Manhattan Contrarian Award For The Most Transparent Self-Promotion By A Government Agency

You know that it's budget season in Washington when the news pages become filled with one story after another put out by government agencies trying to get their budgets increased or, possibly, trying to avoid the budget ax.

There's a real art form to this.  Champion players of the game know that you need to come up with something that accomplishes multiple difficult goals all at once.  First, whatever it is (call it the "McGuffin")  must justify a big increase in your budget because after all, that's all that really counts in the end in Washington.  Second, the McGuffin must be associated with a seemingly plausible story that can be sold without giving any overt hint that you are just playing a totally cynical game for more money to grow your empire.  (This one is relatively easy because the press is ridiculously gullible, particularly in any area that involves growth of government.)  Third, the McGuffin needs to be sufficiently catchy that it gets on the front pages and headlines of lots of papers and web sites and news shows.

And having read those criteria, I know what you are thinking.  You are thinking that it is impossible to beat the annual "food insecurity" scam put out by the Department of Agriculture (DOA).  For those unaware of it, every year around this (budget) time, the DOA comes out with a report declaring that some 15 to 20% of Americans have been determined to be "food insecure."  (This year's report does not seem to have come out yet, but the 2014 version is here.)  This is the most cynical and blatant self-promotion by the DOA seeking more money for its food stamp and other nutritional programs.  Dozens of free-food-advocacy organizations can be counted on to immediately pick up the survey results, equate them with "hunger," and go to bat lobbying for more money for the DOA.  And the gullible press laps it up, running one article after another, never thinking to ask how the DOA can already be spending some $80 billion per year on almost 50 million food stamp beneficiaries without ever making a dent in the "food insecurity" problem (if indeed it is a problem).  The "food insecurity" metric has been carefully crafted to be completely impervious to reduction no matter how much is spent on food programs.   It's the perfect scam!

So come on, is it really possible to top that one?  Yes!  Check out the front page of today's New York Times.  It's the old NASA "we may have found water on Mars" scam!  And where there's water, there must be life!  "Liquid Water, and Prospects for Life, on Mars."   NASA held a news conference on this yesterday, reporting on a new article they have just released.

“This is tremendously exciting,” James L. Green, the director of NASA’s planetary science division, said during a news conference on Monday. “We haven’t been able to answer the question, ‘Does life exist beyond Earth?’ But following the water is a critical element of that. We now have, I think, great opportunities in the right locations on Mars to thoroughly investigate that.”    

And, he was about to add, if you just give us another, say, $50 billion a year, we can build a lot more space stuff and send it off toward Mars and keep reporting back every year for the next 50 years (at budget time) that we may have just discovered some evidence that there is water on Mars.

OK, he didn't really say that.  That would not be in accordance with the strict rules of this art form, where you are never supposed to give away that this is just cynical playing for more money.  But let's see how NASA's effort stacks up against the rules of the game:

• Does it justify a big increase in the budget?  You betcha!  Do you see Jim's reference to "great opportunities in the right locations on Mars to thoroughly investigate that."  We need to send another spacecraft to Mars!  Or how about two or three!!!  "John M. Grunsfeld, NASA’s associate administrator for science, [is talking about] sending a spacecraft in the 2020s to one of these regions, perhaps with experiments to directly look for life."
• Does it give any hint that this is just a cynical ploy to increase the budget?  Well, as totally obvious as this game is to any thinking person, the New York Times doesn't mention the subject one single time in its article.  Are the people at Pravda just particularly gullible?  Try these stories from CNN, the Washington Post, USA Today, wired -- and that's just the start of dozens of stories that can be found with a simple Google search of "NASA water on Mars."  Really, how naïve are these people?
• Does it generate lots and lots of high-profile and front-page press stories that just parrot the agency's line without asking any embarrassing questions?  See previous bullet point.

And it actually gets a little worse -- or, I guess, better, if you're looking to win the prestigious Manhattan Contrarian "Most Transparent Self-Promotion By A Government Agency" award.  A website called Quartz seems to be on to NASA's game, and points out that the U.S. has agreed by international treaty not to send any spacecraft to a place on Mars near water, since to do that would be likely to contaminate the water with earthly microbes.

