Reagan Revolution 2.0?

Repetition of history is often a given. The question is not so much whether, but how and when. To the latter, our accelerated technology driven world might answer: “Sooner than you think.”

Of particular interest is the similarity between today’s pattern of economic-political events and those of the 1970’s and 80’s: Both involved broad Republican power leading to their by overreach and loss of power; the worst economic collapse since the Great Depression; England's return to conservatism. In the late 1970's, the last event preceded America's return to the Right as well. We've yet to see if the same shoe will drop today.

In 1974 Nixon left office on the heels of the largest political scandal in American history. He left the economy in sharp recession, and although you can’t blame a recession on any one person, his poor economic policy certainly didn’t help. Bitter aftertaste from Watergate allowed the Democratic Party to take charge with Jimmy Carter. The economy continued to slump over Carter’s term, while England grew restless and the conservatives took charge. Thatcher was elected prime minister in 1979, and shortly thereafter Reagan was elected in 1980 – their combination sparking the “Reagan revolution”.

Today’s sequence of events, although not the exact same, shares some uncanny similarities: W Bush left office in 2009 widely unpopular. It was not due to scandal per se, but there was a palpable sense that, similar to what occurred under Nixon, the Republican Party had gained a whole lot of power and under his lead shot itself in the foot, a blow from which it’s still recovering. Similar to Nixon, Bush also left the economy in a state of disrepair; and although you can’t blame a recession on any one person, Bush’s previous policies (particularly on housing) certainly didn’t help.

England is also witnessing a hard and abrupt shift towards Conservatism, one of historic proportion. The immediate cause of this is the expenses scandal, but that can only explain for so much. It is important to view such developments as non-coincidental, particularly in a democracy: Sometimes people need a reason to turn against a party on a dime. Sometimes parties in power become complacent. In following sequence, it is worth asking whether, similar to the late 1970's, England's conservative shift will precede the same in America.

Although one shouldn’t jump to conclusions, it’s difficult not to compare today’s events with those of the 1970’s and ‘80’s. The speculative implication, of course, is that a conservative Reagan-like personality will emerge come next presidential election.

Avoiding such fantastical speculation, the analogy further likens Obama to Carter, a president who is frequently conceptualized as a failed idealist: Perhaps one with the right mind, but in the wrong place at the wrong time to use it to address crisis after crisis.



It is still too soon to judge Obama – and the public, likewise, is giving him his due time to perform. But emerging recently – and well written in a series of Economist articles focusing on areas in which his efforts have been stifled by poor execution and lack of detail and foresight – is a lingering suspicion that Obama will leave the country in no better shape than when he entered office.

This seed of lingering suspicion grows much bigger in light of the soaring popularity with which he entered office, particularly among young people. Such a failure should it occur would be seen as widely symbolic as his election. And such a failure should it occur would no doubt leave the Oval Office wide open for a rising Republican star (perhaps along the likes of Bobby Jindal).

At present Obama’s legacy remains to be written in stone. But time is running out. Much of it will rest on his performance over this upcoming year: “Crunch Time” as The Economist puts it. In the meanwhile Americans continue to hold their breath.

Judging from output alone, it took over 10 years for the US economy to return to pre-1974 levels. These sorts of recessions have a way of working themselves out but only in the very long run. Such is often the time required for an economy to unwind and reposition itself, a process which arguably took the whole of Reagan’s first presidential term. That the rate of job and capital loss will slow down is a given, but it’s very unlikely that we’ll see the economy prop itself back up over the next few years. The speculative implication is that the recovery won’t begin until at least the next presidential term.

The worst of the crisis is likely over. And yet we still find ourselves at a crossroads with little indication of where we might be heading. Only history will be able to tell us if we’ve been here before.


-KJ
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Media (in order of appearance)

Photo: (1)Richard Nixon; (2)Jimmy Carter; (3)Ronald Reagan; (4)The Economist, April 1st 2009 Cover; (5)Hazy Trees, Katwingz20.

Video: (1)Carter Crisis in Confidence Excerpt from 1979 speech, 11/11/2008, metbans. Sphere: Related Content

Healthcare: Time, Money, and Details

Capitol Hill is filled with buzz about Obama’s rushed health care proposal, intended to overhaul the current system. But as politicians portray healthcare with broad rhetorical brushstrokes, they continue to overlook a plethora of details that unnecessarily inflate its cost. A less publicized news item from last week was the annannouncement that the FDA will delay their final decision on Ampligen – the leading drug for the treatment of Chronic Fatigue Syndrome (CFS) – until this fall. The FDA announced that the delay was due to staffing problems.

