Philippine price caps...

Philippines imposes price caps on drugs

The Philippines will impose price caps on more than two dozen drug products after an offer by manufacturers to cut prices voluntarily fell short of government expectations.

Gloria Macapagal Arroyo, the country’s president, has imposed maximum retail prices on medicines made from five compounds starting in mid-August, according to Robert So, the department of health’s manager for the drugs programme.

The move, which affects products developed mostly by Pfizer of the US, the world’s biggest pharmaceutical company, comes as Mrs Arroyo travels to Washington for a meeting with Barack Obama, US president, this week.

The American Chamber of Commerce of the Philippines said price controls might satisfy popular demand for cheaper drugs in the short run but could hurt the country’s long-term competitive standing and foreign investments.

“The Philippines is already near the bottom of the global competitive rankings. The government should do something to get the country out of the ­bottom,” said Robert Sears, the chamber’s executive director.

This will be the first time since the 1970s, when the Philippines was under martial law, that the government has fixed medicine prices. The move underscores how the popular and political mood in the country has shifted against the free-market policies that many blame for the high price of medicines.

Health officials say the Philippines has the second-highest drug prices in Asia.

The Philippine health authorities’ initial proposal was to put price caps on more than 80 products. Fearing a backlash from the international business community, the president tried to avoid imposing price controls by asking pharmaceutical companies to cut retail prices voluntarily.

The government accepted the bulk of the voluntary price cuts but rejected them for 27 preparations made from five compounds, which would be subject instead to price caps, said Dr So.

Planned mandatory price cuts will cover the anti­hypertensive amlodipine, the antibiotic azithromycin, cholesterol-lowering ator­vastatin and two cancer treatments – doxorubicin and cytarabine.

In a statement, Pfizer said it had made “the largest offering of voluntary reductions by any one company” and was “disappointed to learn that the government did not accept its offer and chose instead to impose the Maximum Retail Price (MRP) on Pfizer’s products”. However, the company promised to co-operate with the government.

Posted via web from Jim Nichols

China reveals big rise in gold reserves

From Financial Times:

China has quietly almost doubled its gold reserves to become the world’s fifth-biggest holder of the precious metal, it emerged on Friday, in a move that signals the revival of bullion after years of fading importance.

Gold rose to a three-week high of more than $910 an ounce after Hu Xiaolian, head of the secretive State Administration of Foreign Exchange, which manages the country’s $1,954bn in foreign exchange reserves, revealed China had 1,054 tonnes of gold, up from 600 tonnes in 2003.

Edward Harrison Guest Post at Naked Capitalism:

The Chinese want to weaken the U.S.'s power derived through its currency status. They have been setting the stage to do so for some time. However, they want to act in a way that benefits them in the short- and long-term. Cutting loose in an uncontrolled fashion now benefits no one with the world economy in dire straits. However, when the economy does right itself, you should see some major changes in the currency markets.

 

 

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"The field of ethics went into crisis just as economics turned to mathematics,"

Gavin Kennedy responds..

From where do they get these muddled ideas? Economics as a subject did not exist in the 18th century, certainly not as Adam Smith wrote about what was called ‘police’ (ensuring subsistence for a society).

Political economy was a title coming into vogue when Smith wrote Wealth Of Nations, which lasted a century until the 1870s when mathematical analysis began to appear. That title too declined in the 20th century.

Smith wrote about ‘commercial society’ and market, but did not mention The Metaphor of an ‘invisible hand’ in his analysis of how markets functioned (Books I and II of Wealth Of Nations). He certainly never said ‘the advent of market economics as being guided by "an invisible hand" ’.

It is, however, true that The Metaphor is ‘often misconstrued as the early progenitor of the Milton Friedman-spawned, market-knows-all Chicago School’.

Indeed, the modern myth of The Metaphor was virtually invented by ‘Chicago’ in the environs of 59th street (see Oscar Lange, 1946 and Paul Samuelson, 1948) and has become universally misconstrued as ‘markets always produce socially beneficial outcomes’, despite the presence of monopolistic practices, protectionist policies, tariffs and non-tariff barriers, pollution, and other negative externalities.

