Archive for February 2020

It’s Congress, Stupid

February 29, 2020

The Democrat Primary is exposing a national broad based fault line.  Democrats are torn between choosing “reform” candidates versus a moderate “do it like we used to do it” candidate in order to solve the grave problems Democrats see.  If ever there was a search for the “silver bullet”, Democrats are showing the way. 

Progressives are speaking about the evils of wealth and corporate interests and why those segments should pay for new entitlements such as universal healthcare for all and free college education.  Moderates, meanwhile, focus upon returning America roughly to the place where it was when Donald Trump assumed the office.  Moderates promise they can unite the party, beat President Trump, and fix Washington.  Hmmm.

Almost every experienced economist appear flabbergasted with Bernie Sanders’ “Medicare For All” which includes ending private insurance and mandatory participation in Medicare.  Healthcare represents about 1/3rd of the US economy and fixing healthcare will be a complicated process to say the least. Free college education is a second attractive proposal which is loaded with hidden traps.  In both cases, where is cost control and efficacy measures?

We live in strange and interesting times.  President Trump has made such a mess of his office that one must be amazed that there would be any confusion on whether Trump should have a second term,  (Trump supporters, of course think otherwise.)  For example, the current coronavirus threat has exposed everything why Donald Trump is unfit to be President. 

  • The coronavirus is a world issue, global cooperation is a must.  Trump shuns global cooperation. 
  • Disease control is an on going activity requiring study and preparations ahead of the actual outbreak.  Trump has cut funding for most of the government agencies involved in disease control. 
  • And the elephant in the room is that fight against the coronavirus requires science and a scientific approach.  Trump routinely dismisses science, scientist, and science methodology.  Hmmm.

So why aren’t all Democrats seeking a less controversial moderate candidate that can win in November?

  • One reason is a healthy one.  There have been close to 30 Democrats who have expressed interest in being the nominee.  Democrat voters are fortunate to have such a wide field of candidates.  Isn’t this much better than a smoke filled room where political bosses make the pick?

 

  • The second reason is a matter of concern.  Both Bernie Sanders and Elizabeth Warren appear to have tapped into a voter segment who do not want government done the way it was in the past.  These voters appear to feel that while President Trump may be a buffoon and may be doing a poor job, their particular lives are unaffected, just as they were during President Obama.  For these voters healthcare costs are too high or coverage too slim.  Also, for many, college education is the way to improve ones economic position.   Yet, under current policies they are looking forward to insecure jobs prospects and a huge debt as outcomes of college years.  To this group of voters, moderate candidates simply do not care to upset the status quo and therefore will do nothing for them.

This leads to a worrisome outlook.  Suppose Sanders gets the nomination.  Will his Medicare for All and free college tuition produce enough votes to defeat Trump?  Unlikely.  Suppose Sanders does not get the nomination and the nominee is a moderate.  Can that candidate unite the party and turn out sufficient vote in November to defeat President Trump?  Maybe but maybe not.

  • The last troubling observation is the growing tendency of Americans to look to the President as someone who can fix what is “wrong”.  To be sure, the President can set a tone and certainly can be important in implementation of new laws.  But, it is Congress that has the sole Constitutional responsibility to enact laws.  Unless the Congress is aligned with progressive ideas, any President will lack support for the changes Sanders and Warren supporters seek.

Affordable healthcare and college education are reasonable aspirations.  Both are not free and must be paid for in some way.  Unless America is ready for a dictator, those elected to Congress must carry first the banners of universal healthcare and “free” college education. 

Choosing a Presidential nominee ought to reflect the belief that

  • that person can manage as well as lead,
  • that person can surround themself with the best and brightest, and
  • that person will work hand in hand with Congress to translate all American’s wants and needs into law.

It’s Congress, Stupid.

Too Many Billionaires?

February 25, 2020

Pundits as well as Democrat Presidential hopefuls Elizabeth Warren and Bernie Sanders, are asking this rhetorical questions, “are there too many billionaires?”  And the answer is ????

Without question there is growing income inequality.  Also there is a large numbers of previously employed workers who find themselves out of employment or stuck in a much lower paying job, either because their original job has been outsourced or their job has become a victim of technically driven productivity adoptions.  So for many ones job is now residing in low wage countries overseas, or there is a new robot or computer algorithm doing ones former job better, cheaper, and faster.  Hmmm.

Pundits (plus Warren and Sanders) point to the growing list of billionaires as the root cause of all evil.  And to the extent that each of these “concentrations of wealth” are taking a blind eye towards societal problems, one can at least agree that some of the newly minted billionaires would not be missed if they were to suddenly disappear.  But is the billionaire class responsible for the mess in Washington?

