The subtext of The Great Recession Conspiracy is that the U.S. Treasury Department is really being run by Goldman Sachs for the benefit of Goldman Sachs. That fact is confirmed, and greatly expanded, in Matt Taibbi's new book, Griftopia (More on that book later).
We knew Hank Paulson (then the Secretary of the Treasury) spoke to Lloyd Blankfein (then chairman of Goldman Sachs) several times a day for every day of the crisis. Hank said it was just to stay in touch with the thinking on Wall Street, and Lloyd denied ever needing any money from the government to stave off bankruptcy.
Now we know, thanks to Julian et al, that Goldman Sachs borrowed money from the government EVERY DAY for 84 straight days.
Even a blind pig would now understand that the sole purpose of TARP was to head off bankruptcy at Goldman Sachs!!
I sure hope that somebody got kissed in this deal because everybody who doesn't work for Goldman Sachs got screwed!!
Monday, December 13, 2010
Some Bad News
latimes.com
Weighing effectiveness versus risk in obesity drugs
Experts disagree on whether the FDA is too tough or not tough enough on weight-loss medications.
By Jeannine Stein and Shari Roan, Los Angeles Times
December 13, 2010
Advertisement
In their quest to find drugs to curb obesity, scientists have had about as much success as long-term dieters who want to stay thin — which is to say, very little. In fact, the last year has been so bleak on the research front that some experts are questioning whether a long-desired safe and effective diet pill can be found.
Advisory panels for the Food and Drug Administration recommended against approval of two experimental weight-loss drugs this year — Lorqess in September and Qnexa in July — citing unacceptable risks for unimpressive benefits. Another drug, Meridia, was withdrawn from the market in October after it was linked to higher risks of heart attacks and strokes.
Last week, an advisory panel did finally recommend approval of a weight-loss drug: Contrave, a combination of two existing drugs, the antidepressant bupropion and the anti-addiction medication naltrexone. (FDA rulings for all three drugs are expected next year.) But it did so with a marked lack of enthusiasm, citing the medication's poor effectiveness and a need to closely track health risks, such as high blood pressure, once the drug is in broad use.
As drug after drug falters or falls by the wayside, doctors who treat obese patients are growing increasingly frustrated. They say that the agency's standards for approving anti-obesity drugs are overly stringent and fail to recognize the health risks associated with carrying extra weight — at a time when almost 34% of U.S. adults are obese and almost 6% are morbidly obese, and when study after study has shown that the most that can be hoped for from diets and exercise, on average, is a 10% loss of body weight sustained for at least one year.
So gloomy is the climate for these drugs that some experts fear drug companies will out-and-out abandon the anti-obesity market.
"Every big company is going to get out of the game, and venture capitalists are not going to invest in the smaller companies to develop drugs," Dr. Donna Ryan, past president of the Obesity Society, said in October during that group's annual meeting in San Diego. "Everybody in the obesity field is upset. There is a lot of anger."
Obesity drugs in the U.S. certainly don't have a terrific track record. Fen-phen, a combination of appetite suppressants fenfluramine and phentermine, was hugely popular in the 1990s but was pulled from the market in 1997 after it was linked with primary pulmonary hypertension, a potentially fatal condition, and heart-valve problems. But the new generation of medications was supposed to be more finely crafted, and therefore safer and better.
The only prescription medication approved solely for weight loss is orlistat, a drug that inhibits fat absorption that is sold under the trade name Xenical or as a weaker over-the-counter version, Alli.
And though an FDA advisory committee did recently endorse expanding eligibility for Lap-Band surgery to allow people with less-extreme obesity to be candidates, obesity experts say that not everyone is eligible for surgery and that this decision, in any case, does nothing to serve people who are overweight, not obese.
The FDA treats drugs for obesity "as if they were in a different category," said Judith Stern, professor of nutrition and internal medicine at UC Davis. "I think [it is] not taking it seriously as a disease, and I have no clue why. We have a problem that affects over 65% of the adult population … the FDA should be jumping through hoops to give approval."
FDA officials would not comment on this year's advisory committee votes nor on its philosophy on obesity drugs. But in an era when the agency is holding all new drugs to more rigorous safety standards, it's clear that most of the new offerings haven't cut the mustard in the key equation of whether benefits outweigh potential risks.
"I understand the frustrations people have — but I don't think we have great medications," said Dr. Abraham Thomas, division head of endocrinology at Henry Ford Hospital in Detroit, who was acting chairman on the FDA advisory panels that reviewed Meridia and Lorqess (also known by its generic name, lorcaserin) and a member of the panel that reviewed Qnexa.
"It's a balance," Thomas added. Each panel carefully weighs a drug's effectiveness against its safety. If weight-loss results look good, then potential side effects (unless they're extremely serious) might not be weighed so heavily. But if a drug isn't very effective, "then the safety issues become magnified." So, for example, in the case of lorcaserin, panel members were hesitant to recommend approval because trials "barely proved" effectiveness, Thomas said.
Obesity experts counter that the agency and its expert panels don't properly appreciate the health risks associated with obesity — diabetes, heart disease, stroke, osteoarthritis, certain types of cancers and, possibly, dementia.
"They are framing weight loss as a cosmetic problem," Ryan said. "Obesity is a medical problem."
