Monthly Archives: November 2012

Pushing for change? So am I but not today.

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On this holiday of Thanksgiving, Random Spotter was moved to a deeper sense of gratitude about life in the United States in 2012.  Today is too important a day for anyone to poison it with messages of discontent.  Instead, RS wants to acknowledge a few moments in history that have personal meaning to me.

Barely 10 years after the American Revolution, the political leaders of the time negotiated a document that would be ratified in 1789.  The Constitution was to be a document that embodied collaborative agreement for the protection of citizens’ rights and the advancement of a nation.  Equal parts recognition of the benefits of government and despise for abusive political control, the document they drafted was meant to bind future leaders to this compact to prevent zealous and corrupt individuals from usurping the rights of those they sought to lead.  Our nation has been an example of freedom and political judiciousness for over two hundred years because of their vision, and RS is thankful to them for these foundational efforts.

RS is also grateful for the welcome that this nation has afforded its immigrants, including my parents.  Although immigration policy continues to divide us, the undeniable historical fact is that the United States has never been a nation of closed borders.  Our leaders have sought to create immigration policies that protected our economic and security interests.  Today, we are as diverse as any nation on earth, and millions wish to join our imperfect horn of plenty.  I was born to parents who left their homeland to start life anew in this country, and I have been blessed with freedoms that are recognized as among the greatest in the world.  Our individual and collective journeys have not been easy.  No system is perfect in fairness and performance.  Our systems of religion, government, business are extensions of ourselves, and we all have our failings.  But Random Spotter is grateful for the miraculous ability of the human animal to recognize that so much more can be achieved when we roll up our sleeves to make our goals a reality.  In so doing, we continue to build a society of opportunity.

I am grateful for this Thanksgiving meal with family, the opportunity to work and make a living, the security that I enjoy when I walk down a city street, and the future I see in my mind for those who will follow.  I won’t deny our deficiencies, but we can discuss flaws tomorrow.  Today, Random Spotter will focus on the good things in life.

Flashing your badge is fine, but I want to see a warrant if you are going to read my e-mail.

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Patrick Leahy has again changed his mind about his email privacy bill.  He originally announced that the bill would enhance online and e-mail privacy protections, but after Justice Department complaints, Leahy’s revised bill was expected to give more surveillance powers to government agencies.  Leahy pushed back this week after CNET reported on the bill, but he has given little guidance regarding exactly what his position will be.

James Baker, the associate deputy attorney general at DOJ, has publicly warned that requiring warrants to gain access to stored e-mail could have an “adverse impact” on criminal investigations.  Is that so?  I think Mr. Baker should appear before the Senate to explain in detail what this impact could be.  Not to be overly skeptical, but every U.S. law enforcement agency has addressed the requirements for issuance of search warrants for decades.  District attorneys understand the rules and know that, if the case merits, they can obtain a warrant through well-defined channels 24 hours a day.  How is it a greater burden to the feds than anybody else?  My theory is that the “burden” lies in having to explain DOJ, CIA or NSA logic and investigation to a judge.

I’m not advocating naiveté.  National security is a very dirty business carried out by many patriotic Americans.  This mission is so dirty that most of us never want to observe the sausage-making process.  Nonetheless, the Constitution offers the only real protections against the excessive actions of those who would wish to protect us.  The rule of law is paramount if we are to avoid a “the ends justifies the means” approach to government.  I hope Senator Leahy is listening to those who vigorously defend our Fourth Amendment protections.  We’ll know on Thursday.

Charitable Giving: Taxes and philanthropy go hand in hand, but not the way you think

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RandomSpotter had the opportunity to participate in a charitable event yesterday.  A community church held a three-peat drive for 3 different organizations that distribute supplies to the needy.  This got me thinking about charitable giving in the US, especially in light of what I view as forced giving through government entitlements.  I wanted to answer for myself whether it doesn’t make more sense for Americans to just increase charitable giving to save the significant taxes that will continue to be funneled to government “causes.”

One report from Sparxoo indicates that 65% of American households give to charity, with an average household contribution of $2,213 (2008-2011).  Of those who give, the top-earning ten percent contribute over 25% of the funds donated, and 98% of high income individuals contribute to charities.  75% of the estimated $300 billion donated each year comes from individuals, 13% from foundations, 8% from bequests, and 4% from corporations.  The US has the highest rate of giving among all countries, donating 1.65% of GDP to charitable causes (Forbes).  Let that all sink in and you see that we are a giving nation already, even if we could and should grow the number of Americans who give.