[E]ven if NASA was 100% certain that there is liquid water on Mars, it could not do anything about it.  The world’s space powers are bound by rules agreed to under the 1967 Outer Space Treaty that forbid anyone from sending a mission, robot or human, close to a water source in the fear of contaminating it with life from Earth. 

So then why are they using the "water on Mars" angle to suggest research missions that actually can't be carried out?  Quartz has the answer:

NASA’s hype around the discovery of liquid water on Mars can be explained by its constant need to increase funding for its work. 

Is it possible to be any more cynically budget-grubbing than these guys?  NASA, you have won the "Most Transparent Self-Promotion By A Government Agency" award for 2015!

On The Nature Of "American Exceptionalism"

In the New York Times on Friday, David Brooks -- allegedly the house conservative -- had a column critical of many current Republicans for their views on "American exceptionalism."  According to Brooks, the defining feature of American exceptionalism has historically been its looking to the future rather than the past, including to the prospective achievements of people not yet here.

America was settled, founded and built by people who believed they were doing something exceptional. Other nations were defined by their history, but America was defined by its future, by the people who weren’t yet here and by the greatness that hadn’t yet been achieved.

I won't quibble with Brooks over whether acceptance of large amounts of immigration is an essential feature of American exceptionalism.   But there is another element of American exceptionalism that Brooks does not mention, an element that is eminently forward-looking, and yet has little to do with immigration.  That element is the role of free markets and limited government.

Free markets and limited government mean that the people "run the country," not the government.  Free markets and limited government mean an economy that is a gigantic exercise in trial and error, which turns out to be a tremendous engine for generating innovation, wealth and widespread prosperity.  Free markets and limited government mean that the country succeeds even as the government fails.  With few exceptions (all of them small), even relatively advanced other countries have the opposite, namely restricted markets and unlimited government.  Restricted markets and unlimited government mean that these countries have most or all of: sluggish and stagnant economies, lack of innovation, and high rates of government dependency.

On September 21 Bret Stephens had a column in the Wall Street Journal, discussing the upcoming visit of Chinese President Xi to the U.S., in which he commented on the difference between the results achieved in a country that allows people to run their own lives and experiment for themselves, versus a country where the supposedly superior elites dictate solutions for all:

Yes, America, perhaps the only country on earth that can be serially led by second- or third-rate presidents—and somehow always manage to come up trumps (so to speak). America, where half of the college-age population can’t find New York state on a map—even as those same young Americans lead the world in innovation. America, where Cornel West is celebrated as an intellectual, Miley Cyrus as an artist, Jonathan Franzen as a novelist and Kim Kardashian as a beauty—and yet remains the cultural dynamo of the world.  America, in short, which defies every ethic of excellence—all the discipline and cunning and delicacy and Confucian wisdom that are the ways by which status and power are gained in China—yet manages to produce excellence the way a salmon spawns eggs. Naturally. By way of a deeper form of knowing.

And yet there is almost no appreciation among American elites of the dynamo effects of free markets and limited government, with the result that those things experience gradual erosion.

Consider President Obama's speech to the U.N. on Sunday on the subjects of poverty and economic development.  OK, most of it is meaningless platitudes, and even I can find much in it to agree with.  But the overwhelming sense from reading it is that poverty reduction and economic development are the responsibility of elites who must provide for the less fortunate, rather than things that can only come about if the people are free to experiment and strive for themselves.  The main way to the goals is that "governments" and "NGOs" and "institutions" must commit "resources" to achieve them:

In just a few short years -- in the areas of health, and food security, and energy -- my administration has committed and helped mobilize more than $100 billion to promote development and save lives.  More than $100 billion.  And guided by the new consensus we reached in Addis, I'm calling on others to join us.  More governments, more institutions, more businesses, more philanthropies, more NGOs, more faith communities, more citizens -- we all need to step up with the will and the resources and the coordination to achieve our goals.  This must be the work of the world.  

And then there's this bit of hubris:

We know the ingredients for creating jobs and opportunity -- they are not a secret. . . .  We know what works.  We know how to do this.