They point to studies showing that even modest weight loss — what might be considered just a drop in the bucket when measured against a person's total weight — can have surprisingly large effects. A 10% drop in weight can reduce the risk for Type 2 diabetes, lower blood pressure and help counter other problems such as sleep apnea and high blood cholesterol.
They say that a diet medication could be the catalyst needed to jump-start a successful weight loss program. "In my office a patient will come in and say, 'You know, doctor, I've lost some weight through diet and exercise, but I need something to help me kick-start [a serious weight loss program],'" said Dr. Ken Fujioka, director of nutrition and metabolic research at the Scripps Clinic in San Diego.
And they note that while several studies show that diet and exercise can produce about the same weight-loss percentages as medication, such programs — which can include supervised fitness instruction and pre-made meals — may not be realistic or affordable for most people, let alone viable for the long haul.
"When you look at interventions, they're done with volunteers and there are all kinds of people on the team, like psychologists and trainers," said Dr. Arya Sharma, professor of medicine at the University of Alberta in Canada. "You'll see the lengths they go to keep people motivated, and in the end they may get 3% to 5% weight loss."
Finally, most people can't maintain significant weight loss for more than a year or two through diet and exercise alone in part because the body kicks into a starvation mode and begins to conserve energy. Getting around this thorny problem has become one of the most significant scientific questions in the field — and may possibly, say obesity specialists, be a place where diet pills could help.
Some, such as Dr. Sidney Wolfe, director of the not-for-profit health research group Public Citizen, feel that more caution — not less — is in order when assessing these drugs. Contrave "is another drug that increases blood pressure and pulse, and it's possibly going to be approved — and that is a huge mistake. Losing weight is meaningless if it is nullified by increasing cardiovascular risks."
Wolfe knows that some doctors are frustrated by a lack of obesity medications. But that, he said, isn't justification for approving drugs that may have serious side effects. "If the overall benefits are outweighed by the risks, that's it. The FDA is part of the public health service, and we have to be aware that if they approve a drug, a doctor can prescribe it … why would any doctor want to prescribe a drug like that?"
But obesity experts argue that risks can be managed. In a September statement to the FDA advisory panel regarding Meridia and the increased risk of cardiovascular events, officials from the Obesity Society noted that "the drug is intended for use in patients who do not have established cardiovascular disease." They note that other medications for serious disorders have been approved despite known adverse side effects.
It certainly makes sense to carefully scrutinize potential health risks of any new obesity medication, especially because they have to be taken for a year or even longer, Ryan said. But diet drugs should not be held to a higher safety standard than other types of medications.
"Safety is important," Ryan said. "That is not to say that they have to be as safe as water."
jeannine.stein@latimes.com
shari.roan@latimes.com
Copyright © 2010, Los Angeles Times
Weighing effectiveness versus risk in obesity drugs
Experts disagree on whether the FDA is too tough or not tough enough on weight-loss medications.
By Jeannine Stein and Shari Roan, Los Angeles Times
December 13, 2010
Advertisement
In their quest to find drugs to curb obesity, scientists have had about as much success as long-term dieters who want to stay thin — which is to say, very little. In fact, the last year has been so bleak on the research front that some experts are questioning whether a long-desired safe and effective diet pill can be found.
Advisory panels for the Food and Drug Administration recommended against approval of two experimental weight-loss drugs this year — Lorqess in September and Qnexa in July — citing unacceptable risks for unimpressive benefits. Another drug, Meridia, was withdrawn from the market in October after it was linked to higher risks of heart attacks and strokes.
Last week, an advisory panel did finally recommend approval of a weight-loss drug: Contrave, a combination of two existing drugs, the antidepressant bupropion and the anti-addiction medication naltrexone. (FDA rulings for all three drugs are expected next year.) But it did so with a marked lack of enthusiasm, citing the medication's poor effectiveness and a need to closely track health risks, such as high blood pressure, once the drug is in broad use.
As drug after drug falters or falls by the wayside, doctors who treat obese patients are growing increasingly frustrated. They say that the agency's standards for approving anti-obesity drugs are overly stringent and fail to recognize the health risks associated with carrying extra weight — at a time when almost 34% of U.S. adults are obese and almost 6% are morbidly obese, and when study after study has shown that the most that can be hoped for from diets and exercise, on average, is a 10% loss of body weight sustained for at least one year.
So gloomy is the climate for these drugs that some experts fear drug companies will out-and-out abandon the anti-obesity market.
"Every big company is going to get out of the game, and venture capitalists are not going to invest in the smaller companies to develop drugs," Dr. Donna Ryan, past president of the Obesity Society, said in October during that group's annual meeting in San Diego. "Everybody in the obesity field is upset. There is a lot of anger."
Obesity drugs in the U.S. certainly don't have a terrific track record. Fen-phen, a combination of appetite suppressants fenfluramine and phentermine, was hugely popular in the 1990s but was pulled from the market in 1997 after it was linked with primary pulmonary hypertension, a potentially fatal condition, and heart-valve problems. But the new generation of medications was supposed to be more finely crafted, and therefore safer and better.
The only prescription medication approved solely for weight loss is orlistat, a drug that inhibits fat absorption that is sold under the trade name Xenical or as a weaker over-the-counter version, Alli.
And though an FDA advisory committee did recently endorse expanding eligibility for Lap-Band surgery to allow people with less-extreme obesity to be candidates, obesity experts say that not everyone is eligible for surgery and that this decision, in any case, does nothing to serve people who are overweight, not obese.
