The debate over prescription drug pricing is a great testament to how deeply propaganda can affect people’s thinkings. The NYT had a piece on lowering prescription drug prices by Jay Hancock, a reporter for Kaiser News Service.
Hancock runs through a range of mechanisms that the government can pursue to make drug prices lower. Incredibly, he never mentions what would almost certainly be the most simple route: stop making drugs expensive with patent monopolies.
Drugs are almost invariably cheap to manufacture. The reason they are expensive is that we give drug companies patent monopolies and related protections which severely restrict competition in the market. We will spend roughly $450 billion this year on prescription drugs. If drugs were sold in a free market, without patents or related protections, these drugs would almost certainly cost less than $80 billion. The difference of $370 billion is a bit less than 2.0 percent of GDP, it is more than five times the annual food stamp budget. In other words, it is real money.
We do have to pay for the research, but there are other more efficient mechanisms, most obviously direct government funding. We currently spend more than $30 billion a year on research through the National Institutes of Health. If we tripled this figure we could likely replace the $50 billion that the industry claims to spend on research each year. (A mechanism for funding is described in my book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer [it’s free].)
Anyhow, it is incredible that the idea of not having the government grant the monopolies that make drugs expensive in the first place never even made Hancock’s list. This is not a new idea, it has been pushed by Nobel Prize-winning economist Joe Stiglitz, cited as a route for future funding by a UN panel, and even considered seriously by an OECD meeting on the topic. It should at least warrant a few sentences in what is supposed to a far-reaching NYT piece on drug pricing.
The debate over prescription drug pricing is a great testament to how deeply propaganda can affect people’s thinkings. The NYT had a piece on lowering prescription drug prices by Jay Hancock, a reporter for Kaiser News Service.
Hancock runs through a range of mechanisms that the government can pursue to make drug prices lower. Incredibly, he never mentions what would almost certainly be the most simple route: stop making drugs expensive with patent monopolies.
Drugs are almost invariably cheap to manufacture. The reason they are expensive is that we give drug companies patent monopolies and related protections which severely restrict competition in the market. We will spend roughly $450 billion this year on prescription drugs. If drugs were sold in a free market, without patents or related protections, these drugs would almost certainly cost less than $80 billion. The difference of $370 billion is a bit less than 2.0 percent of GDP, it is more than five times the annual food stamp budget. In other words, it is real money.
We do have to pay for the research, but there are other more efficient mechanisms, most obviously direct government funding. We currently spend more than $30 billion a year on research through the National Institutes of Health. If we tripled this figure we could likely replace the $50 billion that the industry claims to spend on research each year. (A mechanism for funding is described in my book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer [it’s free].)
Anyhow, it is incredible that the idea of not having the government grant the monopolies that make drugs expensive in the first place never even made Hancock’s list. This is not a new idea, it has been pushed by Nobel Prize-winning economist Joe Stiglitz, cited as a route for future funding by a UN panel, and even considered seriously by an OECD meeting on the topic. It should at least warrant a few sentences in what is supposed to a far-reaching NYT piece on drug pricing.
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I have a hot tip for Washington Post reporters: politicians aren’t always honest. As a result when they say they believe something, it doesn’t mean they really believe it.
This means that the Washington Post likely misled its readers in a discussion of Republican tax cut proposals when it told them:
“Republicans believe the corporate rate cut and other incentives will stimulate economic growth, offsetting the revenue loss.”
The reality is the Washington Post’s reporters have no clue what the Republicans pushing tax cuts really believe about the impact of tax cuts on growth. If these Republicans were at all familiar with with the evidence, they would not expect their tax cuts to have much, if any, positive impact on growth.
So while it is possible that Republicans believe in something that is not true, it is possible that they are deliberately deceiving the public. It is also possible that they have no clue whatsoever about the impact of tax cuts on the economy, just as they have no clue about the impact of their health care proposals. They are simply voting as their funders are telling them to.
Newspapers are supposed to report the facts, not make them up, as the Post is doing here.
I have a hot tip for Washington Post reporters: politicians aren’t always honest. As a result when they say they believe something, it doesn’t mean they really believe it.
This means that the Washington Post likely misled its readers in a discussion of Republican tax cut proposals when it told them:
“Republicans believe the corporate rate cut and other incentives will stimulate economic growth, offsetting the revenue loss.”