Submitting Ampligen’s application is Hemispherx, a small biotech company that has researched the drug for nearly 3 decades. Like a handful of similar companies, their future solely depends on the FDA’s forthcoming decision. All of the clinical trials are complete. The drug’s application was accepted for review just over a year ago, which would make the FDA’s turnaround time over a year and a half. Judging from Hemispherx’s annual operating costs, the FDA’s delay by itself will cost them a total of approximately $15 million.

The FDA’s mission is largely to protect the public from harmful drugs, however critics demonstrate that their overcautious ways do more harm to the public than good. Their delays have cost the public thousands of more lives than they have saved, along with making them unpopular among most practicing physicians.

Even if you believe in the FDA’s mission, then it is hard to overlook the sheer inefficiency and waste that they introduce to healthcare. Clinical trials for new drugs take about 10 years, but even after all the data is in – as is the case with Ampligen – it often takes up to 1 more year for them to make a final decision. FDA delays are not-too-unexpected, but they have still hit Hemispherx hard.

Following each FDA delay, Hemispherx announced new efforts to raise more cash. Currently they are operating like a bear in hibernation, placed on life-support.

Given the millions of dollars lost due to FDA "staffing issues", one strategy might be to give them more staff. They might have applicants pay directly for these staffing issues, but the FDA already receives hundred of millions of dollars worth of fees; supplemented with more money by Congress, fees from private companies consist of half of their drug approval budget. Why these fees aren't enough to reduce the decision time to under 12-months isn't clear.

But the real problem, as discussed above, is with the structure of the FDA and the responsibilities placed on them. As drugs like Vioxx prove to be more dangerous than people could have guessed, the FDA has taken part of the blame; in response they have received more money and power, but this hasn’t led to marked improvement, accuracy, or efficiency.

Determining the safety of drugs can be particularly tricky, but there is only so much that you can ask for: Did the clinical trials meet their endpoints? Were there side-effects? Is there any reason to believe that there might be additional risks? Even if it takes 10 years of research to answer these quesitons, it should not take an additional year to intrepret the results: Either the end points were met or they weren't; there are side-effects or there aren't; there are reasons to consider additional risks or there aren't. These questions are not black-and-white, but following 10 years of required research (and often more), an additional year to make the decision - supposedly filled with heated internal regulatory debate - is not likely to find anything new.

As with most jobs, the problem lies not so much with the staffing, but with the structure of the organization. The main question is whether their mission – to approve and oversee every single drug (and many foods) on the marketplace – would be feasible, even if they had a large army of scientists at their disposal.

Science, like anything in life, obeys laws of diminishing returns: Beyond a certain threshold, the more you study one particular thing, like a drug, the less return in greater knowledge you'll receive for your efforts. Going back to the Voixx example, how many more years of clinical trials, and how much more power and money granted to the FDA, would have better assured its safety?

The assumption being placed on the FDA is that more research and regulation is better, regardless of the specific types of research and regulation being carried out. This is the same mistake that has been applied to the SEC for years, whose added regulations over the years tends to favor red tape, paper work, and superfluous committee-creating over investigatory manpower.

Currently drugs like Ampligen wander through a maze like patients lost in the healthcare system, knowing where they want to go but not being able to get there. And likewise they incur quite a cost – in the case of Ampligen, an added 18 months and about $15 million, assuming, of course, that the drug is even accepted. On top of decades of research and piles of paperwork, does it really take an additional 18 months and $15 million to judge a drug? The frustrating part is that much of this could be avoided either by cutting back on new drug requirements; somehow lowering the cost to big pharma of drug approval; or at least greasing the FDA's wheels in any manner that would make them more - not less - efficient. As it is, patients along their way are forced to pay for these costs, which are often more attributable to regulatory stuckiness than to added value.

Any improvement in healthcare requires us to look at the factors driving up its cost, rather than further re-distributing costs that already exist. In this environment, small companies like Hemispherx - who can survive 30 years researching just one drug - exist not because of the current healthcare system, but in spite of it. Indeed, in what other private industries is it common for a company to go decades without a product? Such gargantuan human efforts are testament to our need for better healthcare, not for better government intervention.

-KJ

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Note: Long position held in HEB.

Media (in order of appearance)

Photo: (1)Day 20, 1/20/2009, Richard; (2)Ampligen PR; (3)Healthcare, hospital, doctor, 04/22/2009, Anoto Group; (4) corridor, 04/10/2005, sumit. Sphere: Related Content

Honing Capitalism - BAC vs. Fed

Political rhetoric has moved beyond socialism vs. capitalism. Instead, it centers on how to best hone capitalism for the common good. This insight comes directly from Barrack Obama’s autobiography. And in that context, it might just be semantics, replacing the term “socialism” with “honing capitalism for the common good”. The main difference, however, is that people will often have a definitive stance on socialism; but no one quite knows how to hone capitalism for the common good. This is why the Bank of America / Federal Bank scandal has emerged as bar none the most fascinating subplot of the financial collapse.

