Trade policy is perhaps the most Orwellian area of U.S. politics today. Most formal trade barriers in the form of tariffs or quotas have been eliminated. What usually occupies the time of trade negotiators now is the crafting of regulatory rules dealing with health and safety issues, the environment, and other areas having little direct relationship to trade. Since the parties at the table generally reflect corporate interests, the strategy is to use “trade” agreements to put in place rules that may not be politically possible at the national or sub-national level due to the opposition of consumer, environmental, or labor groups.
In some cases “free trade” talks turn reality on its head, for example negotiating stronger patent and copyright protections. The former is especially the case with drug companies who have been major actors in the trade agreements pushed by the United States for the last quarter century.
The industry’s push for greater protection for its patents or other forms of intellectual property claims, such as data exclusivity, are quite explicitly intended to push up drug prices. The rationale is that higher drug prices will support more research. The extent to which is true, or whether patents are the best way to finance research, is debatable, but the fact that drug companies want government protections to allow them to raise their prices is not.
That is why it is strange that the NYT felt the need to put the word “protectionism” in quotation marks in an article on how people in the United States are increasingly buying drugs from other countries where they are available at much lower prices. The quotation marks were added in the context of presenting the views of a retiree who was saying that he had saved thousands of dollars over the last decade by buying drugs from other countries.
“Dr. Stephen Barrett, a retired psychiatrist and health care advocate in North Carolina, said he has saved thousands of dollars buying medicines from overseas in the past decade. ‘It may be technically illegal, but I don’t think anyone would ever get prosecuted,’ he said, adding that such laws reflected ‘protectionism’ for drug makers.”
It is difficult to see any legitimate reason for including quotation marks around protectionism. The restrictions on importation are clearly a form of protectionism. That is not an arguable point.
Trade policy is perhaps the most Orwellian area of U.S. politics today. Most formal trade barriers in the form of tariffs or quotas have been eliminated. What usually occupies the time of trade negotiators now is the crafting of regulatory rules dealing with health and safety issues, the environment, and other areas having little direct relationship to trade. Since the parties at the table generally reflect corporate interests, the strategy is to use “trade” agreements to put in place rules that may not be politically possible at the national or sub-national level due to the opposition of consumer, environmental, or labor groups.
In some cases “free trade” talks turn reality on its head, for example negotiating stronger patent and copyright protections. The former is especially the case with drug companies who have been major actors in the trade agreements pushed by the United States for the last quarter century.
The industry’s push for greater protection for its patents or other forms of intellectual property claims, such as data exclusivity, are quite explicitly intended to push up drug prices. The rationale is that higher drug prices will support more research. The extent to which is true, or whether patents are the best way to finance research, is debatable, but the fact that drug companies want government protections to allow them to raise their prices is not.
That is why it is strange that the NYT felt the need to put the word “protectionism” in quotation marks in an article on how people in the United States are increasingly buying drugs from other countries where they are available at much lower prices. The quotation marks were added in the context of presenting the views of a retiree who was saying that he had saved thousands of dollars over the last decade by buying drugs from other countries.
“Dr. Stephen Barrett, a retired psychiatrist and health care advocate in North Carolina, said he has saved thousands of dollars buying medicines from overseas in the past decade. ‘It may be technically illegal, but I don’t think anyone would ever get prosecuted,’ he said, adding that such laws reflected ‘protectionism’ for drug makers.”
It is difficult to see any legitimate reason for including quotation marks around protectionism. The restrictions on importation are clearly a form of protectionism. That is not an arguable point.
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The coverage of the legal battles surrounding how Detroit’s pensions would be treated in bankruptcy have generally treated the guarantee of public employee pensions in the Michigan state constitution as somewhat of a joke that needs to be cast aside given Detroit’s dire circumstances. The basis for the humor is less than obvious.
When the state of Michigan put a guarantee into its constitution it was presumably sending a message to both its public sector workers and its potential creditors. The pensions would have a prior claim on state and local government assets before other creditors. Workers put in their time with this understanding and presumably creditors made loans to Detroit’s city government with the same understanding.
The question now is often posed as to whether this priority can carry over into federal bankruptcy court, which does not award pensions complete priority over other creditors. (In other words, bondholders do not have to allow pensions to be paid in full before they can get partial collection.) The argument presented in the media is that federal law trumps state law or a state constitution, therefore the bankruptcy judge is free to cut pensions to partially payoff other creditors.