The reality is the Washington Post’s reporters have no clue what the Republicans pushing tax cuts really believe about the impact of tax cuts on growth. If these Republicans were at all familiar with with the evidence, they would not expect their tax cuts to have much, if any, positive impact on growth.
So while it is possible that Republicans believe in something that is not true, it is possible that they are deliberately deceiving the public. It is also possible that they have no clue whatsoever about the impact of tax cuts on the economy, just as they have no clue about the impact of their health care proposals. They are simply voting as their funders are telling them to.
Newspapers are supposed to report the facts, not make them up, as the Post is doing here.
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Paul Krugman does a nice job dissecting the logic, or lack thereof, of Republican efforts to dismantle Obamacare. He points out that one of the games played by the Republicans is claiming that the Graham-Cassidy bill would increase Medicaid spending. It makes this claim based on the fact that nominal Medicaid spending would increase under the bill. While this is true, the bill would hugely cut spending compared with the baseline which factors in both projected increases in the number of people covered and the medical cost inflation.
It might be harder to get away with this cheap trick if papers like the New York Times used budget reporting to actually inform readers. As it is, budget reporting usually doesn’t put numbers in any context, which makes them absolutely meaningless to the vast majority of readers. This point was acknowledged a few years back by both Margaret Sullivan and David Leonhardt, who were at the time the NYT’s public editor and Washington editor.
In spite of the acknowledgment that its budget reporting does nothing to inform the vast majority of its readers, the paper has done nothing to change the practice. (Does the paper really find it hard to find reporters who know basic arithmetic?) As a result, it is much easier for Republicans to lie when they want to do something like massively cutting back Medicaid spending.
Paul Krugman does a nice job dissecting the logic, or lack thereof, of Republican efforts to dismantle Obamacare. He points out that one of the games played by the Republicans is claiming that the Graham-Cassidy bill would increase Medicaid spending. It makes this claim based on the fact that nominal Medicaid spending would increase under the bill. While this is true, the bill would hugely cut spending compared with the baseline which factors in both projected increases in the number of people covered and the medical cost inflation.
It might be harder to get away with this cheap trick if papers like the New York Times used budget reporting to actually inform readers. As it is, budget reporting usually doesn’t put numbers in any context, which makes them absolutely meaningless to the vast majority of readers. This point was acknowledged a few years back by both Margaret Sullivan and David Leonhardt, who were at the time the NYT’s public editor and Washington editor.
In spite of the acknowledgment that its budget reporting does nothing to inform the vast majority of its readers, the paper has done nothing to change the practice. (Does the paper really find it hard to find reporters who know basic arithmetic?) As a result, it is much easier for Republicans to lie when they want to do something like massively cutting back Medicaid spending.
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The Washington Post misled readers in its discussion of Republican claims that its tax cuts will lead to a large boost to GDP growth. The piece quotes Kent Smetters, an economist at the University of Pennsylvania, as saying the Republican growth projections did not take account of debt. This is wrong.
The real issue is whether the projections take account of how close the U.S. economy is to its potential level of output. If the current level of demand is near the point where the economy is hitting serious supply constraints, then the Republican tax cuts will not have much impact on growth. On the other hand, if there is still considerable excess capacity in the form of unemployed and underemployed workers, then it may be possible to increase growth by increasing demand, such as the tax cuts.
Debt is a meaningless concept in this context. Debt would only matter insofar as the flow of income in the form of interest payments on bonds create a source of demand that pull resources away from other uses. With interest payments near a post-war low as a share of GDP, this should not be a major issue for the foreseeable future.
Also, direct debt is only one way in which the government commits flows of future income. Government-granted patent and copyright monopolies are actually much more important in determining future flows of income than debt. In the case of prescription drugs alone, patent and related protections raise the price of drugs by close to $370 billion a year over the free market price, a bit less than 2.0 percent of GDP. This is considerably larger than the current interest burden of the debt, which is approximately 1.6 percent of GDP, net of money refunded from the Federal Reserve Board to the Treasury.
These monopolies are effectively like privately collected taxes. The government grants them as a way to pay for research and creative work. If anyone were really concerned about the burden created by government debt, they would factor in the cost of these monopolies to the public. The decision not to include the costs from patent and copyright monopolies in assessments of the debt makes for a fundamentally dishonest discussion of the issue.
