showed minimal if any delay in tumor growth and "nowhere near five months," said FDA cancer-drug chief Richard Pazdur in an interview in January.

3.      Genentech says that it brings important quality-of-life benefits even though the drug hasn't been shown to extend life expectancy.

So what exactly is the problem.

1.      Research is paid for by the Company.  Researchers paid by the Company will be testifying at the hearing.  There is no way around this clear conflict of interest.

2.      Should health care insurers and/or the government pay $88,000 per year for a drug that does not extend the patient’s life?

3.      Why does the drug cost $88,000 per year?  Is all of that to repay development costs or is it for production costs? 

4.      Genentech has made the issue a political one,  with several leading House Republicans criticizing the FDA. They say the agency is trying to withhold life-saving drugs from women, and they link the action to the Obama administration's health-care overhaul, which they say will encourage rationing of care by federal bureaucrats. (Yes, that is those same House Republicans who unanimously approved a plan to end Medicare and whose deficit cutting program includes cuts to health care.  And calling independent scientists trying to make the correct decisions that affect life and death bureaucrats is just plain wrong, but then to hijack an issue like this for purely political purposes is also just plain wrong). 

No rational person would support a health care system characterized by the process described above.  Maybe that is why the U. S. health care system is irrationally expensive and less effective than other countries.  And if politicians get their way, some  health care decisions will be decided by members of Congress instead of independent scientists and health care professionals.  Given the damage that will do, this is just plain sad.

Follow Up:  The Incidental Economist has an excellent discussion of the science and regulatory aspects of this issue.

More Follow Up:

A special advisory committee of the Food and Drug Administration voted 6-0 Wednesday that two key studies on Avastin show it isn't effective as a treatment for breast cancer, for which it received accelerated approval.

The panel also voted 6-0 that available evidence generally doesn't show the drug provides clinical benefits. The votes are setback for Avastin maker Genentech, a U.S. unit of Roche Holding AG, which has argued that the drug can significantly delay tumor growth in breast-cancer patients about five months and improves the quality of life.

The panel is also voting on whether to allow the breast cancer approval to remain on the drug's label while the company conducts another study on the drug's benefits, which could take more than four years.

Exactly why they need to vote on whether or not to allow the breast cancer approval to remain on the drug's label is a mystery The Dismal Poltical Economist cannot solve.  He just does not know that much about science, and never will.

Tuesday, June 28, 2011

Virginia Governor Bob McDonnell in the Wall Street Journal – No Spin Should go Unanswered

If Things are Going So Well, Why Aren’t GOP Governors


Virginia’s Governor Robert McDonnell is a Republican and Vice Chairman of the Republican Governor’s Association, and so is expected to brag about accomplishments of Republican governors.  And there is no better place to brag about those so-called accomplishments than in the editorial pages of the Wall Street Journal.  Here is what Gov. McDonnell says, and here is a little bit of rebuttal.

Since February 2010, 67,400 new jobs have been created in Virginia and our unemployment rate has fallen to 6% from 7.2%. Virginia's unemployment rate is more than a full three points below the national average and the third-lowest east of the Mississippi

Remember all that Federal Stimulus money.  Let’s see, where was a bunch of it spent.  Oh yes, Virginia.  So yes Mr. McDonnell there has been job creation in your state, thanks to Federal spending which you oppose.

Mr. McDonnell goes on to praise other newly elected Republican governors.  And he uses the low popularity of Democratic governors as a measure of how the public views the President and the Democrats. 

The low popularity of Democratic governors facing re-election in 2012 tells us quite a bit about how the public regards the policies and work done by the president's party in the state capitals

 But on that standard all those Republican governors he sites fair even worse.  Here is their popularity since they were elected.

And of course, the ever popular Rick Perry of Texas, who job creating success is credited to everything except the main thing, that almost all of the oil in the United States is located in his state.

So yes Mr. McDonnell, Republican governors can do well if the Federal Government spends a bunch on money in their state, or nature endows their state with $100 a barrel oil. And if low popularity of Democrats says they are not doing a good job, then low popularity of Republicans says that they are doing a good job.

Sorry Mr. McDonnell, you pass the spin test but fail the Course in Logic 101.

Lower Consumer Spending Does Not Look Good for Economy, International Agency Wants Less Economic Growth, Michelle Bachmann Says She Has the Values of a Serial Killer. . .

And Other News That Requires Comments

Consumer spending in May was unchanged, meaning zero growth in the most vital sector of the economy.  This information, combined with other negative growth news about the economy should increase pressure in Washington for more expansionary fiscal policy. Instead Republicans and Democrats are negotiating policy that will produce lower growth and employment. 

Are they really that stupid?  (Don’t answer, it is a trick question).


In its lead story for June 27 the Financial Times has the following headline

Economic growth must slow, warns BIS


The gist of the story being that

In its annual report, the Bank for International Settlements said that with the scope for rapid growth closing, monetary policy should be quickly brought back to normal and countries should act urgently to close budget deficits.

The tough recommendations were urged on advanced and emerging economies alike . . .

The concern of the BIS, an international financial regulatory body, is inflation, well actually future inflation, that is, inflation that has not yet happened.

Are they really that stupid?  (Don’t answer, it is a trick question).

It turns out that Michelle Bachman

has benefited from the kind of government aid she frequently criticizes on Capitol Hill and on the campaign trail.