However, there is a prior issue. If public employee pensions cannot be guaranteed protection in federal bankruptcy court, can the city of Detroit declare bankruptcy? The city is a creation of the state. (This is especially true at present with Detroit being run by a city manager appointed by the governor.) Certainly the state of Michigan can’t embark on a course of action that would lead it to violate its own constitution, so how can a city within the state?
There are entities that do not have the option of filing for bankruptcy in federal court, like state governments. It is possible that Detroit may also not have this option if it could result in a violation of the state’s constitution.
Okay, that’s enough playing at lawyer for the day. It just doesn’t seem like the issue of protecting pensions is so obviously crazy and informed investors should have known about this clause in the Michigan constitution when they decided to lend the city money.
The coverage of the legal battles surrounding how Detroit’s pensions would be treated in bankruptcy have generally treated the guarantee of public employee pensions in the Michigan state constitution as somewhat of a joke that needs to be cast aside given Detroit’s dire circumstances. The basis for the humor is less than obvious.
When the state of Michigan put a guarantee into its constitution it was presumably sending a message to both its public sector workers and its potential creditors. The pensions would have a prior claim on state and local government assets before other creditors. Workers put in their time with this understanding and presumably creditors made loans to Detroit’s city government with the same understanding.
The question now is often posed as to whether this priority can carry over into federal bankruptcy court, which does not award pensions complete priority over other creditors. (In other words, bondholders do not have to allow pensions to be paid in full before they can get partial collection.) The argument presented in the media is that federal law trumps state law or a state constitution, therefore the bankruptcy judge is free to cut pensions to partially payoff other creditors.
However, there is a prior issue. If public employee pensions cannot be guaranteed protection in federal bankruptcy court, can the city of Detroit declare bankruptcy? The city is a creation of the state. (This is especially true at present with Detroit being run by a city manager appointed by the governor.) Certainly the state of Michigan can’t embark on a course of action that would lead it to violate its own constitution, so how can a city within the state?
There are entities that do not have the option of filing for bankruptcy in federal court, like state governments. It is possible that Detroit may also not have this option if it could result in a violation of the state’s constitution.
Okay, that’s enough playing at lawyer for the day. It just doesn’t seem like the issue of protecting pensions is so obviously crazy and informed investors should have known about this clause in the Michigan constitution when they decided to lend the city money.
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Both the Post and the NYT have front page articles on the problems in the computer system that allows people to sign up for health care insurance through the federal exchange. It is worth noting that 14 states, including large ones like New York and California, have state run exchanges which have worked relatively well. The fact that people in other states are having difficulty signing up for insurance is the result of the decision of political leaders in those states not to establish their own exchanges. In other words, the problems are due to the fact that state leaders opted not to take responsibility themselves for setting up a well working system.
Both the Post and the NYT have front page articles on the problems in the computer system that allows people to sign up for health care insurance through the federal exchange. It is worth noting that 14 states, including large ones like New York and California, have state run exchanges which have worked relatively well. The fact that people in other states are having difficulty signing up for insurance is the result of the decision of political leaders in those states not to establish their own exchanges. In other words, the problems are due to the fact that state leaders opted not to take responsibility themselves for setting up a well working system.
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That’s what David Cameron claimed according to the New York Times. Of course he didn’t describe the gains as 0.08 percent of GDP, he referred to the gains as 1.3 billion pounds, which probably sounds like a bigger deal to most people. People in the UK will also have to wait to see this dividend, since trade deals are typically phased in over a number of years. The full effect may not be seen for ten years or more.
That’s what David Cameron claimed according to the New York Times. Of course he didn’t describe the gains as 0.08 percent of GDP, he referred to the gains as 1.3 billion pounds, which probably sounds like a bigger deal to most people. People in the UK will also have to wait to see this dividend, since trade deals are typically phased in over a number of years. The full effect may not be seen for ten years or more.
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That was the implication of a claim by Bob Laszewski, a health policy analyst, interviewed on Morning Edition. Laszewski told listeners that the problems with the mechanics of the exchanges could be a problem for insurers:
“They’re very worried about only sick people showing up for coverage, because only sick people are willing to go through the gauntlet.”
If it turns out that the exchanges in the states run by the federal government produce such a serious skewing of applicants that it becomes unprofitable for insurers, then it’s possible that these states would end up without insurance provided through the exchanges. This would be an interesting outcome since it would mean that the states that refused to set up their own exchanges will have succeeded in denying their residents of the benefits of the Affordable Care Act. On the other hand, states like California, New York, and Kentucky, which did set up their own exchanges, seem to be signing up people with few problems, so presumably the insurance markets in these states will work as expected.