The Washington Post misled readers in its discussion of Republican claims that its tax cuts will lead to a large boost to GDP growth. The piece quotes Kent Smetters, an economist at the University of Pennsylvania, as saying the Republican growth projections did not take account of debt. This is wrong.
The real issue is whether the projections take account of how close the U.S. economy is to its potential level of output. If the current level of demand is near the point where the economy is hitting serious supply constraints, then the Republican tax cuts will not have much impact on growth. On the other hand, if there is still considerable excess capacity in the form of unemployed and underemployed workers, then it may be possible to increase growth by increasing demand, such as the tax cuts.
Debt is a meaningless concept in this context. Debt would only matter insofar as the flow of income in the form of interest payments on bonds create a source of demand that pull resources away from other uses. With interest payments near a post-war low as a share of GDP, this should not be a major issue for the foreseeable future.
Also, direct debt is only one way in which the government commits flows of future income. Government-granted patent and copyright monopolies are actually much more important in determining future flows of income than debt. In the case of prescription drugs alone, patent and related protections raise the price of drugs by close to $370 billion a year over the free market price, a bit less than 2.0 percent of GDP. This is considerably larger than the current interest burden of the debt, which is approximately 1.6 percent of GDP, net of money refunded from the Federal Reserve Board to the Treasury.
These monopolies are effectively like privately collected taxes. The government grants them as a way to pay for research and creative work. If anyone were really concerned about the burden created by government debt, they would factor in the cost of these monopolies to the public. The decision not to include the costs from patent and copyright monopolies in assessments of the debt makes for a fundamentally dishonest discussion of the issue.
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The NYT criticized the Republican tax-cutting plans. In particular, it focuses on the plan to apply a 15 percent or 25 percent corporate tax rate for all business pass-through income. This is in place of the current individual income tax rate, which could be as high as 39.6 percent.
The editorial argues that this would be a huge tax break for partners in hedge funds and real estate developers (like Donald Trump), who typically get their income through pass-through corporations. While this is true, it is only part of the story.
Allowing owners of pass-through corporations to just pay the corporate tax rate instead of the individual income tax rate would be a huge loophole that every higher paid person would rush to take advantage of. For example, a highly paid medical specialist would reorganize their business as a pass-through corporation to pay a lower tax rate. The same would be true of other professionals.
In effect, this would allow the vast majority of high-income individuals to pay a lower tax rate than school teachers or firefighters while creating an enormous tax shelter industry. This is truly awful from the standpoint of policy (increasing inequality while reducing efficiency), but if the point is to give more money to the rich, it gets the job done.
The NYT criticized the Republican tax-cutting plans. In particular, it focuses on the plan to apply a 15 percent or 25 percent corporate tax rate for all business pass-through income. This is in place of the current individual income tax rate, which could be as high as 39.6 percent.
The editorial argues that this would be a huge tax break for partners in hedge funds and real estate developers (like Donald Trump), who typically get their income through pass-through corporations. While this is true, it is only part of the story.
Allowing owners of pass-through corporations to just pay the corporate tax rate instead of the individual income tax rate would be a huge loophole that every higher paid person would rush to take advantage of. For example, a highly paid medical specialist would reorganize their business as a pass-through corporation to pay a lower tax rate. The same would be true of other professionals.
In effect, this would allow the vast majority of high-income individuals to pay a lower tax rate than school teachers or firefighters while creating an enormous tax shelter industry. This is truly awful from the standpoint of policy (increasing inequality while reducing efficiency), but if the point is to give more money to the rich, it gets the job done.
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Germany’s official measure of unemployment is constructed differently than the U.S. measure. They count people working part-time who want full-time jobs as being unemployed. In contrast, these people are counted in the United States as being employed. As a result, the official measure is not directly comparable to the U.S. measure. Fortunately, the OECD constructs a “harmonized” unemployment rate which essentially applies the U.S. methodology to the unemployment measures for other countries.
Since the OECD measure is readily available, it is difficult to see why the NYT used the German official measure in an article on growing poverty and inequality in Germany. The piece tells readers that Germany’s unemployment rate is 5.7 percent. This is the official German measure. The unemployment rate using the OECD’s harmonized measure is 3.7 percent. Since few readers are likely to be familiar with the methodology used to construct the German measure, using the 5.7 percent figure is misleading to them.