Observing the above, it’s puzzling that a country with the third highest government revenues from personal income taxes (38%) and relatively high effective corporate tax rates (around 13%) should need to continue to push ever-harder for government programs to solve social problems.  It seems to me that a fallacy we’ve embraced is the belief that government should solve every major problem of our citizens.  One undeniable fact of life is that it comes with hardship.  Government can’t make us happy any more than it can make us pain-free or healthy.  There is an ocean of evidence to prove that government programs are wasteful and inefficient in comparison with not-for-profit organizations serving the same goals.  To burden our government and tax structure with a philanthropic mission is lunacy.  Although I’ve not seen them, I’m sure there are studies that indicate an inverse relationship between growth in charitable giving and growth in government social programs.  That’s got to be the most reasonable answer.  Of course, volunteerism goes hand in hand with giving.  It costs relatively little in comparison to donations, is available to most everyone, and is a tool that expands the value of charitable contributions exponentially.

Therefore, it would fall upon us, individually and collectively, outside of government to do the heavy lifting of philanthropy and charitable support.  And doesn’t it make a lot more sense for each of us to decide who gets the benefit of our time and dollars?  It does to me.

Taxes, spending cuts, and denial: Politics as usual

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Unless you’ve been in a coma for more than 12 months, you know the Administration has proposed a plan that is heavy on tax increases for households making $250,000 or more per year.  Republicans want to see deep spending cuts before they even consider taxing the rich.  We may never see anything that pleases them enough to agree to the tax hikes on the wealthiest Americans, but there’s no current danger of anyone testing that theory.  In spite of Republicans digging their heels in on the tax hikes issue, the other side of their arguments makes the most sense. Spending is the driver of debt and deficits, not tax credits.  They’re not even in the same universe.  Spending has exceeded revenues for over a decade, and the ever-increasing pace of deficit spending continues to threaten the future of the country.  The threats are not philosophical or reputational, they’re fundamental.

If there is still no painfully realistic plan for balancing the budget barely a month before the sequestration deadline, it can only mean that politicians aren’t serious.  The messaging signals another short-term deal that will push consequences out to 2015.  And, you know what?  That pisses me off.  I’m sick of a broken system that safeguards long and lucrative careers to so many liars who consistently spend on our credit card and leave us holding the bill for generations.

My plan is simple, Washington.  Cut.  Cut it all.  Cut it all equally.  Cut MY benefits wherever necessary.  I’m willing to live with benefit reductions to programs to which I’ve contributed over the years.  Slimmer Medicare benefits and smaller Social Security checks?  We can deal with it.  Keep pandering and you’ll keep dividing us.  Treat Americans respectfully, and you’ll get legitimate agreement to take the pain now rather than the giant mushroom cloud later.  Will it hurt?  Hell, yes.  If we do it equitably, the pain will be dispersed, and there’s some comfort in that.

But, don’t you dare look into the camera and tell us about sacrifice when you can’t muster up enough courage in D.C. to stop the entitlements and special interests merry-go-round that passes for government.

 

 

The rich need to pay their fair share. So make them pay .00023!

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In an October report, Adam Looney of The Tax Policy Center helped clarify some of the major debate issues in the fiscal cliff discussion.  In contradiction to common perceptions, the Administration’s current proposals would continue to extend certain tax cuts to the top 2% of US taxpayers, but at a rate of about 30% of the cost of extending cuts in their current form.  In the top 1% of taxpayers, there are essentially 3 tiers of revised tax cuts in the President’s proposal, and these differ significantly in tax break percentage.

The dollar impact?  From the TPC’s analysis, “the heated debate over whether to extend all of the tax cuts or whether to extend merely the vast majority largely concerns whether to extend an extra $310,000 in tax relief to the wealthiest 120,000 taxpayers or whether we should instead make a relatively small down payment toward fiscal sustainability.”  That’s right.  The math works out like this:  $310,000 x 120,000 highest income taxpayers = $37.2 billion dollars a year.   That’s an impact to the federal deficit of a whopping 2.3 100ths of 1%.  Tough to imagine?  Picture 16,250 balls in a pool.  Now, remove 4.  Ta-dah!  But, surely it must impact annual government spending in a profound way.  A whopping 1%, and that’s a bit over 3 days’ expenses for Uncle Sam.

Am I a protector of 1 percenters?  No.  I’m not a single agenda person.  I try to share verifiable information that clarifies issues in ways that rhetoric can’t.  And, I smell a Hawaiian rat.  If the goal is debt and deficit reduction why is the message always “the rich need to pay their fair share”?  It turns out the Administration’s idea of that is a pimple on the…well, you get the idea.  On the other hand, the President’s political foes reject tax-based proposals and push for tougher spending cuts that have the potential to advance short and long term fiscal responsibility.  This round goes to the opposition.

The Myth of Pharmaceutical R&D: Why are drug makers so rich?

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Last Thursday, Canada’s Supreme Court invalidated Pfizer’s patent for Viagra in that country.  The reason:  Pfizer’s failure to comply with patent rules in Canada that require disclosure of the mechanisms of action for drugs.  In a country that typically allows patents for a mere 5 years, Viagra had enjoyed patent protection since 1998.  But generic drug makers sued to begin generic production, and the Supreme Court determined that Pfizer gamed the patent system to unfair advantage.