Would that were true.  But if it were true, there is no way that Haiti would still be dirt poor, with the gobs and money and phalanxes of "experts" that are thrown at it.  In fact what happens is that the money goes straight to a corrupt government that uses it to entrench its own position and keep the poor poor.  Obama's speech does contain some sensible statements about the need for investment and encouragement of entrepreneurs.  But I'm not convinced at all that he understands what makes America and its economy exceptional.

Which Republican Candidate Is Prepared To Recognize Limits On Government's Ability To Solve All Problems?

I have often said that in matters of political philosophy, there are two fundamentally different ways of looking at the world.  Believers in Way 1 think that the government through its taxing, spending and police powers is capable of solving all of the personal problems of the people and of eliminating all down-side risk from human life.  The government's credit card is infinite!  And, as I put it on my About page,

The obvious corollary is that since all problems can be solved by taxing and spending, therefore they must be solved by taxing and spending, and anyone who stands in the way of those solutions is immoral. 

Meanwhile, Way 2 of looking at the world sees that down the road of infinite government spending to solve all problems lies the socialist fallacy and ultimate disaster, although the disaster might take a long time to unfold.  Since demands for government solutions to problems are endless and infinite, somewhere lines need to be drawn and limits set.

Clearly the Democratic candidates for President subscribe to Way 1.  Their campaigns are full of proposals for bigger and bigger new government spending to solve smaller and smaller problems, including proposals for single-payer health care for all, free college tuition for all, vast enhancements to social security, universal cures for  income inequality, and so forth.  All of this with no price tags attached, but instead a vague notion that all costs can be somehow charged to the magical top one percent of income earners.

One might think that the Republican candidates are the advocates for Way 2.  But the problem is that Way 2 inevitably leads to the necessity for drawing some lines and setting some limits, and this in the face of a usually hostile press that is always ready to accuse the candidate of immorality for standing in the way of any proposed government solution to any problem.  And so, one by one, when pressed, the Republican candidates decline to draw any lines or set any limits, and agree to go along with one or another, or multiple, of the currently-proposed big government solutions to the personal problems of the people.

Examples:

• Donald Trump has famously advocated at times for some kind of comprehensive or single-payer healthcare scheme for the United States.  A BuzzFeed article on July 17 has this quote from Trump in 1999:  “I would put forward a comprehensive health care program and fund it with an increase in corporate taxes."     Peter Suderman at Reason on August 7 has a series of amusing quotes from the first Republican debate, where Bret Baier of Fox News tried to pin Trump down on this subject.  After devoting most of his answer to the question about single-payer healthcare to the Iraq war, Trump finally got around to this: "As far as single payer," Trump says, "it works in Canada. It works incredibly well in Scotland. It could have worked in a different age, which is the age you're talking about here."    OK, that's pretty vague, but as far as I can find Trump has never explicitly disavowed his endorsement of single-payer (socialized) healthcare for the U.S., although he also has never put out any specific plan with details and costs.  The question is, where are the limits to be drawn here, if at all?
• HotAir reports yesterday that Carly Fiorina came out in 2013 for at least a form of an individual mandate for healthcare coverage.  The 2013 date is significant because it postdates the Supreme Court's 2012 decision in NFIB v. Sibelius holding the individual mandate in Obamacare unconstitutional as a mandate (although then upholding it as a tax).   HotAir quotes from a CNN panel discussion in 2013 where Stephanie Cutter of CNN asked Fiorina if she agreed with "the mandate idea," and with the "ban on pre-existing conditions," and Fiorina responded "I actually do agree with those two provisions."    To be fair to Fiorina, she went on to call Obamacare "an abomination."  But again, what are the limits she would set on government trying to achieve perfect fairness in healthcare through spending and mandates?
• John Kasich has famously supported and overseen the adoption of the massive Obamacare Medicaid expansion in his state of Ohio.  NPR has a summary of his actions and positions on the subject here.   His main defense of his actions is basically that he owed it to the people of Ohio to take the free federal money that was lying on the table.  OK though, John, you're now running for President.  Is the federal money really free in unlimited amounts, and if not, what are the limits?
• Chris Christie got big play in 2012 for his huge and, frankly, ridiculous demands on the federal government for disaster relief for Hurricane Sandy.  This was previously covered by the Manhattan Contrarian here and here.   When the Republican Congress initially refused to pass a wildly inflated $60 billion handout bill on New Year's Eve, Christie was quoted by ABC News as calling their action "disgusting."  The $60 billion went way beyond mere aid to help people get back on their feet, and included things like paying for all losses of all business, plus some $7.4 billion for unspecified "mitigation."  Shortly before that Christie had been photographed walking on the beach and hugging President Obama while making a plea for the aid.  Again, does this guy just think that the feds have infinite amounts of money to pass out, or are there some limits?
• And finally, Ben Carson has recently seemingly joined the bandwagon calling for a massive increase in the federal minimum wage.    Granted, this one is not a spending program, but still represents acceptance of the concept that the federal government somehow has the power to create fairness through mandates, without downsides like higher unemployment among the young and minority populations and higher poverty. 