Economics didn’t turn ‘to mathematics’; scholars calling themselves economists ‘turned to mathematics’. Economics did not become ‘a hard science’; its proponents confused ‘hard science’ with economic models that were bereft of the presence of human beings.

And ‘ethics’ did not become ‘a confusion’ – the basic ideas of ethics (partly summarized by Adam Smith in his Moral Sentiments) remain valid.

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Feldstein worried that inflation is looming

and Mark Thoma responds...

Once we begin to recover, there are three ways to reduce the inflationary pressures from the growing money supply. First, we could simply reduce the money supply. How do you do that? By selling bonds to the public. Feldstein's worry is that the Fed has bought so many private sector bonds (and traded for government bonds in the process) that it won't have enough government bonds to reduce the money supply by as much as needed, and nobody will want to purchase the private sector bonds unless the price is very low, or, saying the same thing, the interest rate is [excessively] high. But high interest rates are undesirable so reducing the money supply may be difficult.

The second choice is to raise taxes. It might happen, but my inclination is to say good luck with that. But I hope I'm wrong, and maybe we can make some headway here. Third, we could reduce government spending. I don't know what the administration's goals are as to the size of government over the long-term, so I can't say for sure how much of the stimulus spending is considered to be temporary, and how much is intended to be permanent, e.g. for health care reform. But much of it was sold to the public as temporary, and I expect the administration to make good on that commitment (though "good luck with that" comes to mind again, but I'm still hopeful). If it doesn't, other goals such as health care reform could be compromised.

And speaking of health care reform, that's where the focus needs to be. The budget worries twenty years from now have little to do with the temporary stimulus measures we are taking today, going forward health care costs are the most important issue by far in terms of the budget, and everything else revolves around solving that problem.

So am I worried about inflation? Somewhat, particularly when I hear that the Fed's independence is likely to come under review by congress. Whatever doubts you have about the Fed's commitment and ability to keep inflation low in the future, I have little doubt that congress would choose to monetize the debt when faced with tough choices about how to solve a deficit problem (would congress have done what Volcker did?). I still have faith in the Fed, but as you can see from the government budget constraint above, what the Fed can do is dependent upon the actions of congress. If deficits persist, it could come down to a choice by the Fed to monetize the deficit - and risk inflation - or allow government debt to pile up and risk high interest rates. Volcker chose low inflation over high interest rates when confronted with a similar choice, but it's not completely clear to me at this point what this Fed will do in the same situation, and how much cooperation they can expect from congress in terms of reducing the deficit.

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Contending Obama -- critics of the Presidents economic policy

The prophets of doom

Meet the Cassandras, 14 economists, bloggers, politicians and businesspeople of all political stripes who have become the most strident critics of President Obama's stewardship of the economy.

on tax reform... which is need in a bad way...

Taxing times for tax policy

It makes you wonder if the tax reform thing is serious.

Moreover, recent history on tax reform panels is not encouraging.  You might recall that President Bush also called for tax reform, and his bipartisan panel produced a pretty good plan.  But Bush pretended that some other president had asked for the report and ignored it. 

Obama's also not making this easy.  For one thing, his tax proposals would further gum up the tax code.  For example, his proposal to limit itemized deductions has gotten charities in a tither because they think it would stifle philanthropy. But it’s also really, really complicated.  Think “alternative maximum deduction,” cousin to the dreaded Alternative Minimum Tax.  Not a good idea.

And Obama would add to the hodge podge of credits and deductions that already mystify the tax system. 

Another problem: Obama keeps promising to never, ever raise taxes on 95 percent of Americans.  That pretty much rules out meaningful reform because you can't replace an irrational system with a rational one without changing some people's taxes.  Unless you're talking about major tax cuts (a bad idea), some people's taxes have to go up.