 A report in the Washington Post states that her in-laws’ farm, in which she is listed a partner, received about $260,000 in federal money, and her husband’s clinic got $30,000 in training funds for its employees.  Ms. Bachmann defended the clinic money on Fox News (where else) describing 

the clinic funding as “one-time training money” and noting that it went toward the employees and not to Bachmann and her husband themselves.

So her husband’s business gets federal money that goes to employees to help them train to be better and more productive in their jobs, and Ms. Bachmann says she and her husband got no benefit.  And yes she did list income from the farm on her financial reports.

Does she really think we are that stupid?  (Don’t answer, it is a trick question).

And here from the Washington Post

she flubbed her hometown history when declaring “John Wayne was from Waterloo, Iowa,” and “that’s the kind of spirit that I have, too,” in running for president.

The actor was born nearly 150 miles away. It was the serial killer John Wayne Gacy Jr. who lived, for a time, in Waterloo, Iowa.

Conservative Supreme Court Does Not Believe in Free Markets . . .

They Just Want to See More Wealthy Republicans Elected

Freedom of Speech has been a fundamental Constitutional right since the beginning of the nation.  The Dismal Political Economist believes in this and also believes the the free market system is particularly suitable to having and preserving freedeom of speech.

It is naive and unrealistic to expect any politician to present an objective argument.  What Freeedom of Speech does is to create a competitive market place of ideas.  If all side of a question are presented to the electorate in competitive debate, the electorate is more likely to pick the best of the ideas, and the politicians who support those ideas.

What wealthy candidates of all parties and all sides want to do is to stifle the free marketplace of ideas.  They would use their wealth not to supress the opposition, but to drown them out.  If they have a huge monetary advantage, their message can win simply because their voice is so prevalent it prevents competiting ideas from even being considered.  Conservative Republicans primarily but not exclusively act in this manner.  The say they support free and open market, but in effect want their own speech to be the dominant speech in the arena.  This can prevail, and distort Democracy only so long as public regulations do not allow competiting speech to, well, compete.

The Supreme Court has continued its never-ending quest to provide primarily Conservative Republican electoral candidates with unlimited amounts of funding.  It struck down an Arizona law that gave extra state money to candidates who accepted public financing after their privately financed opposition spent a huge amount more. 

The Court’s rationale in eliminating any restrictions on unlimited spending by candidates is based on “free speech”.  Apparently for the Court’s Conservative members, free speech means speaking so often and so loud that you completely obliterate the speech of your opponent.

Incredibly, the Court ruled that the Arizona law, which does not interfere in any way in a privately financed campaign  puts a burden on the wealthy, privately financed campaign.  Specifically

The privately financed candidate must “shoulder a special and potentially significant burden” when choosing to exercise his First Amendment right to spend funds on his own candidacy.

Yes, Conservative Justices feel that allowing the opponent of a wealthy, privately financed campaign some degree of access (but nowhere near equality) in the arena of public discourse burdens the rich, wealthy candidates. Not exactly what Jefferson and the others who sought to incorporate freedom of speech into the Constitution were talking about, is it?

Well Justice Scalia often says that he  and  he alone knows exactly what the Founders meant in the Constitution.  The Dismal Political Economist strongly suspects though that were the flow of unlimited money to favor Democrats, Mr. Scalia and his Conservative colleagues would find that Thomas Jefferson was telling them that to limit campaign spending was Constitutional.  Just a hunch

Rep. Heath Shuler in North Carolina – A Microcosm of Redistricting

Will Democat Mr. Shuler Change Parties?

Every ten years the U. S. redraws Congressional districts to reflect population changes and shifts.  Where Democrats control the process they try to re-district to support Democrats.  Where Republicans control the process they try to re-district to support their members and add new members.

North Carolina is an interesting case.  The state is one of the more moderate southern states, and in 2008 voted for Obama.  In 2010 the Republicans captured the state legislature and with it control over re-districting.  Now they plan to use that power to draw districts that will maximize their chances of gaining seats.

Much of the interest will be on the 11th Congressional District, which is currently the western part of the state.  The core of the district is Asheville, a Democratic leaning area surrounded by Republican leaning rural and mountain areas.  In 2006 former football star and conservative Democratic candidate Heath Shuler took the seat from a long time Republican, and has held it ever since. 

Shuler is considered a leader of the conservative Democrats, a group that shrunk dramatically in the 2010 Republican sweep. He mounted a symbolic challenge to Nancy Pelosi for House Minority Leader after the 2010 electoral debacle.   He is pro gun, anti abortion rights and has survived elections because he has been able to consolidate voters of various political philosophies and has had weak opposition.  He now faces a potential shift in his district that will put him in a much more Republican area.

The interesting question for Mr. Shuler, and for Democratic prospects in the south is whether or not Mr. Shuler becomes a Republican.  The Dismal Political Economist can easily imagine the pitch that Republicans will make to the Mr. Shuler. 

“Switch parties and you are assured election for the rest of your life.  You get money and a path to the leadership.  Your seniority will be recognized  Stay a Democrat and you have no power or influence in a Republican held House and every two years there will be an unlimited amount of money against you and you will lose, if not in 2012 then at some time in the future.”

For Mr. Shuler to stay a Democrat would mean he puts party and political philosophy ahead of personal ambition and influence.  That somewhat rare event has happened with other politicians, and the interesting question is whether or not it will happen with Mr. Shuler, and what that portends for the Democratic party being a national party.