Regarding Taxpayer Support of the Evil Drug Companies

DrRich | November 14th, 2011 - 7:00 am

Podcast:

A key goal of the Central Authority, as it contemplates how best to run our healthcare system, is to do whatever it can to stifle medical progress. Medical progress usually means introducing new drugs or new medical devices, which are often very expensive in themselves, and worse, which often threaten to improve the survival of some category of patients with chronic disease. So typically, medical progress greatly multiplies the costs of healthcare, and all the Central Authority gets in return is more chronically ill people to contend with. For this reason, suppressing medical progress is a critical aspect of covert healthcare rationing.

It goes without saying that a major tactic in achieving this goal is to demonize the drug companies. If the pharmaceutical industry can be made out to be sufficiently evil, corrupt, greedy, and callous to the needs of the people, then it will become the duty of our leaders to constrain them, and in so doing, to limit their ability to develop and introduce new products. This is easily done by adding daunting new regulations, or by piling on oppressive new taxes, or by legislating “windfall profits” penalties, or by using the threat of the regulatory speed trap to threaten them with massive fines or imprisonment. It is indeed fortunate for the Central Authority that the drug companies are, in fact, not the most fastidious members of the corporate community, and that their actions and methods often suggest many fruitful avenues for demonization.

One such avenue that is particularly fruitful, since it recruits the public squarely into the camp of the prosecutorial horde, is to show how the corrupt pharmaceutical industry feeds at the trough of the American taxpayer.

A few years ago, to specifically document this sort of reprehensible behavior, the New York Times pointed us to the case of Dr. Laszlo Bito and the anti-glaucoma drug Xalatan.

In the early 1980s Dr. Bito, a researcher at Columbia University, made a key discovery about a new class of substances that could potentially treat glaucoma. His research was funded with American tax dollars through the National Institutes of Health.

Subsequently, the pharmaceutical giant Pharmacia purchased the rights to Bito’s discovery for a mere $150,000. Based on Bito’s tax-supported work, eventually Pharmacia released the anti-glaucoma eyedrop preparation Xalatan. Xalatan rapidly became a worldwide best-seller, yielding as much as $500 million in sales per year. For their part in this unalloyed success story, Columbia University has netted over $20 million in licensing fees and royalties, and Bito himself became a millionaire.

Meanwhile American glaucoma sufferers are forced to spend upwards of $50 every six weeks for a tiny vial of the drug, which costs the company only a small fraction of that amount to produce, and whose discovery the glaucoma sufferers paid for with their own tax dollars. And, as if to guild this already brazen injustice, Pharmacia makes Xalatan available in Canada, France, and most other countries around the world (where taxpayers decidedly did not support the discovery of the drug), for less than half what American patients pay for it.

It seems, the Times points out, that the American taxpayers are the only parties in this little scheme who reap no financial return on their investment. All they got were some expensive eyedrops.

And so, drug-company demonizers would have us conclude, this is a particularly egregious example of how the evil pharmaceutical industry is ripping us off. Not only are the drug companies mercilessly profiteering from sick Americans (which indeed is their openly-admitted business model), but they are also picking the pocket of every American by using our tax dollars to invent new drugs, then selling those drugs back to us at exorbitant prices. This, one could reasonably argue, is at least as sociopathic as anything the tobacco companies ever did. (The tobacco companies, in contrast, at least had the good graces to eventually stop claiming that their products were beneficial to one’s health.)

And (we in the great unwashed are all supposed to agree), if this reprehensible behavior doesn’t give our government the right to control the prices charged by drug companies, one would be hard pressed to say what does.