And I'm sure I could come up with more examples with a little more digging.  The question is, which Republican candidate is ever actually going to say that there are limits here and the government cannot solve everybody's problems by taxing, spending and mandates?    

Is The Problem With Socialism Really That They Just Haven't Executed Correctly Yet?

A couple of weeks ago I invited commenters to try to explain how they could support the avowed socialist Bernie Sanders in the face of the failures -- nay, disasters -- of the Soviet Union, Cuba, North Korea, Venezuela, etc., and a commenter named Justin Ferraro took me up on my invitation.  Basically, his answer was, those guys' hearts were in the right place, but they just didn't execute correctly.

Just as the USSR was a sham of a communist country it is also a failure of socialism, which is doomed, like any other economic system, if it exists within an authoritarian framework.

But this time we'll do it right, and it's sure to work!

Well, we don't have full-blown socialism in this country, but we do have pockets of socialism, that is, areas of the economy where the government owns the assets and passes them out to the people on some government-determined basis of "fairness," or something like that.  One of those areas is public housing.

So how has the public housing thing worked out in the U.S.?  Here's my summary:  They started out in the 50s and 60s building massive "projects" of gigantic high-rises; but those quickly became concentrated islands of poverty, crime and violence.  They weren't executing correctly!  In the 90s they (led by HUD and its then-Secretary Andrew Cuomo) instituted programs of destroying the previous high-rises and replacing them with more widely-distributed low-rises and with Section 8 vouchers.  And how has that worked out?  Terrible!  They're not executing correctly!  So we need to expand public housing initiatives and, or course, we'll execute correctly this time.

Over at The Atlantic, it seems that they run one article after the other on public and affordable housing initiatives.  A reporter named Alana Semuels generates at least an article a month, most recently on September 22.   The overriding theme of the articles is -- you guessed it -- public housing has been a disaster so far in the United States, basically because of poor execution, so what's needed now is more government funding and better execution.  It's really touching how these people can maintain an unshaken belief in the socialist model no matter how often and how disastrously it fails -- or it would be touching, if it didn't entail trapping millions of innocent victims into lifetimes of poverty.

The September 22 article contains a brief summary of the history of public housing in the U.S., not differing much in its essentials from my summary a paragraph above.  Much of Ms. Semuels' history is sourced from a new book by Professor Ed Goetz of the University of Minnesota, "New Deal Ruins: Race, Economic Justice and Public Housing Policy."  Goetz traces the decline of the original massive-high-rise public housing model to as early as the 70s:

Going into the 1970s, public-housing authorities were becoming poorly-run, barely-financed departments, with most of their properties located in urban areas that were marked by declines related to white flight. And then they had to face urban decline, crime, and the gangs that rose up in the 1970s and 1980s with diminishing funding from both HUD and the local municipalities that didn’t want to spend money on deteriorating properties for the poor.  “It is impossible to overstate the dysfunctional state of some public housing complexes in the late 1980s and 1990s,” Goetz writes, in his book. 

Funny, isn't it, how with over 3000 public housing authorities in the U.S., they all made the exact same execution errors at the same time?  But the new policies of decentralization and vouchers were in place by the early 90s, just in time for the Clinton presidency.

This [new decentralization and voucher] strategy became federal law in 1992, when public-housing authorities began receiving billions through the HOPE VI to tear down some of the nation’s worst housing complexes. The idea was that projects like the infamous Cabrini-Green in Chicago would go away, and along with them, the blight that characterized center cities.