The president and the country have a unique opportunity to rethink taxes.  The stimulus bill passed in January enacted many of Obama's tax campaign promises through 2010, and most of the Bush tax cuts also run through '10.   If we’re very lucky and the economy recovers over the next year, the president will have a truckload of political capital that he could use to enact meaningful reform.

Meanwhile, let’s take a “time out” from unnecessary tax changes while we figure out how to make the tax system simpler, fairer, and maybe even capable of raising enough to pay for government. 

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Bookman on Health Care

Jay Bookman makes a great point... it falls in line with my quandry when debating true classical liberals--in the fact that political reality and their philosophical preferences run head long into one another...

Does the right to life include the right not to die?

Do people have a right to health care? That’s the crucial question — the question that resolves many lesser questions — in the ongoing debate over health care reform.

Personally, I’d say yes, of course people have a right to health care. Others argue no, they don’t.

When it comes down to it, though, I doubt most of the opponents really mean it. They may mean it in a political sense, in an ideological or theoretical sense. But they don’t mean it where it counts, in real life.

In real life, here’s how the question would be put: Are you willing to deny life-saving surgery to Mr. X, a father with two children, on grounds that he or she could not afford it? Would you allow Mr. X to die?

If your answer is yes, then you sincerely don’t believe people have a right to health care.

However, if your answer is no, you would not be willing to deny life-saving care to Mr. X, then at some level you do believe that access to health care is a right and the whole debate changes.

Having crossed the threshhold of whether to treat that person, the question becomes how. How will you pay for it? How will you provide it?

At the moment, we’re trying as a society to straddle the fence. We won’t insure the millions of uninsured, because we haven’t accepted that health care is a right. But we also won’t turn the uninsured away from the emergency room, because we actually sort of do believe that health care is a right.

As a consequence of that indecision, we provide health care to the uninsured in the most expensive, irrational and inefficient means possible. It’s a bad system for everybody involved.

Because we are going to end up paying to save that persons life, shouldn't we have some kind of system to fall back on to control costs? Only those who don't care about government spending would not care about controling those costs... (which would make the other insurance companies more competative as well...)

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Danger... danger... China.... China... the sky is falling!!!

Is China Threatening to Stop "Manipulating" Its Currency?

The NYT reports that China has been buying up fewer dollars in recent months to hold as reserves. It suggests that this may be due to growing concern about the potential loss in value on its dollar holdings. It is worth noting that China must buy up dollars in order to keep down the value of its currency against the dollar. China has maintained a managed exchange rate where the value of the yuan is below the market rate. This reduces the cost of China's imports to people in the United States. This managed exchange rate is exactly what the U.S. government has complained about for years as currency "manipulation." If China decided to stop buying up dollars for whatever reason, then it would mean that China's currency would rise against the dollar. Ostensibly, this is what U.S. government wants to see happen. It is not something that should provoke fear.

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Tea Parties...

Krugman:

So the “tea parties” are to a large extent being run by Freedom Works, which is basically Dick Armey with a lot of Koch-Scaife-Bradley-Olin support.

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Krugman: recovery in sight?

Green shoots and tea leaves

The crisis is over! Or so some are saying.

OK, a couple of things.

One is that even in the Great Depression, things didn’t head down all the time. The chart above, from Eichengreen and O’Rourke, shows world industrial production in months from the previous peak, in the Depression and in the current crisis. Notice that there were several upturns along the way; each of those could have been — and was! — heralded as the beginning of recovery.

Meanwhile, about those great numbers from Wells Fargo: remember, reported profits aren’t a hard number; they involve a lot of assumptions. And at least some analysts are saying that the Wells assumptions about loan losses look, um, odd. Maybe, maybe not; but you do have to say that it would be awfully convenient for banks to sound the all clear right now, just when the question of how tough the Obama administration will really get is hanging in the balance.

All that said, I would not be surprised if GDP growth is positive in the second half of this year, if only because of the inventory bounce. But I will be surprised if the unemployment rate actually turns down.