DrRich certainly doesn’t want to absolve the pharmaceutical industry of all responsibility for drug prices that seem obviously too high, or for the striking disparities we see in the prices they charge for their drugs between the U.S. and other countries. He has read the complex justifications, published by apologists for the pharmaceutical industry, as to why drugs in Canada cost so much less than in the U.S., and why a tablet whose actual manufacturing cost is five cents is sold to our elderly sick for five dollars. DrRich thinks that, despite all the pretty explanations the pharmaceutical industry gives for these “seeming disparities,” drug companies simply do what every other industry does – they charge the highest price the market will bear, for each market in which they participate. If they didn’t do this, they would be abrogating their fiduciary responsibilities to their shareholders.

There is much not to like about high drug prices, or the fact that people in other countries reap the benefits of American research for far lower prices than Americans do. And it is reasonable for us to seek to address these pricing issues. But as we address certain inequities in drug pricing, we should be careful that in doing so we don’t throw the baby out with the bath water. So if we’re going to alter the arrangement we have with the pharmaceutical industry, let’s be clear on how that arrangement works, and why we set it up in the first place to operate as it now does.

Consider once again the glaucoma drug Xalatan, and consider how Dr. Bito’s discovery was actually used by Pharmacia.

Bito did not discover a finished product. Instead he discovered a new concept for reducing intraocular pressure (that is, for treating glaucoma), and demonstrated that it could be effective – but the specific compound he discovered was not marketable. In fact, it was so highly irritating when applied to the eye that it was simply not suitable for human use. (DrRich does not understand why the drug companies are the evil players in this story, when Columbia University so obviously allowed research to proceed in their facilities in which irritating substances were intentionally placed into the eyes of bunnies or other cute animals.) Indeed, Bito’s new compound was so impressively unusable that, before Pharmacia bought the rights, his discovery had been offered to and rejected by a host of other drug companies as being completely infeasible.

So when Pharmacia finally agreed to pay for the rights to Bito’s patent, they took on an expensive risk that, some estimated, had less than a 5% chance of achieving success. Pharmacia assumed the difficult task of developing a brand new synthetic molecule that would have all the benefits described by Bito, but at the same time would not have the prohibitive side effects. There was no assurance at all that such a molecule could ever be developed, and the cost of searching for one would dwarf the cost of purchasing Dr. Bito’s compound in the first place.

If such a thing turned out to be feasible, then the company then would have to conduct painstaking and extraordinarily expensive human research trials, and if successful, would then have to shepherd their new compound through a time-consuming and costly regulatory gauntlet – which explains why the vast majority of promising new drugs fail to ever gain FDA approval. That their efforts were ultimately successful does not diminish the fact that, when Pharmacia agreed to invest the time, money and opportunity cost to develop Dr. Bito’s discovery, the company was committing itself to an expensive and extremely risky proposition, with no assurance of making a profit or even recouping their losses. It was, in fact, a very long shot.

The folks occupying Wall Street ought to remind themselves that the cool products they are using each day (such as the iPhones they use to organize their flash demonstrations) all came about because the profit motive – and only the profit motive – encouraged some entrepreneur to risk his/her time, treasure, and sacred honor on some new idea. And for each risk-taker who becomes a millionare or billionare, thousands of others achieve only modest success – or fail altogether. (That’s why it’s called “risk.”) But the lure of big profits drives the whole system, and accounts for American progress.

Bito’s (tax supported) idea was a promising one, but the challenge of developing that idea into a product that was useful to patients and that could be brought to market was very expensive and highly risky. Pharmacia took on that risk (all of which was borne by its shareholders, and not by taxpayers) only after difficult, internal corporate soul-searching. If not for the prospect of making enormous profits if this risk worked out, the company (like several other drug companies did in this particular instance) certainly would have walked away.

Before 1980, it is likely none of this would have happened. The Bayh-Dole Act of 1980 was passed expressly to encourage the further development of federally financed, university-based basic research. Until then, a large proportion of basic university research was never “translated” into useful medical products. Such translation of basic research was recognized by Congress to benefit society not only by advancing the practice of medicine, but also by stimulating the overall economy. So industry was actively encouraged to take on the risk of developing promising ideas that came out of federally-funded research. And the profit that greeted successful enterprises was designed to be the one thing that would lure industry into taking that risk.