As a practical matter, it really doesn’t matter if the people who sign up in the first few weeks are skewed toward the sicker segment of the population. It will only matter if this continues to be the case through 2014.
That was the implication of a claim by Bob Laszewski, a health policy analyst, interviewed on Morning Edition. Laszewski told listeners that the problems with the mechanics of the exchanges could be a problem for insurers:
“They’re very worried about only sick people showing up for coverage, because only sick people are willing to go through the gauntlet.”
If it turns out that the exchanges in the states run by the federal government produce such a serious skewing of applicants that it becomes unprofitable for insurers, then it’s possible that these states would end up without insurance provided through the exchanges. This would be an interesting outcome since it would mean that the states that refused to set up their own exchanges will have succeeded in denying their residents of the benefits of the Affordable Care Act. On the other hand, states like California, New York, and Kentucky, which did set up their own exchanges, seem to be signing up people with few problems, so presumably the insurance markets in these states will work as expected.
As a practical matter, it really doesn’t matter if the people who sign up in the first few weeks are skewed toward the sicker segment of the population. It will only matter if this continues to be the case through 2014.
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That’s what readers of this AP interview with Greenspan must be asking. Greenspan was asked about the crisis caused by the collapse of the housing bubble (inaccurately referred to in the interview as the “financial crisis). He responded by saying:
“A: The problem is that we didn’t know about it [the growth of the subprime market]. It was a big surprise to me how big the subprime market had gotten by 2005. I was told very little of the problems were under Fed supervision. But still, if we had seen something big, we would have made a big fuss about it. But we didn’t. We were wrong. Could we have caught it? I don’t know.”
The correct response from the interviewer should have been an astonished, “you are claiming that you did not know of the enormous growth of the subprime market by 2005? It was widely talked about in the business press and documented in a number of different data series. How could the Fed chair possibly have missed the explosion of exotic mortgages?”
It is preposterous that Greenspan would make such a claim. Everyone who was paying any attention to the housing market was joking about the proliferation of “NINJA” loans, which meant no income, no jobs, no assets. The Fed chair really didn’t have a clue of this?
His professed ignorance on this topic is astounding. If he really missed the flood of bad mortgages that was propelling the unprecedented rise in house prices then he was not doing his job. He should repay the taxpayers his salary for these years, he obviously did not work for it.
That’s what readers of this AP interview with Greenspan must be asking. Greenspan was asked about the crisis caused by the collapse of the housing bubble (inaccurately referred to in the interview as the “financial crisis). He responded by saying:
“A: The problem is that we didn’t know about it [the growth of the subprime market]. It was a big surprise to me how big the subprime market had gotten by 2005. I was told very little of the problems were under Fed supervision. But still, if we had seen something big, we would have made a big fuss about it. But we didn’t. We were wrong. Could we have caught it? I don’t know.”
The correct response from the interviewer should have been an astonished, “you are claiming that you did not know of the enormous growth of the subprime market by 2005? It was widely talked about in the business press and documented in a number of different data series. How could the Fed chair possibly have missed the explosion of exotic mortgages?”
It is preposterous that Greenspan would make such a claim. Everyone who was paying any attention to the housing market was joking about the proliferation of “NINJA” loans, which meant no income, no jobs, no assets. The Fed chair really didn’t have a clue of this?
His professed ignorance on this topic is astounding. If he really missed the flood of bad mortgages that was propelling the unprecedented rise in house prices then he was not doing his job. He should repay the taxpayers his salary for these years, he obviously did not work for it.
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Simon Nixon appears nearly ecstatic over the what he terms the “strong recovery” in the United Kingdom. The problem is his notion of strong recovery doesn’t fit the usual definition of the term.
According to the new upgraded growth projections from the I.M.F., which he highlights, the U.K. is projected to see 1.6 percent year over year growth in 2013. That would leave per capita income in 2013 about 6.0 percent below its 2007 level. The new upgraded projections show per capita income in the UK getting back to its 2007 level in 2018. Eleven years of zero rise in per capita GDP is certainly a new definition of success.
Even worse, this recovery is almost certainly not sustainable since it is being driven by a re-invigoration of the U.K.’s housing bubble. House prices in the U.K. are on average about 60 percent higher than in the U.S.. (In the mid-1990s they were about 10 percent less.) They are again rising rapidly driven in part by a policy of the Cameron government to promote homeownership that seems deliberately designed to re-inflate its housing bubble in advance of the election. Of course after bubble bursts we can expect another grand chorus of “who could have known?“
Simon Nixon appears nearly ecstatic over the what he terms the “strong recovery” in the United Kingdom. The problem is his notion of strong recovery doesn’t fit the usual definition of the term.