It was Congress that passed in 2017 a tax cut which has allowed a company such as Amazon to pay zero corporate income tax.  Amazon didn’t pass the tax cut legislation (although its lobbying efforts may have helped).  The tax cut was the work of Congress and the cuts should have been seen as fundamentally unnecessary, but it wasn’t.

Economists with even a modest amount of credentials knew the tax cut was unnecessary.  The economy was expanding, interest rates were low, and no further stimulus would be wise.

As details emerged following the tax cuts implementation, it became clear that corporations reinvested little of their tax savings (bonuses and stock buybacks got the bulk of the cuts.  Further, the promise that the economy would “explode” as the tax cut kicked in was shown hollow. The tax cut did not pay for itself and must be viewed as unfunded (thereby increasing the national debt). 

Is it “billionaires fault” that Congress passed the unnecessary tax cut? 

IMO, billionaires are not the fault of our national problems.  Rather it is the greed and sophisticated corruption of all those attempting to become billionaires along with too many of our political Congress Members.  The problems more accurately lies with all those who “want” to be billionaires.

So the wiser solution lies not in trying to take money from the already wealthy (of course they should pay a fair progressive tax) but instead our tax code should be adjusted to make it far more expensive (tax-wise) to become a billionaire in the first place.  

A society which thinks it is ok to “take from the wealthy” (even to give to the poor) is walking on dangerous grounds.  Taking from the wealthy does not incentivize the less wealthy to work harder or cleverer.  Further taking from the rich just smells of unfairness.

Setting the tax rules so that no one can achieve a zero tax rate sounds obvious.  Eliminating “give aways” to corporations, although extremely difficult to achieve, makes sense too.  And let’s not forget a transfer tax on all the high speed buying and selling on Wall Street.

Hmmm.

Coronavirus, Trump, and Victoria Secret

February 22, 2020

Question, what does Coronavirus, Donald Trump, and Victoria Secret have in common? 

Answer: Each has run its course (or soon will) and it’s time to move on.

Respiratory illnesses are an every year event.  The famous “flu” which sickens millions each year has spawned flourishing businesses encouraging everyone to receive a “flu shot” for protection against the yearly flu version.  Head aches, fevers, and sneezy congested colds plague so many that we hardly notice that the flu shot might not have worked.  Doctors and advertisements tell us to get the flu shot, so we do.

Coronavirus, however, we are told, is different.  This virus is more contagious and more lethal per infected person than our old friend the flu.  Spoiler alert: more people die each year from the flu than will die (with what we know now) from the Coronavirus because so many more people contract the flu.  So why are health officials so concerned about the Coronavirus?

Health officials are first and foremost scientists and realize that new viral strains may not just mimic older stains but instead could become a super lethal pathogen. Public health officials get up each morning alert to change and attempt to learn as quickly as possible when a new strain will still fade away like all the others before it… if the public follows certain good practices.

Donald Trump represents another type of phenomena.  “Con” man, shill artist, or crude bully all aptly describe a person who played the “system” and achieved the highest elected office in the nation.  Even though Trump did not win the popular vote, he did receive more electoral college votes and accordingly won the Presidency fair and square.  

Trump’s game is to deconstruct what others have built and claim he has done something nobody else could have done.  Institutions like the State Department, FBI, and CIA are easy targets.  Alliances like NATO, or agreements like the Iran Nuclear deal, the Paris Climate Pact, or the TransPacific Partnership were Trump “walk-away victories”.  And not much tops his “tariffs are great” approach to global trade.  Coal workers, Steel and Aluminum Industries, and farmers are all worse off than when Trump took office.  Hmmm.

Victoria Secret was a legitimate success story for many years.  Breaking social norms about intimate underwear, Victoria Secret created sizzle around the bedroom.  Sell in-sell out created profits as malls proliferated in American cities.  Times have changed, however.

What was new once, is old-hand now.  Competition using the internet and competition with far more realistic sets of “body shaped” models coupled with the decline in malls has taken a toll on the great Victoria.  Victoria Secret is a shadow of its former self.

Coronavirus, Trump, or Victoria Secret are all subjects whose time has come and gone.  They each had their day but in short order, were rendered out of touch.  Isn’t it time to move on and let the sunshine in?

What’s More Important?

February 19, 2020

Looking at the Democrat Presidential candidate field, one must wonder who will emerge as the standard bearer.  One would think that this process is designed to identify the most qualified and strongest candidate to carry the Democrat platform across the finish line.  Hmmm. 