So when the Times “discovers” a company “profiteering” from work done with tax dollars, it should not be a revelation, nor should it be an unmistakable sign that the company is inherently evil or dishonest. Nor does the company’s activity in this regard give us a justification to arbitrarily restrict its profits. Rather, that’s simply the deal we taxpayers (through our elected officials) have made with the drug industry. We made this deal because we felt it would benefit American society, the American economy, American patients, and quite probably, us as individuals. Of course, if we want to change that deal now, it is within our rights to do so.

Without Bayh-Dole, perhaps patients with glaucoma would still be getting surgical therapy and wearing those coke-bottle eyeglass lenses instead of just using eyedrops. And if we wish to allow the Central Authority to put the brakes on such medical advances (ostensibly to prevent unseemly profiteering, but actually to stifle medical progress), we certainly can. It’s how covert rationing works.

But we shouldn’t vilify the drug companies for taking us up on the deal we offered them, back when we were thinking more clearly.

Gibson Guitar and the Regulatory Speed Trap

DrRich | September 19th, 2011 - 6:25 am

Podcast:

A couple of weeks ago, a swarm of Federal agents from the Fish and Wildlife Service, armed with automatic weapons, suddenly raided the Gibson Guitar Company and confiscated raw materials and finished guitars, apparently because Gibson allegedly violated the Lacey Act in their importation of exotic wood.  Spokespersons from Gibson insist that they purchased the wood legally, that the sale was approved by Indian authorities, and that they have the paperwork to prove it.

To DrRich, the interesting aspects of this episode are: a} The Jobs! Jobs! Jobs! Obama administration is happy to raid and disable a business – a manufacturing business at that – that has been hiring Americans, in order to enforce murky, difficult-to-interpret laws which require Americans to comply with even more difficult-to-interpret and even murkier laws in foreign lands. b) The administration is willing to enforce such laws in such a way as to induce maximum intimidation. And c), they are willing to do so selectively. (Several guitar companies, which have not been raided, also import the same wood from the same sources.)

DrRich stipulates that neither he – nor anyone else – knows all the facts of this case, and that perhaps Gibson really is guilty of imperfect compliance with the Lacey Act.  However, from what is known publicly, even if this were true, this episode would appear to be a case of selective enforcement. DrRich does not know whether the Administration would pick on Gibson because its CEO is a well-known Republican, or to teach a lesson to the people of Tennessee because at least one of their Senators has been seen consorting with the Tea Party, or because Gibson is non-unionized, or for some other reason.

The current version of the Lacey Act was arguably promulgated for good reasons, aimed as it was, ostensibly at least, at protecting rare species. But full compliance with the Lacey Act requires companies to document they are in full compliance with changeable, obscure and opaque laws in foreign lands, and in a fundmental sense is impracticable. America has many laws, rules, regulations, and guidelines that are just like this – for which it is, for all practical purposes, impossible to be in full compliance.

Such laws and regulations are very useful to the government, because it allows them to declare, at a time of their choosing, almost anyone who is functioning under those laws to be criminals. If Americans understand that the only thing standing between them and a raid by Federal agents armed with automatic weapons is the pleasure of the Central Authority, then smart Americans will do whatever they can to curry that pleasure.

DrRich calls it the Regulatory Speed Trap. The Regulatory Speed Trap can be recognized by its typical 5-step pattern;

1) Over a long period of time, regulators will promulgate a confusing array of disparate, vague, poorly worded, obscure and mutually incompatible rules, regulations and guidelines.
2) Individuals or companies which need to provide their products or services despite such hard-to-interpret regulations, will necessarily render their own interpretations (usually with the assitance of attorneys, consultants, and the regulators themselves), and will act according to those interpretations.
3) By their apparent concurrence with, or at least by their failure to object to, such interpretations of the rules, the regulators over time allow de facto standards of behavior to become established.
4) When it becomes to their advantage, the regulators will reinterpret the ambiguous regulations in such a way that the formerly tolerated de facto standards suddenly become grievous violations.
5) Regulators aggressively, but selectively, prosecute newly felonious providers of products or services.