According to the new upgraded growth projections from the I.M.F., which he highlights, the U.K. is projected to see 1.6 percent year over year growth in 2013. That would leave per capita income in 2013 about 6.0 percent below its 2007 level. The new upgraded projections show per capita income in the UK getting back to its 2007 level in 2018. Eleven years of zero rise in per capita GDP is certainly a new definition of success.
Even worse, this recovery is almost certainly not sustainable since it is being driven by a re-invigoration of the U.K.’s housing bubble. House prices in the U.K. are on average about 60 percent higher than in the U.S.. (In the mid-1990s they were about 10 percent less.) They are again rising rapidly driven in part by a policy of the Cameron government to promote homeownership that seems deliberately designed to re-inflate its housing bubble in advance of the election. Of course after bubble bursts we can expect another grand chorus of “who could have known?“
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Steven Pearlstein reviewed Alan Greenspan’s new book in the Washington Post today. He is far too generous to the former Maestro.
Pearlstein tells readers:
“Like Fred Astaire on the dance floor, Greenspan glides through the list without the slightest sign he might have had something to do with those developments. What he does remember is that during his watch, the markets and the economy quickly recovered after asset bubbles burst — in 1987 (junk bonds) and again in 2001 (dot-com). Based on those happy outcomes, Greenspan confidently reprises his now widely discredited view that, in the long run, the economy is better off if the government restricts itself to cleaning up after bubbles rather than trying to prevent them from growing too large.”
It is more than a bit silly to compare the bursting of the stock bubble (not dot-com, the market in general was hugely over-valued) and the housing bubble to the 1987 crash. The market had gained a great deal of value in the year of 1987. After the crash in October it quickly began to make back lost ground and by the end of the year the market was at virtually the same level as the beginning of the year. No one thinks that the economy is affected in any significant way by short-terms movements in the market, so there was really nothing to clean up in this story.
The picture was very different following the 2001 crash which resulted in the elimination of roughly $10 trillion in stock bubble wealth, an amount approximately to the economy’s GDP. The economy did not recovery quickly following this crash. While the recession was officially short and mild, ending in 2001, the economy did not begin to create jobs again until the fall of 2003, almost two years after the recession was over. It did not get back the jobs lost in the recession until January of 2005. At the time, this was the longest period without job growth since the Great Depression.
The Fed seemed to take notice of the weakness of the economy keeping the federal funds rate at just 1.0 percent until the summer of 2004. This can be seen as effectively the zero lower bound. No one thinks that there is any great stimulatory effect from dropping the rate from 1.0 percent to zero, which is why people routinely talked about the European Central Bank as being at its zero lower bound even when its overnight interest rate was 1.0 percent.
Of course even when the economy did finally bounce back it was on the back of the housing bubble, which was not a very stable course. In other words, if Greenspan thinks he can point to evidence that the economy recovers quickly from the collapse of asset bubbles it is only because he is very confused about basic economic facts.
Steven Pearlstein reviewed Alan Greenspan’s new book in the Washington Post today. He is far too generous to the former Maestro.
Pearlstein tells readers:
“Like Fred Astaire on the dance floor, Greenspan glides through the list without the slightest sign he might have had something to do with those developments. What he does remember is that during his watch, the markets and the economy quickly recovered after asset bubbles burst — in 1987 (junk bonds) and again in 2001 (dot-com). Based on those happy outcomes, Greenspan confidently reprises his now widely discredited view that, in the long run, the economy is better off if the government restricts itself to cleaning up after bubbles rather than trying to prevent them from growing too large.”
It is more than a bit silly to compare the bursting of the stock bubble (not dot-com, the market in general was hugely over-valued) and the housing bubble to the 1987 crash. The market had gained a great deal of value in the year of 1987. After the crash in October it quickly began to make back lost ground and by the end of the year the market was at virtually the same level as the beginning of the year. No one thinks that the economy is affected in any significant way by short-terms movements in the market, so there was really nothing to clean up in this story.
The picture was very different following the 2001 crash which resulted in the elimination of roughly $10 trillion in stock bubble wealth, an amount approximately to the economy’s GDP. The economy did not recovery quickly following this crash. While the recession was officially short and mild, ending in 2001, the economy did not begin to create jobs again until the fall of 2003, almost two years after the recession was over. It did not get back the jobs lost in the recession until January of 2005. At the time, this was the longest period without job growth since the Great Depression.