The FDA treats drugs for obesity "as if they were in a different category," said Judith Stern, professor of nutrition and internal medicine at UC Davis. "I think [it is] not taking it seriously as a disease, and I have no clue why. We have a problem that affects over 65% of the adult population … the FDA should be jumping through hoops to give approval."
FDA officials would not comment on this year's advisory committee votes nor on its philosophy on obesity drugs. But in an era when the agency is holding all new drugs to more rigorous safety standards, it's clear that most of the new offerings haven't cut the mustard in the key equation of whether benefits outweigh potential risks.
"I understand the frustrations people have — but I don't think we have great medications," said Dr. Abraham Thomas, division head of endocrinology at Henry Ford Hospital in Detroit, who was acting chairman on the FDA advisory panels that reviewed Meridia and Lorqess (also known by its generic name, lorcaserin) and a member of the panel that reviewed Qnexa.
"It's a balance," Thomas added. Each panel carefully weighs a drug's effectiveness against its safety. If weight-loss results look good, then potential side effects (unless they're extremely serious) might not be weighed so heavily. But if a drug isn't very effective, "then the safety issues become magnified." So, for example, in the case of lorcaserin, panel members were hesitant to recommend approval because trials "barely proved" effectiveness, Thomas said.
Obesity experts counter that the agency and its expert panels don't properly appreciate the health risks associated with obesity — diabetes, heart disease, stroke, osteoarthritis, certain types of cancers and, possibly, dementia.
"They are framing weight loss as a cosmetic problem," Ryan said. "Obesity is a medical problem."
They point to studies showing that even modest weight loss — what might be considered just a drop in the bucket when measured against a person's total weight — can have surprisingly large effects. A 10% drop in weight can reduce the risk for Type 2 diabetes, lower blood pressure and help counter other problems such as sleep apnea and high blood cholesterol.
They say that a diet medication could be the catalyst needed to jump-start a successful weight loss program. "In my office a patient will come in and say, 'You know, doctor, I've lost some weight through diet and exercise, but I need something to help me kick-start [a serious weight loss program],'" said Dr. Ken Fujioka, director of nutrition and metabolic research at the Scripps Clinic in San Diego.
And they note that while several studies show that diet and exercise can produce about the same weight-loss percentages as medication, such programs — which can include supervised fitness instruction and pre-made meals — may not be realistic or affordable for most people, let alone viable for the long haul.
"When you look at interventions, they're done with volunteers and there are all kinds of people on the team, like psychologists and trainers," said Dr. Arya Sharma, professor of medicine at the University of Alberta in Canada. "You'll see the lengths they go to keep people motivated, and in the end they may get 3% to 5% weight loss."
Finally, most people can't maintain significant weight loss for more than a year or two through diet and exercise alone in part because the body kicks into a starvation mode and begins to conserve energy. Getting around this thorny problem has become one of the most significant scientific questions in the field — and may possibly, say obesity specialists, be a place where diet pills could help.
Some, such as Dr. Sidney Wolfe, director of the not-for-profit health research group Public Citizen, feel that more caution — not less — is in order when assessing these drugs. Contrave "is another drug that increases blood pressure and pulse, and it's possibly going to be approved — and that is a huge mistake. Losing weight is meaningless if it is nullified by increasing cardiovascular risks."
Wolfe knows that some doctors are frustrated by a lack of obesity medications. But that, he said, isn't justification for approving drugs that may have serious side effects. "If the overall benefits are outweighed by the risks, that's it. The FDA is part of the public health service, and we have to be aware that if they approve a drug, a doctor can prescribe it … why would any doctor want to prescribe a drug like that?"
But obesity experts argue that risks can be managed. In a September statement to the FDA advisory panel regarding Meridia and the increased risk of cardiovascular events, officials from the Obesity Society noted that "the drug is intended for use in patients who do not have established cardiovascular disease." They note that other medications for serious disorders have been approved despite known adverse side effects.
It certainly makes sense to carefully scrutinize potential health risks of any new obesity medication, especially because they have to be taken for a year or even longer, Ryan said. But diet drugs should not be held to a higher safety standard than other types of medications.
"Safety is important," Ryan said. "That is not to say that they have to be as safe as water."
jeannine.stein@latimes.com
shari.roan@latimes.com
Copyright © 2010, Los Angeles Times
This May Interest You
December 12, 2010
Senator Jeff Merkley
107 Russell Senate Office Building
Washington DC 20510
Dear Senator Merkley
I listened to your interview on NPR last Saturday with great joy! I had given up thinking anyone in Washington had any common sense whatsoever. So your ideas and remarks were absolutely fascinating!
However, it seems to me that you need an “economic structure” to organize your ideas. That economic structure exists, and I hope you will find it useful.
Business Cycles have been observed in EVERY developed economy for at least 500 years. Further, they have the same characteristics every time.
When I heard economists and politicians in Washington babbling about ending the “Bubble” two years ago, I wrote The Great Recession Conspiracy to explain why ending the Bubble was ignorant nonsense. The book is available online at scribd.com, Kindle books, Google books, etc. If you send me an email address, I will send you a copy gratis.
Here is the thing to understand about Business Cycles. Every economy is ALWAYS in one condition or the other, e.g., the economy is either expanding or contracting. Further, the Business Cycle is driven by psychology, not FINANCE. The Business Cycle is enabled by credit. There is NOTHING any government has been able to do to stop the Business Cycle. However, there are a lot of things that government policy can do to mitigate the pain of contractions and to aid the benefits of expansions.