Basic to the Regulatory Speed Trap is an underlying set of complicated and contradictory rules and regulations. In most instances, such as with the Medicare regulations that have evolved over the past several decades, the complexity and self-contradictions grow almost organically over time, and are not planned in any way.  In other instances – such as with the Lacey Act – some new regulations that cannot be complied with are created de novo. And in yet other circumstances – such as the Obamacare legislation or the Dodd-Frank legislation – an entire, massive, tangled web of impossible regulations is painstakingly created out of whole cloth. (This is likely why it is taking so long to render each of these new laws into their hundreds of thousands of pages of regulations.)

It is a rule of nature that bureaucracies evolve away from clarity and toward maximum complexity. But the resultant regulatory morass does not necessarily have to produce fatal paralysis. Societies have thrived for long periods of time despite such bureaucratic complexity. (The Byzantine Empire for instance, whose very name came to symbolize the bureaucratic tangle, lasted for a thousand years.) These societies have thrived, however, only because bureaucrats have allowed de facto interpretations and standards of behavior to develop under their watchful eyes. This sort of benign oversight permits societal commerce to continue to function within some reasonable bounds.

But the modus operendi of our Progressive leaders – in their perpetual attempt to establish the perfect society – is to control “everything” from the top down. And what they have discovered, to their unending delight, is that in a mature bureaucracy – one that has found a way to function despite a tangle of vague and contradictory regulations – is that Everyone Is Always Guilty Of Something.

And if everyone is always guilty of something, then the judicious use of the Regulatory Speed Trap, which is to say, the selective enforcement of inherently ambiguous regulations, becomes a useful tool for achieving Social Justice. By such selective enforcement they can punish their enemies (the enemies of the Progressive Program), reward their friends, and press their own agenda as they see fit.

This, DrRich submits, is what we see happening today to the Gibson Guitar Company, and for that matter, to Boeing.

Less obvious to the average citizen, but very obvious to individuals and organizations working within it, is that the same thing holds for the American healthcare system. Even before all the Obamacare regulations are published, the morass of already-existing rules, regulations and “guidelines” means that, at any given time, the Central Authority can suddenly construe some rule in such a way that virtually any worker or any institution dealing with the healthcare system becomes a criminal. The Central Authority has already exercised its awesome and arbitrary power to do so, in selected and circumscribed cases, and to good effect. Today, healthcare workers and institutions – and especially the medical profession – know that staying on the good side of the Feds is Job One.

Which means that doing what’s best for your patient can be no higher than Job Two*. It is not only “ethical” to act for the good of the collective instead of the individual patient, it is also the only way to optimize your chances of staying on the right side of the law – whichever law, that is, the Feds choose to reinterpret at any given time.

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*For doctors, doing what’s best for patients is actually Job Three. The top priority is maintaining your professional viability (by keeping the Feds happy); the second priority is protecting your turf against encroaching physicians from other specialties; and the third priority is the patients. This order of priorities does not mean that doctors are evil; if they ignore the first two priorities, they will not be able to do anything at all for their patients.
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Most doctors are very smart and can adjust to these or any other rules of engagement. It is the patients who are well and truly screwed by the Regulatory Speed Trap.

Eliminating Waste and Inefficiency Is Not Enough

DrRich | August 29th, 2011 - 7:22 am

Podcast:

A recurring theme of the CRB is that the rising cost of healthcare is the main internal threat to the continued viability of the US. Indeed, the very title of this blog reflects the chief mechanism which is being employed, fruitlessly and disastrously, in the attempt to reduce those costs.

Recently, DrRich pointed out that there are four ways – and only four ways – to reduce the cost of healthcare. He did this as a service to his readers, so that when politicians describe in their weaselly language how they will get the cost of healthcare under control, you will be able to figure out which of the four methods they are actually talking about.