And then in 1997, Andrew Cuomo -- now our governor in New York -- became Secretary of HUD.  If anybody could "execute" this new strategy correctly, he would be the guy.  Right?

“CHA [Chicago Housing Authority] must come down. You can no longer put a Band-Aid on a bullet wound,” Andrew Cuomo, the secretary of HUD, said in 2000.

So, Alana, what's the review of how the new strategy is faring today?  From a June 24, 2015 article in The Atlantic by the same author:

But somewhere along the way, “Section 8” became a colloquialism for housing that is, to many, indistinguishable from the public-housing properties the program was designed to help families escape.  How did this happen? To begin with, Section 8 is poorly designed. 

Really, you have to hate when this happens.  It's just so obvious to all the right-thinking people that the socialist government-handout model can cure injustice and lift the poor out of poverty with some minimal proper execution, and yet once again it has failed.

So, Alana, are you prepared now to admit that public housing is never going to work?  The opposite.  In the most recent article (September 22) Semuels goes to Austin, Texas, to find an example of a public housing success story:

Public housing gets a bad rap, but Maddie Garrett has no complaints. She’s lived on the same few blocks on Austin’s east side for 50 years, moving between one of the nation’s oldest public-housing complexes, Rosewood Courts, and a senior housing development called Salina Apartments. When her family grew, the housing authority helped her move to a bigger apartment; when her kids moved away, she moved back to a smaller one. When her husband became disabled, the housing authority put them in a unit that could accommodate his disabilities.  “It’s comfortable; it’s safe; I haven’t had any problems,” she told me, in the shady courtyard of her apartment building. . . .   “The story of American public housing is one of quiet successes drowned out by loud failures,” writes Ed Goetz, a professor at the University of Minnesota. 

Maintained for 50 years by government hand-outs in a life of continuous poverty -- that's what counts as "success."  I wonder what counts as failure?

When Falsely Shouting "Crime" Pays

Over at the Huffington Post, they're running a gigantic 15-part 58,000 word serial by Steven Brill titled "America's Most Admired Lawbreaker."   Today they're up to Chapter 6.  The subject is the off-label marketing by Johnson & Johnson of a drug called Risperdal, to young and old people, without specific approval from the FDA to do so.  Already Nicholas Kristof of the New York Times has devoted an entire op-ed column, titled "When Crime Pays: J&J's Drug Risperdal," to the series and its supposed revelations.  

This is the most blatant possible chasing of the Pulitzer Prize, intended to impress you as being great crusading in the tradition of muckraking journalism.  The theme is that great old standby, evil corporation puts profits over people.  In Brill's telling, this story represents a particularly egregious instance of corporate misbehavior, first because J&J made a lot of money, second because J&J presented itself to the world as a particularly ethical company, but most importantly because all the while J&J's behavior, according to Brill, was systematically and intentionally "illegal" and "criminal."  The evil company cynically committed "crimes" because the pay-off was bigger than the fines they would have to pay.  Here's the very first line:

Over the course of 20 years, Johnson & Johnson created a powerful drug, promoted it illegally to children and the elderly, covered up the side effects and made billions of dollars.      

Accompanying the series is a "Letter From the Editors," signed by Greg Veis and Rachel Morris of HuffPo, telling you (as if you hadn't already figured it out) how terribly, terribly important this story is, and how it is intentionally designed to play on your emotions:

At some point over the course of this massive, magisterial 15-chapter story, you will get angry, and you will stay angry. It may happen when you learn that Johnson & Johnson handed out promotional Legos to pediatricians so that they’d be more likely to prescribe a drug called Risperdal to children with behavioral problems, although the FDA had repeatedly told the company not to market it to children. . . .