Absolutely none of those things are being done by the government today, and that is a great tragedy!! And a frightening prospect for the future of the United States of America.
Here is what you will find in this short (100 pages) book. Section One explains Business Cycles in plain English and describes how they function, what is known about them, and importantly, what is not known. Section Two explains what appropriate government policies should look like and why that is so. Section Four explains what should be done to “solve” the problem with Social Security and Healthcare. They are simple, bullet proof solutions that will make both “problems” go away forever.
Now, let’s backtrack a little. I am not an economist, but I do know a helluva lot about economics and how the U.S. economy actually works. My resume is included with this letter.
Current economic theory is basically mathematical nonsense and I will explain why shortly. Further, current economic theory is a terrible basis for establishing government policy. One example; Larry Summers is convinced that if you are currently unemployed, it is because you are lazy. On the other hand, Joseph Stieglitz is convinced that if you are unemployed it is because you are incompetent. Basing government policy on either of these pieces of nonsense can only make things worse. The vast majority of unemployed Americans today are unemployed because the organizations they worked for no longer have sufficient income to pay their wages.
The only decent way to describe government policies that claim to generate income for businesses by offering some sort of tax break for hiring someone is stupid and uninformed. I have been a manager in a very large company (Hunt-Wesson, Foods, Inc.) and a very small company (Gilbert H. Brockmeyer’s Natural Ice Cream Company). I can assure you that neither company EVER hired a new employee to take advantage of a tax break. We hired new people when our order books were so full we needed help to handle all the business. Period. End of Story. But no one in Washington seems to understand that simple fact. But every business manager knows that fact.
Or another example, government policy is now going to give business a tax break for investing in new equipment. This is another compete failure to understand how business and the economy actually work. Big companies are now sitting on the largest pile of cash in history and those companies do not need a tax break to decide to invest in new equipment. On the other hand, small businesses are not going to spend their precious cash reserves on new equipment when their order books are only partially full, nor are they going to the bank to take on a new loan that requires more interest payments.
I could go on with other examples, but The Great Recession Conspiracy explains what would be appropriate government policy, and why the reality of the Business Cycle demands such policies.
O.K. here is a short explanation I promised you earlier about why virtually all current economic theory in the U.S. at least, is foolish crap. In the 1700’s, Adam Smith wrote down some observations about how economies work, and can work better. David Ricardo later added some elegant insights into the advantages of comparative advantage. Even John Maynard Keynes simply wrote down his observations about how economies work in the 20th Century and suggested what appropriate government polices might be.
But after WW II, American economists turned to mathematics to explain their ideas about how the economy works. It goes something like this. One economist gets an idea about how some part of the economy works and he/she writes it down in arcane English, and then immediately begins to develop a mathematical formula to express that insight. Then another economist gets a different idea about what he/she has seen in the economy, formulates the observation in English and then in mathematical formulas. The ensuing competing theories fuel endless economic journals and conferences.
The problem here is that both economists MIGHT be right, but neither can specify under what conditions their observations are appropriate.
This is exactly what led Harry Truman to make his classic comment about a one handed economist.
But the real problem is that the Business Cycle is driven by human psychology and that notion has been extraordinarily resistant to mathematical modeling. And NOBODY in economics wants to deal with that fact. The “behavioral” economists, some of whom are in favor today, are equally foolish. But that is a story for another day.
And finally, to the best of my knowledge, there is not a single working economist in the U.S. today who has the slightest understanding of Business Cycles and what they mean for government policy. A sad, but true, condition.
Feel free to check any, and all, of the facts in The Great Recession Conspiracy. Just don’t assign the job to an economist, especially to one who doesn’t yet have tenure in some economics department.
So, my point here is to give you some actual, factual, basis for structuring and explaining your ideas. And maybe, winning some converts to common sense.
Any questions?
Very truly yours
P.S. If you want to understand how a life long Republican became a total Obama convert, and finally became a disillusioned former supporter, read http.//thegreatrecessionconspiracy.blogspot.com from the beginning to today. It is a depressing story.
Senator Jeff Merkley
107 Russell Senate Office Building
Washington DC 20510
Dear Senator Merkley
I listened to your interview on NPR last Saturday with great joy! I had given up thinking anyone in Washington had any common sense whatsoever. So your ideas and remarks were absolutely fascinating!
However, it seems to me that you need an “economic structure” to organize your ideas. That economic structure exists, and I hope you will find it useful.
Business Cycles have been observed in EVERY developed economy for at least 500 years. Further, they have the same characteristics every time.
When I heard economists and politicians in Washington babbling about ending the “Bubble” two years ago, I wrote The Great Recession Conspiracy to explain why ending the Bubble was ignorant nonsense. The book is available online at scribd.com, Kindle books, Google books, etc. If you send me an email address, I will send you a copy gratis.
Here is the thing to understand about Business Cycles. Every economy is ALWAYS in one condition or the other, e.g., the economy is either expanding or contracting. Further, the Business Cycle is driven by psychology, not FINANCE. The Business Cycle is enabled by credit. There is NOTHING any government has been able to do to stop the Business Cycle. However, there are a lot of things that government policy can do to mitigate the pain of contractions and to aid the benefits of expansions.