Posted via web from jimnichols's posterous

Economists See a Rebound in September

WSJ:

Economists in the latest Wall Street Journal forecasting survey expect the recession to end in September, though most say it won't be until the second half of 2010 that the economy recovers enough to bring down unemployment.

 Econbrowser notes:

The survey was conducted between April 3-6. Thus, they came before the trade release for February. Since the trade balance was above consensus, conditional nowcasts of GDP have probably risen [2].

On the other hand, the OECD forecast cited in this post implies continued decline throughout 2009. I'm not certain why the OECD is so gloomy (or alternatively, why the US-based forecasters are so optimistic). Using the OECD forecast and the CBO potential, the output gap will be 10.9% (log terms) by 2010q4. Perhaps this is in part due to a more pessimistic assessment of potential GDP (eyeballing the "Output Gap" table in Appendix 1.2 of the March OECD Economic Outlook, it seems that the OECD's estimate of potential is about 1.2% less CBO's).

Econbrowser also has some good graphs to go along with it...

 

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Tea Party... Reconstruction Party?

Left on Lanier:

[Atlanta Tea Party]…scheduled for April 15th (tax day) at the Capitol building. Hannity will be doing his show live as he protests the “wasteful spending” of the Obama administration.

What if Obama supporters threw a “Reconstruction” party? A protest of a different sort, this would point out Georgia’s failing transportation system, the lack of adequate health care and poor trauma care, and the upcoming hike on property taxes through the death of the Homeowners Relief grant.

Keep it local, specific to Georgia. Make it a celebration of Obama’s adminstration, as we cherish his help in providing much needed funds to alleviate our poor state representation. Point out that Rep. Broun and Rep. Deal refuse to ask for federal funds in their district. Illustrate the bone-headed decision to provide $1 billion dollars in tax cuts to Georgia corporations while we can’t even balance our own budget without federal help.

Rarely does it benefit a Georgia Democrat to tie themselves to the national party, but in this case, it would also be an indictment of the piss-poor GOP leadership that has driven our state into the ground on just about every measurable indicator. SAT scores? Among the lowest in the nation. Life expectancy? Median income? Take your pick, Georgia is near the bottom in everything meaningful to a middle class existence.

 A Reconstruction Party.

I'm still struck by the tea party meme...  that was about taxation without representation.  Aside from D.C. nobdy in the states can argue they have no representation.  They could argue for better represenation and I'd even show up (instant run-off voting!!!).  They could argue money in politics is drowning out the voice of human beings.  I'd show up for that too!  But tea party?

I couldn't believe I actually agreed with Ben Stein this morning:

These tea parties strike me as off-base, in some respects, though they evoke a certain principle that rings true, or at least possibly true.

First, I don’t quite get the taxation uproar. As far as I know, no new taxes of any size have been enacted. The only new tax I can spot immediately in front of us is the “cap and trade” levy on carbon emissions, which would be a tax on energy consumers. And even that, based on a questionable idea, doesn’t seem imminent.

When the recession ends, though, we will be facing very large budget deficits, even under the best projections. Unless the Federal Reserve is just going to print money — usually a dangerous road to inflation — how will we pay for government, except through taxes? And who has the money to pay, except the rich? So unless I am missing something, don’t we have to tax the rich, defined in some sensible way?

That’s just arithmetic. I wish that lowering spending were an option, but it’s not. Politicians talk about cutting spending and going through the budget, line by line, looking for waste. It never happens — except that sometimes, the military budget is cut, which is the last thing we should cut in a world as dangerous as ours. And right now, over all, the military budget isn’t being cut, although some programs are being reduced while others are expanding.

So, I don’t quite get the tea parties, although I do applaud citizen activism.