Actually, I have gotten angry after reading the first few chapters of this series, but not for any of the reasons given by Veis and Morris.  I have gotten angry because the story throws around accusations of "illegal" and "criminal" conduct without ever giving an accurate statement of what is legal and illegal in the area of off-label marketing of drugs.  I have gotten angry because Brill unthinkingly accords to the FDA the status of God and lawgiver, without any recognition that we have in this country a Constitution that gives no authority to bureaucrats to make law, and a First Amendment that restrains what government bureaucrats can order the people to do and not do.  I have gotten angry because the article is permeated by the unthinking and ignorant premise that if the self-important pooh-bahs at the FDA "tell a company not to market" a drug to some category of people, then it is then a crime for the company to market the drug to those people.  A correct statement of the law is that when the FDA purports to tell a company that it cannot market a drug to someone by making truthful statements about it, it is the FDA that is behaving lawlessly, not the company.  The FDA systematically behaves in this lawless manner, so far without consequence to itself or any individuals who work for it, and in my view that is a far, far bigger problem for this country than anything that J&J may have done in marketing Risperdal.

Not that I'm standing up for everything that J&J may have done here.  They may well have stepped over the line in some instances.  But Brill's series goes so far in making accusations of criminality for conduct that is specifically legal that I don't think any of the rest of his series can be trusted at all.

In Chapter 2 of his article, Brill lays out what he apparently thinks is the law of off-label marketing of drugs:

A key provision of the [1962 amendments to the Food and Drugs Act of 1906] made it a crime for drug companies to promote drugs to doctors for patients with illnesses for which the drug, according to its FDA-approved label, was not intended and approved for use. . . .  Thus, for Johnson & Johnson to expand the market to reach its [Risperdal] business plan targets, doctors had to be sold on the value of Risperdal in populations that were not included on the label as the drug’s intended users. Yet it was a crime for the company to sell the doctors on the benefits of using Risperdal to treat those populations.  

This is just plain, dead wrong as a statement of the law.  It's not just that people like me have been pointing out since at least 1999 that this interpretation of the FDA Act cannot be reconciled with the First Amendment.  It's that the courts have specifically and emphatically agreed with me and have shot down lawless FDA efforts to criminalize true speech -- on the few occasions when those issues have actually reached the courts.  But those occasions have included one in the Second Circuit Court of Appeals in 2012, and another in the Southern District of New York just last month.  Are Brill and the HuffPo unaware of this decisive case law?

In 2012 the Second Circuit reversed the conviction of Alfred Caronia for what was clearly and admittedly off-label marketing of a drug to an FDA-unapproved population.  Here is the key language of the court:

[W]e decline to adopt the government’s construction of the FDCA’s misbranding provisions to prohibit manufacturer promotion alone as it would unconstitutionally restrict free speech. We construe the misbranding provisions of the FDCA as not prohibiting and criminalizing the truthful off-label promotion of FDA-approved prescription drugs. Our conclusion is limited to FDA-approved drugs for which off-label use is not prohibited, and we do not hold, of course, that the FDA cannot regulate the marketing of prescription drugs. We conclude simply that the government cannot prosecute pharmaceutical manufacturers and their representatives under the FDCA for speech promoting the lawful, off-label use of an FDA-approved drug. 

Then, just last month, Judge Engelmayer of the Southern District of New York actually granted an injunction against the FDA, prohibiting it from bringing a so-called "misbranding" action against a company called Amarin for off-label marketing of a drug to an FDA-unapproved population.  That opinion was covered at Manhattan Contrarian on August 10 here.  After quoting the language of Caronia above, Judge Engelmayer concluded as follows:

Therefore, insofar as Amarin seeks preliminary relief recognizing its First Amendment right to be free from a misbranding action based on truthful speech promoting the off-label use of an FDA-approved drug, Amarin has established a substantial likelihood of success on the merits on this point.  

Brill seems to think his view of the law is supported by the fact that in 2013 (after the Caronia decision) J&J settled FDA charges over the off-label marketing of Risperdal and paid a fine in excess of $2.2 billion.  So?  To me, all this proves is that large companies with a franchise to protect will never take the government to trial.  Partly that's because they can't risk losing, but more important is that they can't risk having the FDA hold up twenty other drugs in the pipeline as revenge.  After the clear holding in Caronia, the FDA cooked up a preposterous position that Caronia's outcome was just a result of peculiar aspects of the trial in that case, and that the Second Circuit's statements as to legality of off-label marketing were not the "holding" of the case.  Judge Engelmayer shreds those arguments in the Amarin decision.  That 71-page decision is too long to summarize here, but read it yourself at the link above if you are curious.  The important thing to note is that these precedents have been set in the situations of an individual (Caronia) and a very small company (Amarin) who have nothing to lose beyond the particular case in which they are involved.  Not so for the big companies.  As Judge Engelmayer notes in his opinion, lots of other big pharma companies have settled FDA off-label marketing charges for huge dollars, including a $3 billion settlement of GSK involving marketing of drugs including Paxil and Wellbutrin, and a $2.3 billion settlement with Pfizer over Bextra and other drugs.  That doesn't mean that any of the conduct was in fact criminal.  It's just a reflection of the leverage that the petty and vindictive bureaucrats at the FDA have over their subjects.