Absolutely none of those things are being done by the government today, and that is a great tragedy!! And a frightening prospect for the future of the United States of America.
Here is what you will find in this short (100 pages) book. Section One explains Business Cycles in plain English and describes how they function, what is known about them, and importantly, what is not known. Section Two explains what appropriate government policies should look like and why that is so. Section Four explains what should be done to “solve” the problem with Social Security and Healthcare. They are simple, bullet proof solutions that will make both “problems” go away forever.
Now, let’s backtrack a little. I am not an economist, but I do know a helluva lot about economics and how the U.S. economy actually works. My resume is included with this letter.
Current economic theory is basically mathematical nonsense and I will explain why shortly. Further, current economic theory is a terrible basis for establishing government policy. One example; Larry Summers is convinced that if you are currently unemployed, it is because you are lazy. On the other hand, Joseph Stieglitz is convinced that if you are unemployed it is because you are incompetent. Basing government policy on either of these pieces of nonsense can only make things worse. The vast majority of unemployed Americans today are unemployed because the organizations they worked for no longer have sufficient income to pay their wages.
The only decent way to describe government policies that claim to generate income for businesses by offering some sort of tax break for hiring someone is stupid and uninformed. I have been a manager in a very large company (Hunt-Wesson, Foods, Inc.) and a very small company (Gilbert H. Brockmeyer’s Natural Ice Cream Company). I can assure you that neither company EVER hired a new employee to take advantage of a tax break. We hired new people when our order books were so full we needed help to handle all the business. Period. End of Story. But no one in Washington seems to understand that simple fact. But every business manager knows that fact.
Or another example, government policy is now going to give business a tax break for investing in new equipment. This is another compete failure to understand how business and the economy actually work. Big companies are now sitting on the largest pile of cash in history and those companies do not need a tax break to decide to invest in new equipment. On the other hand, small businesses are not going to spend their precious cash reserves on new equipment when their order books are only partially full, nor are they going to the bank to take on a new loan that requires more interest payments.
I could go on with other examples, but The Great Recession Conspiracy explains what would be appropriate government policy, and why the reality of the Business Cycle demands such policies.
O.K. here is a short explanation I promised you earlier about why virtually all current economic theory in the U.S. at least, is foolish crap. In the 1700’s, Adam Smith wrote down some observations about how economies work, and can work better. David Ricardo later added some elegant insights into the advantages of comparative advantage. Even John Maynard Keynes simply wrote down his observations about how economies work in the 20th Century and suggested what appropriate government polices might be.
But after WW II, American economists turned to mathematics to explain their ideas about how the economy works. It goes something like this. One economist gets an idea about how some part of the economy works and he/she writes it down in arcane English, and then immediately begins to develop a mathematical formula to express that insight. Then another economist gets a different idea about what he/she has seen in the economy, formulates the observation in English and then in mathematical formulas. The ensuing competing theories fuel endless economic journals and conferences.
The problem here is that both economists MIGHT be right, but neither can specify under what conditions their observations are appropriate.
This is exactly what led Harry Truman to make his classic comment about a one handed economist.
But the real problem is that the Business Cycle is driven by human psychology and that notion has been extraordinarily resistant to mathematical modeling. And NOBODY in economics wants to deal with that fact. The “behavioral” economists, some of whom are in favor today, are equally foolish. But that is a story for another day.
And finally, to the best of my knowledge, there is not a single working economist in the U.S. today who has the slightest understanding of Business Cycles and what they mean for government policy. A sad, but true, condition.
Feel free to check any, and all, of the facts in The Great Recession Conspiracy. Just don’t assign the job to an economist, especially to one who doesn’t yet have tenure in some economics department.
So, my point here is to give you some actual, factual, basis for structuring and explaining your ideas. And maybe, winning some converts to common sense.
Any questions?
Very truly yours
P.S. If you want to understand how a life long Republican became a total Obama convert, and finally became a disillusioned former supporter, read http.//thegreatrecessionconspiracy.blogspot.com from the beginning to today. It is a depressing story.
Thursday, December 9, 2010
It Just Keeps Getting Worse-Washington Post Today
A good place to start cutting
Thursday, December 9, 2010; A26
IF YOU'RE wondering which of America's leaders are serious about cutting wasteful government spending, you might start by examining who's behind the effort to extend tax breaks to America's corn ethanol industry, which expire at the end of the year.
For decades, the idea behind corn ethanol has been that fuel derived from the crop could diminish America's dependence on distasteful foreign regimes for fuel - it's done some of this - and cut carbon emissions - it's done little of this. Congress established an overlapping and expensive system of subsidies, requiring that billions of gallons of ethanol be blended into the nation's gasoline, slapping tariffs on foreign ethanol and handing those who blend the fuel into gasoline a tax credit of 45 cents a gallon.
In other words, the government pays the industry for the privilege of selling to a captive market, spending $6 billion in 2009 on the tax credits alone. Without the tax credits, the amount of corn ethanol produced would still increase over the next 10 years, the Agricultural Policy Research Institute at the University of Missouri calculates. Yet the Congressional Budget Office (CBO) estimates that taxpayers still pay $1.78 to replace a gallon of gasoline with its energy equivalent of corn ethanol. The numbers are far worse when put in terms of greenhouse gases. The CBO reports that it costs a staggering $750 to reduce annual greenhouse gas emissions one ton by burning corn ethanol - and the CBO makes some generous assumptions to get even that figure.