For the Democrats, the issue is that each candidate has some wonderful attributes but it is unclear how these attributes would fair under the vague uncertainties of future years in office.   Hmmm.

Being President of the US is far more complex and difficult than what one sees on TV.  When the market is expanding, when the world is well balanced, and when domestic problems are easy to gain agreement upon, then political life is relatively easy.  But life, however, is not always like that, and who ever follows Donald Trump will have more question marks to consider.

The President sets policy and priorities that influence not only his/her term but set the stage for future successors.  President Trump is laying the stones upon which the next administration must walk.  The next President can expect turbulent times and most likely a divided Congress.  Getting any new President’s agenda transformed into law is not a guaranteed event.

This strongly suggest that Democrats, as they survey the field of 8 candidates, should weigh executive skills equally with each candidate’s policy proposals.  Sanders (Medicare For All, “war” on corporate and wealthy classes) is passionate about healthcare but how does one feel about Sanders ability to confront China or Russia, or rebuild the EPA or Commerce Department?  Biden is identified with years of public “legislative” service and practically no executive experience.  Hmmm.

The Chief Executive is just that.  The President is the chief executive of the US Government and as such should be equipped to run government with a team of capable leaders, many or most who should possess greater expertise in their field than the President.  Being smarter than the generals is not the sign of a well run executive.

Tonight Mike Bloomberg will join seven other Democrat Presidential hopefuls for the first time.  Will the discussion revolve around substance or will discussion focus upon Bloomberg’s wealth?  Will Bloomberg show his “Teflon, non-stick” skills and deflect incoming charges?  Will Democrats continue to “eat their children” instead of educating voters on why a Democrat should be elected in November?

The “Stop and Frisk” Trap

February 17, 2020

The fourth Amendment to the US Constitution reads, “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.  Where does “Stop and Frisk” fit in?

Let’s think of a community where there has been a high level of drinking and driving followed by serious accidents.  Do you remember “sobriety checks” where law enforcement funnels automobile traffic to one lane and then stops each car and looks inside asking “have you been drinking”?  If law enforcement treats each car the same way, and seeks only to know whether the driver has exceeded the alcohol limit, then courts have concluded this procedure does not violate the 4th Amendment.

Now consider a surge in armed crime including robberies and shootings such as took place in New York and most other major US cities in the late 1960’s.  How could law enforcement protect the citizens in the areas of high crime?

Observations were made that the high crime occurrences were associated with the availability of guns and the assumption was reached that “no guns means much less crime”.  So police departments across the nation initiated programs where persons fitting a certain description and living in a certain neighborhood were stopped by law enforcement officers and “patted” down to see if they were illegally carrying a gun.  In the case of New York City, stop and frisk worked until it didn’t.  Crime rates dropped and neighborhoods became safer.  Then innocent citizens spoke out against the policy. So what went wrong?

The underlying problem is that criminals represent a low percentage of the local population.  That means that far more innocent people were being stopped and frisked than were criminals.  As time passed, far more innocent people became annoyed and then angered at the indignity of being erroneously stopped.  Hmmm.

This would appear open and shut example of over zealous law enforcement actions.  But it is not.  Crime did drop and New York City has maintained a low crime rate compared to other large cities.  Stop and Frisk, however, is no longer accepted policy in NYC and hurt feelings still persist.

Former Mayor Mike Bloomberg is now running for President and some groups have raised the “stop and frisk” chapter of Bloomberg’s time as Mayor as a reason African Americans will not support his candidacy.  Is this criticism important?

Consider

  • Bloomberg has apologized for his support of stop and frisk and for his lengthy time to realize the policy was adversely impacting honest African Americans. 
  • Bloomberg’s apology was unqualified, that is Bloomberg did not also try to explain why the stop and frisk policy was introduced and that it had huge benefits for the neighborhoods where it was employed. 
  • At the end of the day, weighing the good of successfully reducing armed crimes versus reinforcing the African American impression that law enforcement was acting in a racist manner, is fraught with so many other social factors (like poverty, lack of jobs, law enforcement training, prejudices, etc).

No doubt many African Americans will prefer other candidates than Bloomberg.  But should the race boil down to Trump versus Bloomberg, this negative issue should disappear, that is African Americans will prefer Bloomberg over Trump.  Front and center ought to be what positive programs the two candidates offer that are intended to make life better for African Americans.  IMO, this should tilt the balance towards Bloomberg.

Which Consumer’s Interest In Mind?