Brill also endlessly cites as evidence of J&J's criminal intent various facts indicating that J&J took steps to conceal from the FDA the actions it was taking to market Risperdal off-label.  Sorry, but again that proves absolutely nothing.  Here we have a lawless bureaucracy repeatedly threatening to prosecute you for conduct that is completely legal, and that you know is legal.  They have hundreds of lawyers and infinite resources.  They have extracted billions upon billions of dollars from your peer firms for conduct that is completely legal.  How would you proceed?

If you read this series, or at least the first 6 Chapters (I would not recommend it) you will come away with the clear impression that Risperdal is way too dangerous to be used for the unapproved populations of young people and the elderly.  Well, what about this:  The J&J 2013 Risperdal settlement covers off-label marketing of the drug to those two populations in the period 1999 - 2005.   Dare we mention that Risperdal was specifically approved by the FDA for treatment of children and adolescents ages 10 - 17 for certain conditions in 2007?  That's right, in 2013 the FDA collected $2.2 billion for off-label marketing of a drug to a population and for conditions that it had actually approved well before the settlement?  Huh?  Here's what you (and Steve Brill) don't understand:  This has nothing to do with whether this drug is appropriate and useful for these populations.  This has only to do with the FDA protecting its bureaucratic prerogatives and fiefdoms.  The FDA would gladly see half of the American people die while they consider and reconsider for years approving some drug, in order to establish the proposition that the FDA and only the FDA has the bureaucratic say-so to determine when and how a drug can be marketed.  I can't find any discussion of that issue in Chapters 1 through 6 of Brill's series.  Maybe it will turn up in Chapter 14.

There are lots of problems with the pricing and marketing of pharmaceuticals in the United States today.  The large majority of drugs are paid for by third-party payers, including the government (Medicare and Medicaid) and insurance companies, and the pharma companies have perfected the art of charging high prices to these price-insensitive entities.  Many important issues in this arena could have been explored by Mr. Brill had he chosen to do so.  Instead, he chose the easy and cheap narrative of evil company committing crimes to put profits before people.  That narrative is just wrong, and misses everything important.    

Donald Trump And The Trade Deficit Fallacy

I think I've picked on Bernie Sanders enough lately, so how about somebody else?  Donald Trump comes to mind.

I was watching a news show last night, and they were playing a video of a speech that Trump had made yesterday on the battleship Iowa in Los Angeles harbor.  Here's a clip of the speech.  As I tuned in Trump was in the middle of things and starting to talk about one of his favorite subjects, trade deficits.  The following appears starting at about 8:30 of the clip:

What is the United States trade deficit with Mexico, Japan and China?  Let's start with China.  Almost $400 billion per year.  If you have a company when you're losing $400 billion you've got to do something very fast.  We don't.  We've been losing hundreds of billions of dollars per year, frankly for decades.  It's not going to happen any more.

Wow -- Donald Trump thinks that a country like the United States, issuing a reserve currency and running a trade deficit, is like a company losing money.  I would have said that running a trade deficit for such a country is equivalent to a company making money.  It's very hard for me to get my head around Trump's apparent level of incomprehension and confusion.  Where to start?