While I am a free market supporter in general, Pfizer’s secrecy in this case earned it what it deserves.  If sildenafil were disclosed clearly as the active agent – instead of the 260 quintillion different chemical compounds addressed in the 7 part patent (that’s right, 260 quintillion!) – Pfizer would have enjoyed another 2 years of protection.  Now, generic producers like Teva will race to bring generic Viagra to market, and Pfizer’s estimated $50+ million market for the drug in Canada will be significantly eroded.  When you include online drug sales to American consumers, the loss to Pfizer is not an insignificant one, although global sales for the drug are in the range of $2 billion.

This story reminded me of the pharmaceutical industry’s claims that R&D costs to bring drugs to market are so prohibitive that long-term patent protection is a necessity.  So, I dug a little into the realities of the industry, and I can’t help but conclude that the onerous cost of drug R&D is nothing more than an urban legend.

Fortune Magazine’s 2012 Industry Rankings list shows Pfizer returning 28.7% to shareholders in 2011.  In fact, 9 of the 12 giants listed returned healthy double digits to shareholders during a year in which shareholder returns were single digit or negative across a majority of  industries.  Only petroleum producers compared in profits generated, but they certainly don’t share the positive reputations enjoyed by U.S. drug manufacturers.

Pharma profitability has been exceptional, and the dollars have been huge for a very long time.  From 1995 to 2002, the pharmaceutical industry was the MOST profitable industry in the US, delivering profits of between 3 to 5 times the average of all other industries combined (KFF).  Since 2002, big pharma has retained superstar profitability, landing no lower than 5th on the Fortune 500 list of most profitable industries (Fortune).

Wow.  Those poor drug developers.  So, we need to provide government-funded research – think NIH, FDA, HHS supports of all kinds – and preferential tax credits because these folks have a long product life cycle with which to contend?   I would suggest that healthcare reform overseers consider boxing gloves when negotiating with pharmaceutical manufacturers.  We’ve seen nothing suggesting meaningful drug cost controls in the pre-PPACA guidance, and insiders have argued that pharma got a huge pass in the process.  Whether this is true or not, drug costs are as important a factor as any other in the healthcare debate, and the pharmaceutical industry can afford to bring a few concessions to the table.

Let’s not punish an industry that has figured out how to make money, even if it lies to us about it in the process.  The only factor here is the transparency of the expenses driving the so-called healthcare crisis.  If we have a crisis, then pharma is front and center.  So, in the spirit of problem-solving, I recommend an acceleration of drug patent expiration by 5 years.  How does that sound, Pfizer?

I won the election for Barack Obama!

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LEGOheadThe ballot numbers aren’t even cold yet, and we’ve already heard from so-called researchers about the impact of certain voting blocks on the election.  Before anybody gets too giddy about their pet group’s contribution to election results, a review of the results for certain key segments is in order:

* Blacks, representing more or less 10% of the electorate, voted 93% for Obama (vs. about 96% in 2008 according to HuffPost).

* Latinos, making up just over 10% of the electorate, voted about 69% for Obama (vs. about 71% in 2008 according to Pew Research)

* Whites, which made up 72% of the electorate, voted 39% for Obama (compared to 43% in 2008 according to the Washington Post)

* Millennials, often cited as a separate segment but with overlap in the racial/ethnic segments, voted about 60% for Obama (compared to about 66% in 2008 according to Pew Research)

*Women, also forming part of the racial/ethnic segments, voted 55% for Obama (compared to 56% in 2008 according to Newsweek)

I’m actually impressed with what these results DON’T show.  That is, there was no major change in any of the major voting segments in comparison to the numbers that won Obama the Presidency in 2008.  This can only mean one of two things:

  1. The Obama campaign machine was highly effective at retaining support that would have otherwise been eroded by the Romney message.  I find this interpretation highly suspect since there were few meaningful Obama successes to cite, and the US economic recovery has been anemic.  Additionally, ALL of his voting blocks remained so consistent in their support, with minor declines so equally dispersed, that it would be highly unlikely that such uniformity was a well-coordinated outcome.  This would not imply that the President’s field teams and voter contact efforts had no impact, only that the larger victory resulted from something else.
  2. Romney’s campaign efforts were wholly ineffective, and Obama could have spent the last year sitting on his couch.  Not to make light of this failure, but it appears that the messages of the Republican Party and its candidate simply did not resonate with voters.

In light of this, any analysis about “who won it for Obama” would seem moot, not praiseworthy.  Minority population shifts aside, the historically Democratic base remained so, and likewise for the Republican base.  When we behave as expected, I call that uneventful.  In fact, this election’s near duplication of 2008 results seems to have demonstrated that voters are now far less likely to change their loyalties than before, no matter how difficult the current conditions or the power of political promises made.  Campaign strategy should look very different in 2016.