Yet because the policy directs cash to farm states that are rich in political influence, lawmakers are rallying to save this payoff from expiration. Sen. Kent Conrad (D-N.D.), who insisted Sunday that President Obama's fiscal commission didn't go far enough in its deficit reduction plan, has paired with Sen. Charles E. Grassley (R-Iowa) to press for renewal of the gratuitous corn ethanol tax credit and the ethanol tariff through 2015. Typically, the farm lobby has won out on such issues. But this year it's meeting stronger than usual opposition from a bloc of fiscal conservatives and environmentalists, backed by such strange bedfellows as Tea Party organizer FreedomWorks and ultra-liberal pressure group MoveOn.org - even Sen. Jim DeMint (R-S.C.) and Al Gore.
An extension of the corn ethanol provisions shouldn't be part of the deal that's emerging on the Bush tax cuts, and if it is, senators should remove it from the resulting legislation. While they're at it, lawmakers should reconsider their blending mandate, too. There are far better ways to address oil dependence and greenhouse emissions.
Thursday, December 9, 2010; A26
IF YOU'RE wondering which of America's leaders are serious about cutting wasteful government spending, you might start by examining who's behind the effort to extend tax breaks to America's corn ethanol industry, which expire at the end of the year.
For decades, the idea behind corn ethanol has been that fuel derived from the crop could diminish America's dependence on distasteful foreign regimes for fuel - it's done some of this - and cut carbon emissions - it's done little of this. Congress established an overlapping and expensive system of subsidies, requiring that billions of gallons of ethanol be blended into the nation's gasoline, slapping tariffs on foreign ethanol and handing those who blend the fuel into gasoline a tax credit of 45 cents a gallon.
In other words, the government pays the industry for the privilege of selling to a captive market, spending $6 billion in 2009 on the tax credits alone. Without the tax credits, the amount of corn ethanol produced would still increase over the next 10 years, the Agricultural Policy Research Institute at the University of Missouri calculates. Yet the Congressional Budget Office (CBO) estimates that taxpayers still pay $1.78 to replace a gallon of gasoline with its energy equivalent of corn ethanol. The numbers are far worse when put in terms of greenhouse gases. The CBO reports that it costs a staggering $750 to reduce annual greenhouse gas emissions one ton by burning corn ethanol - and the CBO makes some generous assumptions to get even that figure.
Yet because the policy directs cash to farm states that are rich in political influence, lawmakers are rallying to save this payoff from expiration. Sen. Kent Conrad (D-N.D.), who insisted Sunday that President Obama's fiscal commission didn't go far enough in its deficit reduction plan, has paired with Sen. Charles E. Grassley (R-Iowa) to press for renewal of the gratuitous corn ethanol tax credit and the ethanol tariff through 2015. Typically, the farm lobby has won out on such issues. But this year it's meeting stronger than usual opposition from a bloc of fiscal conservatives and environmentalists, backed by such strange bedfellows as Tea Party organizer FreedomWorks and ultra-liberal pressure group MoveOn.org - even Sen. Jim DeMint (R-S.C.) and Al Gore.
An extension of the corn ethanol provisions shouldn't be part of the deal that's emerging on the Bush tax cuts, and if it is, senators should remove it from the resulting legislation. While they're at it, lawmakers should reconsider their blending mandate, too. There are far better ways to address oil dependence and greenhouse emissions.
Tuesday, December 7, 2010
It Just Ain't Me
Read what Jame Kwak (13 Bankers) has to say and compare it with my whine.
Tax Cut Ironies
By James Kwak
From The New York Times:
“Congressional Republicans in recent days have blocked efforts by Democrats to extend the jobless aid, saying they would insist on offsetting the $56 billion cost with spending cuts elsewhere.”
Instead, as it turns out, they agreed to offset the cost with tax cuts elsewhere.
Still, though, I place the blame for this one squarely on the White House. The Republicans are just doing what Republicans do: arguing for lower government spending and lower taxes. The fact that they justify the former by saying it will cut the deficit and the latter by saying it will stimulate the economy (when you could just as easily switch the arguments and make them point the other way) is just a detail.
As I’ve said before, the Bush tax cuts were always bad policy.* After the last election, President Obama will be able to accomplish precious little. But he could easily have killed the Bush tax cuts and thereby done more good for our nation’s fiscal situation than anyone will be in a position to do for many years to come. Killing the tax cuts would alone reduce the national debt by roughly as much as the deficit commission’s entire proposal. And killing the tax cuts was the path of least resistance. Obama could have done it by doing nothing. Or he could have done it by taking a strong negotiating position and being willing to walk away from the table.
(Note to Barack: If you want to win a negotiation, you have to be willing to walk away. Take my daughter. If I threaten her with a three-minute timeout, she says, “I want a timeout for eight hours!” If I threaten to take away an episode of Dinosaur Train, she says, “I don’t want to watch Dinosaur Train ever again!” You have two daughters, right?)
Instead, we got a two-year extension as part of an overall package that adds $900 billion to the debt.