While DrRich’s synthesis has been generally well-received, a few readers did offer one particular objection. DrRich, they assert, left out a fifth way to reduce the cost of healthcare, and the very best way at that. Namely, just get rid of the waste and inefficiency.

DrRich has talked about this before, but obviously it is time to revisit the issue.

It is, in fact, a central assumption of any healthcare reform plan ever proposed that we can get our spending under control simply by eliminating – or at least substantially reducing – the vast amount of waste and inefficiency in the healthcare system. Conservatives propose to do this by incorporating the efficiencies of the marketplace, thus eliminating the waste and inefficiency imposed by bureaucrats. Progressives propose to do it by adopting and enforcing strict, top-down regulations (ideally, through a single-payer system, employing the officially-perfect wisdom of various expert panels) that will control the wasteful and inefficient behaviors of healthcare providers. But one way or another, each scheme for reforming healthcare proposes to bring spending under control by eliminating waste and inefficiency.

Another way of describing what all the reformers across the political spectrum are telling us is: There is so much waste in the system that we can avoid healthcare rationing by getting rid of it. Most Americans believe this. Most policy experts believe this. DrRich suspects that even most of his loyal readers believe this, despite what he’s been telling you for many years.

But this is unfortunately false. No matter how much waste and inefficiency you think might be gumming up our healthcare system today, there’s not enough to explain the uncontrolled rise in healthcare spending we have been seeing for decades, and therefore, not enough to allow us to avoid rationing altogether in any publicly-funded healthcare system.

To understand why this is the case, we must first recognize the fundamental problem with our healthcare spending. The real problem is not simply that we’re spending a lot of money on healthcare, or even that we’re spending a larger proportion of our GDP on healthcare than any other country. The real problem is that our healthcare expenditures for years and years have been growing at double digit rates, several multiples faster than the overall inflation rate, such that, over time, an ever larger proportion of our annual GDP is being consumed by healthcare expenditures. Unless this disproportionate rate of growth is stopped, eventually healthcare spending will consume our entire economy. (Rather, what will actually happen is that it will grow to the point of producing societal upheaval, sending us back to a more typical era for mankind, where healthcare is a little-thought-of luxury, and not a necessity or a right. This will happen well before healthcare consumes 100% of the economy.)

To reiterate, it’s not the amount of spending on healthcare that is creating a fiscal crisis, it’s the rate of growth of that spending.

Once we understand the problem – that it’s the rate of growth of healthcare spending that threatens our society – then demonstrating that waste and inefficiency cannot possibly account for that rate of growth is a matter of simple mathematics.

What our politicians and policy experts are telling us, when they say they can fix the problem by eliminating waste, is that without all the waste, our healthcare spending would be economically well-behaved. That is, save for the waste and inefficiency, the annual rate of increase in our healthcare spending would be roughly the same as the general rate of inflation. To say it another way, our leaders are asserting that the “excess” in growth of our healthcare spending is entirely wasteful.

It is trivial to construct a simple spreadsheet to test this assertion, that is, a spreadsheet in which calculations assume that any increase in annual healthcare spending over and above the general rate of inflation must be due to wasteful spending.  In such a spreadsheet, for instance, we may take the annual rate of growth of healthcare spending to be 10% (a reasonably representative number for the past 30 years or so), and the annual rate of overall inflation to be 3%.

We now must “pick” the proportion of healthcare spending that we designate as being wasteful in Year 1 of our spreadsheet. Nobody really knows this value, especially since we all will define wasteful healthcare spending in different ways. Let’s just say, arbitrarily, that 25% of healthcare expenditures are wasteful in Year 1.