I'll be covering the Tea Party here in Henry.  Hopefully get some good photos, ideas, and a better understanding of the positions being articulated.  I enjoyed going with Deana and two of our friends who were Huckabee supporters down to Macon during the election, hopefullly this will be productive and useful for me as well. One thing i've learned is that actually observing and listening, helps a person better understand not just the surface issues, but what lies unobserved below the surface.  We can't have productive governance without better understanding.  So i'm giving them a post to make their point.  I might try to snag an interview or two. 

 

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Republicans on Stimulus

If Government Never Created a Job ...

... then why are anti-stimulus Republicans suddenly clamoring about the stimulative effect of military spending?

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Olympia Snowe and Susan Collins key to health care reform

Brad Delong:

If a health care bill passes this year, it will be because Olympia Snowe and Susan Collins like it a lot.

First-dollar coverage for lumberjacking industries? Super-cobra for workers laid off from their seasonal jobs tapping maple trees?

The Washington Monthly: If Democrats are going to need some Republican votes to pass a major health care reform initiative, it looks like they should start with Sen. Olympia Snowe (R) of Maine. Snowe hosted a "listening session" on health care reform this week and made it clear that she wants to support significant changes to the status quo. (thanks to reader A.F. for the tip)

Speaking to the members of the group before taking their testimony, Snowe, a senior member of the Senate Finance Committee, said the committee is determined to draft legislation by June and to have it ready for debate on the Senate floor by July. The last attempt to overhaul the nation's health care system was proposed in 1993 and dissolved in "polarization and partisanship," she noted. "I believe the climate in Washington is different now," Snowe said. Recognition is widespread that the nation's health care system is unsustainable, ineffective and inequitable, she said, and the current economic crisis is only making things worse. "This is precisely the right time" for national reform, Snowe said.

Snowe added that she expects to see a vote in the Senate before the end of this year.

"We have a totally dysfunctional system now," she said. While like most Republicans she would prefer to see the private sector collaborate on an effective change, a government-run health care system may be the only way to get the job done, she said. [emphasis added]

Now, that's obviously a paraphrase, not a direct quote. But if Snowe really said this -- the Bangor Daily News, which ran this report, has not run a correction -- it seems like a pretty encouraging development.

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McCain economic adviser points out the obvious...

McCain’s former economic adviser flips on Bush tax cuts.

Throughout the presidential campaign, Sen. John McCain’s (R-AZ) top economic adviser and former CBO director, Douglas Holtz Eakin, argued passionately for McCain’s proposal to extend the Bush tax cuts (and cut some more taxes for the wealthy on top of it). Holtz-Eakin, however, has now come out against making the tax cuts permanent, acknowledging that it would explode the deficit:

Though economist Douglas Holtz-Eakin spent the 2008 presidential campaign advising Sen. John McCain to defend the Bush-era tax cuts, he now thinks they should be allowed to expire on Dec. 31, 2010 due to “the prospect of an Argentina-style fiscal meltdown.” Said Holtz-Eakin: “If you ask: ‘Who pays the taxes?’, it’s the first step toward not having the answer be: ‘Our kids.’”

Recall, McCain also flip-flopped on the Bush tax cuts, but he opposed the cuts in 2001 and argued for them in 2008.

Posted via web from jimnichols's posterous

tax-cuts vs. fiscal responsibility

Lincoln’s $250 billion estate tax plan would cut taxes for only 60 ’small businesses.’

Last week, 10 Democrats in the Senate joined all 41 Republicans in voting for a $250 billion proposal to cut estate taxes, designed by Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ). More than 99 percent of this cost would go to the inheritors of estates worth over $7 million. Touting the tax cut in a press release, Lincoln claimed that it was “aimed at farms and small businesses.” However, according to an analysis by the Tax Policy Center, Lincoln’s $250 billion proposal would save just 60 small businesses or farms from the estate tax:

An always charged issue is how the estate tax affects small farms and family-owned businesses. We estimate that under the Obama proposal, 100 family farms and businesses would owe tax…The Lincoln-Kyl proposal would cut the number to 40.

According to the Congressional Budget Office, “almost all such estates are able to pay the tax bill without having to sell business assets.”