Now, Ezra Klein, whom I agree with more often than not, says, “the White House and Congress are right to make the deficit less of a priority than economic recovery.” Well, sure, in principle. But this deal isn’t justified by that principle for two reasons. First, as Paul Krugman pointed out, a two-year extension will reduce the unemployment rate by 0.2 to 0.6 percentage points. Yes, that’s hundreds of thousands of jobs, but it’s at a cost of hundreds of billions of dollars. And at the current course and speed, those hundreds of billions of dollars will, in the long term, get taken away from the middle class in lower Social Security and Medicare benefits. The reason it’s just 0.2-0.6 percent is that tax cuts, once again, are a lousy form of stimulus. According to Mark Zandi (via Menzie Chinn), the multiplier for the Bush income tax cuts is 0.29 and the multiplier for accelerated depreciation is 0.27.
Second, this can no longer be considered a two-year tax cut. This year, the Democrats gave in to the framing that letting the cuts expire would be a tax increase. President Obama has already nailed himself to the cross of “stop[ping] middle-class taxes from going up.” With that on his resume, how is he going to flip-flop and let those taxes go up in 2012? He won’t win a vote to cut taxes just for the middle class with fewer Democrats in Congress than he has now. So if he wants to preserve the middle-class tax cuts, he’ll have to compromise again.
And Obama will no longer be able to say the tax cuts were a mistake made by President Bush that he was letting expire. Now he owns the mistake. This is a long way of saying that this isn’t a two-year tax cut to stimulate the economy (with a 0.29 multiplier, remember) in a recession. It’s a wedge of about 2 percent of GDP that is part of the structural deficit for the foreseeable future, just like the AMT patch that magically keeps getting extended.
Sure, they might not be extended in 2012. But I fail to see how the politics will be any different. “I protected you from a tax increase in 2010, but I’m raising your taxes now because . . . because . . . suddenly I care about the deficit . . . and we’re not in a recession anymore.” Yeah, right. By comparison, the message this time would have been easy: “I and the Democrats in Congress supported a bill to keep your taxes low. The Republicans blocked it because they insisted on tax cuts for the rich. Blame them.” So the tax cuts might not be extended, but you could also say that Congress will vote to raise taxes. Not likely in either case.
So finally, you have to ask, what does Barack Obama want? Does he really like most of the Bush tax cuts? Does he really think the bulk of the tax cuts are good for the country, and that going along with the tax cuts in the top brackets is a reasonable price to pay to keep them?
* How bad? Here’s one example. In order to pass the bill using reconciliation–the first time reconciliation was ever used to pass a deficit-increasing bill–they had to limit the ten-year cost of the bill. One way they did that was by adding a provision that allows upper-income taxpayers, in 2010, to convert their traditional IRAs to Roth IRAs. This is unambiguously good for upper-income taxpayers, because it’s optional, so you can decide if you want to do it. So in the long term, it will result in lower tax revenues. But it artificially juices tax revenues in 2010, because when you convert you have to pay tax on the conversion amount now. That increased the amount by which they could cut taxes elsewhere in the bill. So, as my tax casebook puts it, the bill uses tax cuts for the rich to fund more tax cuts for the rich.
Tax Cut Ironies
By James Kwak
From The New York Times:
“Congressional Republicans in recent days have blocked efforts by Democrats to extend the jobless aid, saying they would insist on offsetting the $56 billion cost with spending cuts elsewhere.”
Instead, as it turns out, they agreed to offset the cost with tax cuts elsewhere.
Still, though, I place the blame for this one squarely on the White House. The Republicans are just doing what Republicans do: arguing for lower government spending and lower taxes. The fact that they justify the former by saying it will cut the deficit and the latter by saying it will stimulate the economy (when you could just as easily switch the arguments and make them point the other way) is just a detail.
As I’ve said before, the Bush tax cuts were always bad policy.* After the last election, President Obama will be able to accomplish precious little. But he could easily have killed the Bush tax cuts and thereby done more good for our nation’s fiscal situation than anyone will be in a position to do for many years to come. Killing the tax cuts would alone reduce the national debt by roughly as much as the deficit commission’s entire proposal. And killing the tax cuts was the path of least resistance. Obama could have done it by doing nothing. Or he could have done it by taking a strong negotiating position and being willing to walk away from the table.
(Note to Barack: If you want to win a negotiation, you have to be willing to walk away. Take my daughter. If I threaten her with a three-minute timeout, she says, “I want a timeout for eight hours!” If I threaten to take away an episode of Dinosaur Train, she says, “I don’t want to watch Dinosaur Train ever again!” You have two daughters, right?)
Instead, we got a two-year extension as part of an overall package that adds $900 billion to the debt.
Now, Ezra Klein, whom I agree with more often than not, says, “the White House and Congress are right to make the deficit less of a priority than economic recovery.” Well, sure, in principle. But this deal isn’t justified by that principle for two reasons. First, as Paul Krugman pointed out, a two-year extension will reduce the unemployment rate by 0.2 to 0.6 percentage points. Yes, that’s hundreds of thousands of jobs, but it’s at a cost of hundreds of billions of dollars. And at the current course and speed, those hundreds of billions of dollars will, in the long term, get taken away from the middle class in lower Social Security and Medicare benefits. The reason it’s just 0.2-0.6 percent is that tax cuts, once again, are a lousy form of stimulus. According to Mark Zandi (via Menzie Chinn), the multiplier for the Bush income tax cuts is 0.29 and the multiplier for accelerated depreciation is 0.27.