February 14, 2020

If one can read and ask relatively simple questions, one can realize that not only is American healthcare expensive, it is so by a factor of 2, the most expensive healthcare in the world.  About 15% of this healthcare expense falls on drug expenditures.  Hmmm. 

When Obamacare was being debated, pharmaceutical companies lobbied long and hard that (1) their proportion of healthcare costs was small, (2) their profits were necessary to maintain the army of researchers working to find new cures, and (3) pharmaceutical companies would do all that was possible to keep drug prices as low as possible… so don’t attack drug prices in Obamacare.

Twelve years later the evidence points to drug prices as the most egregious part of the unseemly high overall healthcare cost.  Maybe a case can be made for sky high prices for newly developed wonder drugs, but drug companies have engaged in all sorts of schemes aimed at raising drug prices and extending the time these drugs were under patent protection.  So much for Mr Nice Guy.

How much is too much profit?  In a free and open society that is a question beyond definition.  Capitalism demands any company to price their products for maximum profit (units sold x profit per unit).  So what can a free economy do to reign in this predatory behavior?

Here are three ideas.

  • Patent Protection.  This is the shot across the bow to get the industry’s attention. Patents are granted by governments, giving monopoly status to the drug company for some period of time.  Shortening the monopoly period will bring on competition and competition normally lowers prices.

 

  • Offering/withholding government money.  This is the carrot and stick approach to gaining more favorable industry behavior.  The US government could offer universities and drug companies grants to underwrite drug research.  For example, in addition to making funding available or not, government could make the grants contingent upon drug selling prices no higher than “X” in return for government financing.

 

  • Worldclass pricing.  This is the hammer where Government enters the pricing decision.  Government funded healthcare plans should expect the lowest price available “in the world” for a specific drug.  Drug companies would have the choice (1) raise the prices of their drugs sold overseas or (2) lower the prices charged in the US.  Most Americans do not realize the US companies sell the same drug overseas (Canada included) for less than the charge US citizens. 

Any plan to reduce the overall US healthcare cost must proceed deliberately but cautiously too.  HOverall healthcare represents over 1/3rd of the US economy and unforeseen consequences could materialize if draconian measures are used as solutions to the overall healthcare cost dilemma.  Further, healthcare availability varies across the US and “one size, fits all” solutions could adversely impact many Americans. 

On the other hand, drug prices can more easily be done in a “one off” manner.

Pharmaceutical companies have been very righteous in their advertising.  Their advertising strategies reflect the industry as dedicated life savers  The opioids tragedy showed the underbelly of the industry where greed and profits ruled. 

It is time for no more Mr Nice Guy. 

Where Have All The Flowers Gone?

February 13, 2020

Democrat 2020 Presidential retail politics has been an unusually fertile area in these months leading up to the 2020 Presidential convention.  There have been a whopping 29 candidates who have thrown their hats in the ring, and of today, there are 8 left (Biden, Sanders, Buttegieg, Klobuchar, Warren, Bloomberg, Gabbard, and Steyer).  So where does this list go?

  • Tulsi Gabbard and Tom Steyer, if playing poker, would fold their hands as soon as possible.  Neither has a compelling case nor do either look like potential VP candidates.
  • Joe Biden and Elizabeth Warren appear headed no where despite sizable followings.  Biden has just looked tired (and old) and lacking the bounce one would think necessary to beat the “Trump drum”.  Warren who looked promising until voters had to make choices has been falling in the national polls for a couple of months in a row.  Both will most likely hang in until “super Tuesday although Nevada and South Carolina could break their wills to continue.

 

  • The rest (Sanders, Buttigieg, Klobuchar, and Bloomberg) are all in, at least through super Tuesday, and following that March 3 primary, there may be enough information to wean the pack further.

The big questions might be:

  • Will Bloomberg have a path to 1991 delegates in his column by convention time?
  • Will Sanders still believe he can muster the 1991?
  • Will Buttigieg and Klobuchar decide to go to the convention with less than 1991 and hope for the nod from a dead locked convention?
  • Will Biden and Warren embarrass themselves by also going to the convention with much less than 1991?

The remaining primaries will be fought under different terms.  Effective ground organization and advertising dollars will be critical since the candidates can not press the flesh as much as in Iowa or New Hampshire.  All the candidates will be at risk of faux pars simply because they and their staffs become tired.  Hmmm.

Mike Bloomberg looks the most promising at this point (money, experience, and a well conceived stump speech on winning issues).  Pete Buttigieg and Amy Klobuchar represent the next generation and have been very effective in connecting with voters.  Bernie Sanders is Bernie Sanders and will fight until the last vote is counted.  IMO, Sanders will not get the nomination again.

Hmmm.