Another example of tax-cutting to hurt our long term deficit...

For those of us concerned about the Ocean of Debt these kinds of tax-cuts are not good policy.

As CBPP noted regarding this "say one thing do another" ideological attack from some folks:

Many of the same Senators and House members who launched the sharpest verbal attacks this week on the President’s budget or the congressional budget plans — on the ground that the deficits and debt projected under those plans are much too high — then opposed a number of the tough choices the President’s budget makes to start reducing deficits. Those tough choices include allowing many of the generous tax cuts enacted in 2001 and 2003 to expire for people at the top of the income scale, making the 2009 estates tax rules permanent rather than eliminating still more of that tax, and limiting itemized deductions for families making over $250,000 to help finance health care reform that is intended to reduce costs over the long term.

 

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Ocean of debt

Jason Pye is on the long term deficit crisis meme... I'll outsource to economist Brad Delong on this one...

We need to worry about the deficits in 2015, 2020, 2025, and beyond--not about the deficits in 2009, 2010, and 2011...

The key to dealing with the deficits in 2015, 2020, 2025, and beyond is--you guessed it--health care. That is the entire ballgame...

[These] long-run deficits...are not much, much worse than they were in 2003--they are somewhat better. Obama has cut the long-run deficit. Bush boosted it. It remains a big problem--but it's not a problem of Clinton's or Obama's or Pelosi's or Reed's creation, it's a problem created by Bush and his cheerleaders

CEPR's done the leg work regarding this with their IOUSA Budget Deficit Calculator which:

allows you to see what the projected U.S. budget deficit would be, as a percentage of GDP, if the United States had the same per person health care costs as various other countries which enjoy longer life expectancies than the United States.

Its time we join the rest of the industrialized world and have some form of Universal Health Care reform--those who oppose competition in the marketplace, which would hurt the profits of insurance companies and help lower the costs for consumers--are the ones creating this long term crisis.

As if ranking 37th in the world for health care isn't bad enough for people... our kids are paying to subsidize private profits...

To see more on our progress in regards to the budget itself you can check out Congressional Budgets Pass Early Tests on Deficits and Economy, but Questions Remain from CBPP

On the whole, the budget plans that the House and Senate approved yesterday pass the twin tests of: (1) beginning to address long-term deficits, or at least not making these deficits worse; and (2) not undermining the fiscal stimulus Congress recently passed. [i] The Senate’s adoption, however, of amendments that are intended both to facilitate a further large tax cut for the estates of the nation’s wealthiest individuals and to make it less likely that Congress will allow the Bush tax cuts to expire for people at the top of the income scale suggests that significant dangers lie ahead. The adoption of these measures raises questions about Senators’ professed concerns about deficits and debt and about whether Congress has the fortitude to begin making hard choices.

From the In-box

Apprears MoveOn.Org is calling for Summers to be fired as advisors to the President:

Click here to tell Treasury Secretary Geithner: "We can't trust the same people who got us into this financial mess to help lead us out...

Let us not forget that he was a key player (the name Rubin comes to mind as well) in creating this crisis.

sigh... a boy can dream can't he?

Another good idea from CBPP

Reforming the Tax Treatment of S-Corporations and Limited Liability Companies

Nineteen states impose only nominal taxes on businesses organized as subchapter S Corporations (S-Corps) or Limited Liability Companies (LLCs) even though these entities — which generate about one-fourth of all business receipts — benefit from state services just as businesses that are subject to state corporate income taxes do. In addition, many of the states that do impose meaningful taxes on S-Corps and LLCs would benefit by updating their tax laws in this area, such as by equalizing their tax treatment of the two kinds of entities. By reforming their policies toward S-Corps and LLCs, states can strengthen their revenue systems to help deal with budget problems states now face.

This makes sense because they recieve the benifits from the court systems and and education system just as much as anyone. Why shouldn't they assist in paying for these services?

Stiglitz's: What caused the meltdown?