When we plug these values into our spreadsheet, the result is clear. In order to account for our unsupportable growth in healthcare spending by invoking waste and inefficiency, the proportion of healthcare spending that is caused by waste must increase to ridiculous proportions very rapidly, such that (for instance) by the Year 10 we will have more than doubled (59%) the proportion of all healthcare expenditures that are wasteful; and by the Year 20, nearly 80% must be wasteful. Similarly, the proportion of the annual increases in healthcare spending that would have to be due solely to waste and inefficiency rapidly climbs to equally ridiculous proportions. By Year 5, wasteful spending will have to account for 82% of the annual increase in healthcare expenditures, and that proportion continues to climb, eventually approaching 100%.

In real life, of course, we have enjoyed healthcare inflation of roughly 10% for over 30 years now. So if the assumptions behind our spreadsheet are accurate – and again, these are the assumptions our political and policy leaders expect us to swallow – we find ourselves in the position, at Year 30, where well over 90% of all of our healthcare expenditures must be wasteful, and virtually all of the annual increase in healthcare spending is entirely accounted for by waste and inefficiency. (This result is largely independent, after 30 years, of whatever value we may have chosen as the proportion of wasteful spending in Year 1.)

Such a result is completely absurd. If you think it is not absurd, but actually reflects reality, then (all of healthcare being entirely useless) there’s no point in worrying about healthcare at all – we should simply stop spending any money on it.

And this result indicates that the initial assumptions must be wrong. That is, the unsupportable rate of growth in our healthcare spending cannot be due to waste and inefficiency. Therefore, that growth must be due, fundamentally, to the growth of “useful” healthcare expenditures.*

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*This analysis does not trivialize the waste and inefficiency we actually see in our healthcare system, which is large and inexcusable. What it likely means is that the level of inefficiency – which is certainly at least 25% of the total if not higher – likely attaches itself proportionately, sort of like a tax, to the underlying growth in healthcare expenditures.
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Therefore, DrRich has demonstrated, using actual Math, that a substantial proportion of our growing healthcare expenditures must necessarily be coming from real, honest-to-goodness, useful healthcare. And if we’re going to substantially curtail that growth, we’re going to have to curtail useful spending. Which means that as long as we have publicly-funded healthcare (which we do), we have to ration.

But, once again, we’re Americans and Americans don’t ration. Which is why we commissioned first the big insurers and then the government to do the rationing covertly, a task they have accepted with great gusto.

DrRich is compelled to point out, once again, that waste and inefficiency is multiplied with great exuberance any time you have covert rationing. Disguising all the rationing activity as something other than rationing fundamentally requires opaque procedures, unnecessary complexity, bizarre incentives, Byzantine regulations arbitrarily and variably enforced or ignored, and the diversion of healthcare dollars to non-healthcare ends (such as corporate profits, expanding layers of government bureaucracies, and other massive bureaucracies within the healthcare system created to defend oneself against those government bureaucracies). Covert rationing greatly increases waste and inefficiency, and does so inherently and systematically.

To reduce the unavoidable rationing to the smallest amount possible, we will have to figure out a way to do it openly, and not covertly. Having viewed commercials featuring Congressman Ryan pushing elderly ladies off a cliff after he proposed a Medicare reform far less drastic than open rationing (a reform that would restore some individual responsibility for healthcare expenditures to at least some of the more well-off beneficiaries, and thus reduce to some extent the need to ration care), DrRich doubts whether the public is yet ready to engage in such an endeavor.

Why This Isn’t Armageddon

DrRich | July 28th, 2011 - 10:19 am

Podcast:

We are, the pundits tell us, staring down the barrel of an economic catastrophe. By this time next week, we may all be huddled in our darkened hovels, breaking up furniture for our meager fires, roasting the family dog for our sustenance, and dreading the likely invasion by the great Canadian menace.*

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*By cutting government spending and not raising taxes, the Canadians have not only turned a deep recession into an economic boom, but have set an embarrassing example which our leaders in Washington and our press have taken great pains not to notice. The Canadians indeed are a menace.
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But fear not. DrRich is here to assure his readers that, despite what you’ve been told, this isn’t Armageddon. He offers three proofs for this assurance.