The Fed seemed to take notice of the weakness of the economy keeping the federal funds rate at just 1.0 percent until the summer of 2004. This can be seen as effectively the zero lower bound. No one thinks that there is any great stimulatory effect from dropping the rate from 1.0 percent to zero, which is why people routinely talked about the European Central Bank as being at its zero lower bound even when its overnight interest rate was 1.0 percent.
Of course even when the economy did finally bounce back it was on the back of the housing bubble, which was not a very stable course. In other words, if Greenspan thinks he can point to evidence that the economy recovers quickly from the collapse of asset bubbles it is only because he is very confused about basic economic facts.
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You’ve got to love those Washington Post folks. They continuously use both their news and editorial sections to push for cuts to Social Security, Medicare, and disability insurance, running roughshod over journalistic standards and data. But when it comes to the Wall Street boys, they just can’t help but to tear at our heart strings.
Last week the Post ran an editorial bemoaning the “political persecution” of J.P. Morgan. It complained that the government was pursuing a civil case against J.P. Morgan for misrepresenting mortgage backed securities it sold to investors during the housing bubble years:
“Yet roughly 70?percent of the securities at issue were concocted not by JPMorgan but by two institutions, Bear Stearns and Washington Mutual, that it acquired in 2008.”
There are two points worth making on this. First, if 70 percent of the securities came from Bear Stearns and Washington Mutual, then 30 percent came from J.P. Morgan. This means that it could have been involved in misrepresenting tens of billions of dollars in mortgage backed securities sold to investors. We have young men sitting in jail for stealing cars worth a few thousand dollars, but the Post thinks that Wall Street bankers should get a pass on fraudulently passing off tens of billions in bad mortgage backed securities.
The other point is that executives of large corporations like J.P. Morgan are supposed to understand that when they take over a company it can involve both upside and downside risks. On the upside, the company may have product lines or assets that the buyer did not fully appreciate at the time of the acquisition. On the downside, it may have liabilities such as the legal issues being raised in the Justice Department suit.
Believers in free markets would expect that a CEO like J.P. Morgan’s Jamie Dimon understood such risks at the time he chose to buy up Bear Stearns and Washington Mutual. However the Post apparently feels that he and his bank need a special hand from the government to change the terms of the deal after the fact and release J.P. Morgan from the billions of dollars of liabilities they inherited when they bought the banks. Their concern for the desperate plight of the Wall Street bankers is touching, but those of us who believe in free markets must insist on contracts being respected and laws being enforced.
It is worth noting that J.P. Morgan apparently disagreed with the Post and thought that the government had a pretty good case since it settled for $13 billion.
You’ve got to love those Washington Post folks. They continuously use both their news and editorial sections to push for cuts to Social Security, Medicare, and disability insurance, running roughshod over journalistic standards and data. But when it comes to the Wall Street boys, they just can’t help but to tear at our heart strings.
Last week the Post ran an editorial bemoaning the “political persecution” of J.P. Morgan. It complained that the government was pursuing a civil case against J.P. Morgan for misrepresenting mortgage backed securities it sold to investors during the housing bubble years:
“Yet roughly 70?percent of the securities at issue were concocted not by JPMorgan but by two institutions, Bear Stearns and Washington Mutual, that it acquired in 2008.”
There are two points worth making on this. First, if 70 percent of the securities came from Bear Stearns and Washington Mutual, then 30 percent came from J.P. Morgan. This means that it could have been involved in misrepresenting tens of billions of dollars in mortgage backed securities sold to investors. We have young men sitting in jail for stealing cars worth a few thousand dollars, but the Post thinks that Wall Street bankers should get a pass on fraudulently passing off tens of billions in bad mortgage backed securities.
The other point is that executives of large corporations like J.P. Morgan are supposed to understand that when they take over a company it can involve both upside and downside risks. On the upside, the company may have product lines or assets that the buyer did not fully appreciate at the time of the acquisition. On the downside, it may have liabilities such as the legal issues being raised in the Justice Department suit.
Believers in free markets would expect that a CEO like J.P. Morgan’s Jamie Dimon understood such risks at the time he chose to buy up Bear Stearns and Washington Mutual. However the Post apparently feels that he and his bank need a special hand from the government to change the terms of the deal after the fact and release J.P. Morgan from the billions of dollars of liabilities they inherited when they bought the banks. Their concern for the desperate plight of the Wall Street bankers is touching, but those of us who believe in free markets must insist on contracts being respected and laws being enforced.
It is worth noting that J.P. Morgan apparently disagreed with the Post and thought that the government had a pretty good case since it settled for $13 billion.
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