Well, what does it mean for the United States to run a $400 billion trade deficit with another country?  Very simply, after netting out everything else, it means at the end of the year the United States ended up with $400 billion dollars worth of real goods and services produced by the other country through hard work and sweat, and in return the other country got $400 billion face value of non-interest-bearing pieces of paper created out of thin air at essentially no cost by the Federal Reserve system.  Now, who came out ahead?  If you're struggling with this, think of it as people rather than countries.  Suppose you (like the Fed) are given the magical ability to issue unlimited amounts of money that everybody else will somehow take in payment for goods and services.  In a given year, you spend a couple of minutes running a photocopy machine to produce a few million worth of your money, and then you buy yourself a nice mansion, a few luxury cars, and a couple of fur coats for the wife.  Who came out ahead -- you, or the people who worked thousands of hours to make all that stuff and sold it to you and got nothing in return but your scrip?  And, playing out the analogy further, the people who got your money could theoretically use it to buy something back from you, but by hypothesis they are never actually going to do it (because if they did, then you wouldn't have any trade deficit any more).

More broadly, the power to issue money is probably the most jealously guarded perk of governments and sovereigns.  Why would this be a carefully-guarded perk if it's a terrible detriment?  The power to issue money is the power to buy stuff without work or effort, not even levying a tax if you are a government.  Of course that's a benefit, not a detriment, to the money issuer.  Certainly, no one gives up the power to issue money if they don't have to.  Now, you do have to be somewhat judicious in using this power.  Within your country, you as sovereign can compel everyone to accept your money; but if you just flood the place with new currency, you'll soon find yourself in an inflation, and then a hyperinflation, and you can kill the goose that laid the golden egg.  Outside your borders, you need to be even more judicious.  You have no ability to compel anyone to take the money, so your ability to go on for years running trade deficits financed only by your own currency depends on nurturing the confidence of your trade partners that you are not going to hyperinflate the currency.  If you are Venezuela and you hyperinflate your currency, no one outside your borders will take it,  and then you need to get your hands on some reserve currency issued by someone else if you want to buy anything.  On the other hand, if you are issuing a reserve currency (meaning only a currency such that trade partners are psychologically willing to accept it), then you're golden.  As long as you are reasonably careful about it, you can go on essentially indefinitely consuming more than you produce.  You are doing a service to the world providing it with a relatively stable international money supply, and the grateful world compensates you to the tune of hundreds of billions of dollars worth of goods and services per year.

The United States has an incredible advantage in that, as irresponsible as we are in managing our money supply, virtually all the other countries are even more irresponsible.  (An exception is Switzerland, but they don't have nearly a big enough economy or enough money in circulation for the currency to act as a world money supply.)  So even as we run large trade deficits, our dollar has been appreciating in value against almost all world currencies for the past several years.  Essentially, that means that the dollar is acting as the world money supply and the world needs the liquidity.  The United States makes literally hundreds of billons of dollars per year (last year it was $505 billion according to the Economic Policy Institute) by getting to act as a reserve currency for the world.   That $505 billion is what is otherwise known as the trade deficit.  One way of looking at it is that it pays for almost all of the defense budget.

Admittedly, Donald Trump is far from alone in being completely confused about the significance of a trade deficit.  Certainly, almost no journalist understands this subject, and the number of newspaper and magazine articles equating higher trade deficits with "bad" or "worsening" and lower with "good" or "improving" is way too many to count.  And I have no idea how many of the other presidential candidates have any good grasp of this either.  Most of them just keep their mouths shut about the subject.   But Trump has somehow chosen to take a subject that he knows nothing about, and where everything he says can be shown to be 180 degrees wrong to anyone who pays attention for even two minutes, and make this a centerpiece of his campaign.  And then there's this (from about 10:00 in the video clip linked above):

The leaders of Mexico, Japan, China and every other country that we do business with -- they're smarter, more cunning, sharper than our own leaders. . . .

Well, if Trump is out to demonstrate that he is "smarter" and "sharper" than the geniuses from Mexico, Japan and China, he's going to have to do a lot better than his pronouncements to date on the subject of trade deficits.  Our current leaders certainly can't claim credit for getting us into the excellent position we currently find ourselves in as reserve currency provider to the world, but at least they haven't intentionally destroyed that position (yet).   If, as he claims, Trump is a really great negotiator, maybe he'll end us up in the position where the Chinese yuan is the reserve currency and instead of them paying us, we'll pay them $500 billion dollars a year for the service of providing the world money supply.  Way to go Donald!  Would it be even better if we paid them $600 billion?