First, the debt limit is a meaningless fiction.

The term debt “limit” implies that there is some limit to the amount of borrowing which we can do; that we may borrow money up to a certain and well-defined point, and no further. But history tells us this is absurd.

Each and every time we decide we’d like to spend more money than the debt limit says we can spend, we simply increase the debt limit. We have blithely blown past dozens of supposed debt limits in recent years, with nary a glance behind us.

DrRich is not sure why we have a debt limit at all. At some point, he supposes, somebody determined that publishing a debt limit would convince people (which people? the voters? the credit-rating agencies? the Chinese?) that we actually have some sort of built-in controls to our fiscal profligacy. But surely, after decades of treating our debt limits with less regard than one would treat speed bumps during a police chase, nobody can actually believe that we would honor those limits, ever, under any circumstances. It is obvious that the only thing debt limits can accomplish is to create transient, artificial fiscal crises, like the one we are all enjoying now.

The only logical solution to our current crisis is to simply eliminate debt limits once and for all. We would not be giving up anything substantial, since no debt limit has ever been honored nor ever will be. Debt limits clearly do no good; they only cause trouble.

So DrRich offers this solution, this change we can all believe in: Eliminate the debt limit altogether.

No problem which has such a simple and happy solution can be Armageddon.

The second reason this is not Armageddon is: One cannot schedule Armageddon.

The current debt ceiling, the one we’re going to exceed on Tuesday, is $14.3 trillion. The President wants it increased by another $2 trillion or so, enough to delay the next debt ceiling crisis until after his re-election. This, of course, is understandable. The Republicans, it appears, would like to increase the debt limit by a lesser amount, so that the next crisis will occur at a time more to their convenience. This is also politically logical.

The point here is that, by simple manipulation of the value of the meaningless fiction known as the debt limit, we have full control over scheduling the next debt crisis which will threaten our markets, economy, &c.

A feature of Armageddon upon which everyone can agree is that it cannot be scheduled. Therefore, this is not Armageddon.

The third reason this is not Armageddon is: The amounts of money we’re talking about are too trivial.

Everyone is arguing over the questions of whether we ought to leave the debt limit at $14 trllion, or increase it by another $2 trllion or so, and whether we ought to cut spending and/or raise taxes by a mere $100 billion a year or so. And the results of these arguments, we are told, will determine whether or not, in a few days, the skies will split asunder and the seas will boil away, and Old Farts like DrRich, suddenly bereft of our God-given entitlements, will immediately be reduced to dining on cockroach-kabobs toasted over a smouldering dung fire.

But worrying so much about increasing our debt by another $2 trillion (an amount so massive, so huge, as to be unimaginable to mere mortals) is akin to worrying about having another smoke as one lies dying of lung cancer – it sure won’t help, but either way, the outcome is the same.

Our debt limit, as huge and unmanageable as it is, is not only a fictional construct, but it serves as a soothing distraction from our real fiscal problem – the one that really does promise Armageddon.

Our unfunded liabilities, over the next few decades, for the things our society has promised and is obligated by law to shell out for us Old Farts – things like Social Security and Medicare – is at least $62 trillion, and some have projected double that amount. Now, there’s a real problem.

We can’t talk about that, though. If a politician proposes the first, meager step towards finding a solution to that, they will show up in a TV ad pushing sweet old ladies off a cliff.

In any case, we are not facing Armageddon next week.

That’s for later.

Stock Up On Fancy Feast While You Can

DrRich | July 24th, 2011 - 4:22 pm

Podcast:

While all the Republicans and Democrats in Washington are spending all these fine summer weekends fighting over the debt ceiling, and so far have absolutely nothing to show for it, the smart people at the New York Times have gone ahead and solved the whole debt problem for us.