Germany’s official measure of unemployment is constructed differently than the U.S. measure. They count people working part-time who want full-time jobs as being unemployed. In contrast, these people are counted in the United States as being employed. As a result, the official measure is not directly comparable to the U.S. measure. Fortunately, the OECD constructs a “harmonized” unemployment rate which essentially applies the U.S. methodology to the unemployment measures for other countries.
Since the OECD measure is readily available, it is difficult to see why the NYT used the German official measure in an article on growing poverty and inequality in Germany. The piece tells readers that Germany’s unemployment rate is 5.7 percent. This is the official German measure. The unemployment rate using the OECD’s harmonized measure is 3.7 percent. Since few readers are likely to be familiar with the methodology used to construct the German measure, using the 5.7 percent figure is misleading to them.
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It is more than a bit bizarre that no one seems to pay any attention to the budgetary implications of the Fed’s decision to start selling off its assets. The impact is potentially fairly large in the scheme of things, possibly as much as $600 billion over the next decade. This is equal to roughly 0.5 percent of GDP. It’s pretty much the same number at stake in the various Obamacare repeal efforts.
For some reason, none, as in absolutely zero, of the news stories I have seen or heard about the asset sales mentioned its impact on the budget. It was the same story back in June when the Fed raised the issue at its meeting that month.
It’s a bit hard to understand how reporters at the New York Times, Washington Post, NPR, and elsewhere can independently decide that adding hundreds of billions of dollars to the budget deficit over the next decade is not worth mentioning. (The basic story can be found here.)
It is more than a bit bizarre that no one seems to pay any attention to the budgetary implications of the Fed’s decision to start selling off its assets. The impact is potentially fairly large in the scheme of things, possibly as much as $600 billion over the next decade. This is equal to roughly 0.5 percent of GDP. It’s pretty much the same number at stake in the various Obamacare repeal efforts.
For some reason, none, as in absolutely zero, of the news stories I have seen or heard about the asset sales mentioned its impact on the budget. It was the same story back in June when the Fed raised the issue at its meeting that month.
It’s a bit hard to understand how reporters at the New York Times, Washington Post, NPR, and elsewhere can independently decide that adding hundreds of billions of dollars to the budget deficit over the next decade is not worth mentioning. (The basic story can be found here.)
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After screaming about budget deficits throughout the Obama administration, Republicans in Congress are apparently planning to pass tax cuts that will substantially increase the budget deficit from the baseline projections. The NYT decided to help them in this effort by printing without comment their absurd claims about growth.
According to the NYT, Senator Ron Johnson, a member of the Budget Committee, said:
“Just going from 2 to 3 percent growth adds about $14 trillion of economic activity over a decade, $2 to $3 trillion of revenue to the federal government.”
This would be like saying that we would have a great baseball team if we just brought Babe Ruth, Lou Gehrig, and Jackie Robinson back to life. Presumably, the NYT would recognize that anyone who said that about baseball was either lying or seriously out of touch with reality and would point this fact out to their readers.
Similarly, the idea that we have a simple route to “just” raise the rate of annual growth from 2 to 3 percent, is equally absurd, but the NYT treated it as though it is a comment that a sane person could have honestly said. That’s great stenography, but truly awful reporting.
After screaming about budget deficits throughout the Obama administration, Republicans in Congress are apparently planning to pass tax cuts that will substantially increase the budget deficit from the baseline projections. The NYT decided to help them in this effort by printing without comment their absurd claims about growth.
According to the NYT, Senator Ron Johnson, a member of the Budget Committee, said:
“Just going from 2 to 3 percent growth adds about $14 trillion of economic activity over a decade, $2 to $3 trillion of revenue to the federal government.”
This would be like saying that we would have a great baseball team if we just brought Babe Ruth, Lou Gehrig, and Jackie Robinson back to life. Presumably, the NYT would recognize that anyone who said that about baseball was either lying or seriously out of touch with reality and would point this fact out to their readers.
Similarly, the idea that we have a simple route to “just” raise the rate of annual growth from 2 to 3 percent, is equally absurd, but the NYT treated it as though it is a comment that a sane person could have honestly said. That’s great stenography, but truly awful reporting.
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