Second, this can no longer be considered a two-year tax cut. This year, the Democrats gave in to the framing that letting the cuts expire would be a tax increase. President Obama has already nailed himself to the cross of “stop[ping] middle-class taxes from going up.” With that on his resume, how is he going to flip-flop and let those taxes go up in 2012? He won’t win a vote to cut taxes just for the middle class with fewer Democrats in Congress than he has now. So if he wants to preserve the middle-class tax cuts, he’ll have to compromise again.
And Obama will no longer be able to say the tax cuts were a mistake made by President Bush that he was letting expire. Now he owns the mistake. This is a long way of saying that this isn’t a two-year tax cut to stimulate the economy (with a 0.29 multiplier, remember) in a recession. It’s a wedge of about 2 percent of GDP that is part of the structural deficit for the foreseeable future, just like the AMT patch that magically keeps getting extended.
Sure, they might not be extended in 2012. But I fail to see how the politics will be any different. “I protected you from a tax increase in 2010, but I’m raising your taxes now because . . . because . . . suddenly I care about the deficit . . . and we’re not in a recession anymore.” Yeah, right. By comparison, the message this time would have been easy: “I and the Democrats in Congress supported a bill to keep your taxes low. The Republicans blocked it because they insisted on tax cuts for the rich. Blame them.” So the tax cuts might not be extended, but you could also say that Congress will vote to raise taxes. Not likely in either case.
So finally, you have to ask, what does Barack Obama want? Does he really like most of the Bush tax cuts? Does he really think the bulk of the tax cuts are good for the country, and that going along with the tax cuts in the top brackets is a reasonable price to pay to keep them?
* How bad? Here’s one example. In order to pass the bill using reconciliation–the first time reconciliation was ever used to pass a deficit-increasing bill–they had to limit the ten-year cost of the bill. One way they did that was by adding a provision that allows upper-income taxpayers, in 2010, to convert their traditional IRAs to Roth IRAs. This is unambiguously good for upper-income taxpayers, because it’s optional, so you can decide if you want to do it. So in the long term, it will result in lower tax revenues. But it artificially juices tax revenues in 2010, because when you convert you have to pay tax on the conversion amount now. That increased the amount by which they could cut taxes elsewhere in the bill. So, as my tax casebook puts it, the bill uses tax cuts for the rich to fund more tax cuts for the rich.
Obama Fails America Again
Today, Barak Obama betrayed America again. First, he back down on Afghanistan. Then on Health Care and then on Financial Reform.
Now he has agreed to give the richest Americans even more money rather than use the money to reduce the deficit.
In doing this odious act, he betrayed America in two distinct ways.
1) He increased the distortion in wealth distribution in the U.S. The growing disparity between the richest 1% of Americans and all of the rest of us is a serious threat to this nation. He doesn't seem to understand how his actions affect this problem, or maybe he is now so rich he doesn't give a damn.
2) The money he gave to the richest Americans could have been used to reduce the deficit. Again, he doesn't seem to understand just how serious this problem is actually. The day the Chinese stop lending us money is the day he will get the message, but by then it will be too lates.
3) He claims he traded all of this, and more, for a 2% reduction in Social Security wage deductions. For a typical American family, that comes to about $20 a week. What a fraud!!
In his press conference today, Obama said he did this crap because he refused to "play games with the American people."
What the hell does he think he is doing anyway???
There is a growing consensus (and that includes me) that the only way Obama gets a second term is if the Republicans nominate Sarah Palin.
How did he get so tone deaf?
Now he has agreed to give the richest Americans even more money rather than use the money to reduce the deficit.
In doing this odious act, he betrayed America in two distinct ways.
1) He increased the distortion in wealth distribution in the U.S. The growing disparity between the richest 1% of Americans and all of the rest of us is a serious threat to this nation. He doesn't seem to understand how his actions affect this problem, or maybe he is now so rich he doesn't give a damn.
2) The money he gave to the richest Americans could have been used to reduce the deficit. Again, he doesn't seem to understand just how serious this problem is actually. The day the Chinese stop lending us money is the day he will get the message, but by then it will be too lates.
3) He claims he traded all of this, and more, for a 2% reduction in Social Security wage deductions. For a typical American family, that comes to about $20 a week. What a fraud!!
In his press conference today, Obama said he did this crap because he refused to "play games with the American people."
What the hell does he think he is doing anyway???
There is a growing consensus (and that includes me) that the only way Obama gets a second term is if the Republicans nominate Sarah Palin.
How did he get so tone deaf?
Monday, December 6, 2010
Connect The Dots
There are two large deficit reduction proposals floating around Washington now. One comes from the Bowles/Simpson cabal and one from a group led by Alice Rifkin.
Neither of those plans appear to deal with two facts of life.
1)U.S. companies are posting record profits. (See last post for numbers.)
2)According to the U.S. Accountability Office, between 1998 and 2005 (latest data available), two-thirds (67%) of all corporations operating in the U.S. paid NO taxes whatsoever. Read that again. No taxes, none, nada, whatsoever!! How much did you pay?
Neither of those plans appear to deal with two facts of life.
1)U.S. companies are posting record profits. (See last post for numbers.)
2)According to the U.S. Accountability Office, between 1998 and 2005 (latest data available), two-thirds (67%) of all corporations operating in the U.S. paid NO taxes whatsoever. Read that again. No taxes, none, nada, whatsoever!! How much did you pay?
Subscribe to:
Posts (Atom)