Blaring at us from the front page of today’s Sunday Review, in huge, bright red print, we see the following chain of logic: A 20% tax on soft drinks will produce a 20% reduction in consumption, which will prevent 1.5 million people from becoming obese, which will prevent 400,000 cases of diabetes – yielding $30 billion in health savings.

This revelation leaves DrRich slapping his forehead and wondering, “Why didn’t I think of that?” Simply use the tax code and the regulatory muscle of the Central Authority to change human behavior in the proper manner, and everything will fall into place.

It takes a special kind of person to believe that human behavior is so predictable, and so controllable, that one can actually titrate in such a manner the amount of obesity that exists in a society, and therefore, titrate the cost of healthcare. It takes a special kind of person to believe that, simply by tweaking a specific tax here, or adding a specific regulation there, one’s actions will yield precisely the response predicted by the “experts,” and that this response will translate precisely down a complex chain of assumptions (based on selective analysis, conjecture and wishful thinking) to yield cost savings anything similar to those predicted, and that the cascade of results (not being subject to any vagaries of human nature) will not have all manner of unintended consequences. That special kind of person is called a Progressive.

Let’s say that some really smart operative in the Obama administration, reading today’s Times, takes it into his head to solve the obesity crisis, the healthcare crisis, and the debt crisis all in one brilliant stroke, and accordingly, gets the President to appoint the entire New York Times Editorial Staff as the country’s new Czar of Food. These fine folks, sensing a once in a lifetime opportunity and not wanting to squander it on such small potatoes as a softdrink tax, decide to go all out. They institute large, prohibitive taxes on ALL the foods consumed by our society that contribute to our obesity. As a result, the only foodstuffs that remain untaxed are fresh fruits, vegetables, and fish. (And, considering the possibility that one or more of the NYT editorial staffers may very well be vegans, DrRich is not sure about the fish.)

According to the Times’ variety of calculus, this action will have remarkably positive consequences.  The consumption of unhealthy, obesity-producing foods will drop by some very large amount – probably 90% if the taxes are high enough – and American obesity will nearly disappear. Diabetes will go the way of tuberculosis and leprosy, all the other medical disorders made worse by obesity will greatly diminish, and we will save trillions of dollars in healthcare expenditures.

What would actually happen, of course, is quite different.

If all sugary foods and fatty foods and processed foods were heavily taxed, the demand on the untaxed foods (the fruits, vegetables and fish) would skyrocket, and prices would go through the roof. Only the very wealthy could get all the healthy food they wanted. The merely wealthy would get some of the healthy food, and would supplement their diets with the unhealthy stuff, grudgingly paying the excessive taxes to do so. DrRich does not know what the poor would do for food, but he bets they would be pissed.

A lot of other unpleasant things would happen as well. The companies that process foods and soft drinks – and most American restaurants – would suffer badly, and would probably go out of business. Robust black markets would establish themselves, trafficking in inexpensive, calorie-dense (and possibly even tasty) foodstuffs, which would now be produced in Mexico, Canada and China instead of in the US. Junk food cartels would murder each other along our borders. Americans would find themselves envying, rather than pitying, that occasional old fart who is discovered dining on a can of Fancy Feast Cat Food.

And furthermore, Americans will learn something about one’s ideal body weight that we don’t hear too much about today, because it does not fit into the “overweight is bad” narrative. Namely, while severe obesity is very bad for your health, being a little overweight is probably not so bad. Statistically speaking, it is more threatening to one’s longevity to be too thin than to be a little overweight.

DrRich does not have the solution to the obesity problem we have in America. If there is a solution, DrRich thinks it is likely to be some combination of science (since there is a large genetic component to true obesity), encouraging a sense of personal responsibility for living one’s own life, and yes, even public policy. But he finds the kind of linear thinking displayed in today’s Times – relying on assumption piled upon assumption, ignoring the obvious human and economic reactions that will knock those assumptions off their straight-line path – to be silly. And if they actually encourage public policy experts to behave in such a manner, they can be dangerous.