The basics of the scandal have been unfolding for some time: In September, BAC announced plans to acquire Merrill Lynch (ML). As the crisis worsened in the winter, BAC considered backing out based on ML’s projected 4th quarter losses. Paulson (previous US Treasury Secretary) and Bernanke (current Fed Chairman) pressured BAC to go through with the deal, threatening to withhold bailout should the economy worsen. BAC complied completing the deal around New Years. 2 weeks later, ML announced astronomical quarterly losses of about $20 billion. This outraged BAC shareholders who blamed CEO Ken Lewis, and Lewis in turn blamed Paulson and Bernanke. On top of all this, recently uncovered emails from the Fed show that they applied much more pressure to BAC than was previously thought, going so far as to threaten to remove Lewis. In the meanwhile, BAC, unsurprisingly, has received upwards of $50 billion in bailout funds, along with guarantees of twice that should they face future losses.

Bernanke and Pualson justified their actions as necessary to avoid widescale financial collapse. Afterall the failure of The Bank of the United States catalyzed the Great Depression in 1930. And it is thought that in order to avoid another Great Depression, we must prevent such large scale failures.

There is one view of history that says it’s determined by large-scale historical events. If you could’ve prevented the event, this line of thought goes, you’d have prevented its consequences. A more subtle view sees large historical events as the effect, rather than cause, of underlying social movement. Going by the latter, it doesn’t matter which large scale events you might prevent, because the underlying problem stays the same.

The BAC/ML merger didn't benefit the greater good at BAC's expense. In some ways, it has made the whole system worse. Going into the crisis, BAC was not only the healthiest bank in America, it belonged to a rare breed of successful commercial banks doing business with tens of millions of everyday people. Loading it up with ML's debt was the equivalent of further dragging down our banking system's best fruits with its worst apples. (Ironically, in 1933 the Glass Stegal act attempted to hone capitalism by doing the opposite, forcing the separation of commercial and investment banking.)

The underlying story of the financial crisis is that institutions which were too big to fail misread their risks and were too interconnected to each other. Fair enough. But to the degree that separate institutions are indeed separate, forcing BAC to merge with ML is simply perpetuating the original problem (of interrelated systemic risk) albeit to the nth degree. Instead of cutting our losses with ML and maintaining one great bank, we have a formerly great bank forced to remain on life-support from the government.

Public bewilderment towards the financial crisis stems partly from the fact that no one quite knows what to do. It makes one nostalgic for the 1980’s when things were as simple – at least in retrospect - as Reaganism and Thatcherism vs. Socialsim. Current economic debate - in contrast to the public’s partisan divide on Obama approval ratings - has become less polarized and ideological, more ambiguous and murky, and more important all at the same time. As Greenspan – a self-described Republican-libertarian - pointed out, his job was similar to those of communist central planners, only he was controlling a relatively smaller piece of the economy.

It’s a point worth repeating that the current depression is more complex than most of us can wrap our minds around. And it reveals one of democracy’s flaws, which is that running a country requires more detailed knowledge than is commonly held by the public. Our successful economic recovery - similar to the post-WWII recovery following the Great Depression - is likely to leave the public with few lasting insights about the economy or how the world works. It’s in this panicked context that we see such strange behavior as the Fed’s pressure to force the BAC/ML merger – a scandal occurring at the main nerve of the crisis, the lasting effects of which are unlikely to be well known by the public and experts alike.

What makes this scandal unique is that it's not quite a financial one, and it is a political scandal but not in the regular sense. What, in the end, did Paulson and Bernanke have to gain by forcing the merger? It wasn't money, votes, or even popularity. It didn't spark public outrage like the Madoff or AIG bonus scandals. And the perpetrators weren't guided by partisan or ideological grounds as in the case of Acorn's voter fraud. Unlike any of the previous examples, the perpetrators' motives are not immediately obvious; you have to sit back and think about it before understanding why Paulson and Bernanke felt the need pressure BAC into the merger. And you also have to sit back and think about it before understanding why Paulson and Bernanke's actions were wrong.

-KJ

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Media (in order of appearance)

Photo: (1)Obama at the Texas book festival, 10/28/2006, by Mr. Wright; (2)Bank of America Logo, 08/19/2007, by Neubie; (3)fail, 09/29/2008, by rin3y; (4)Joan of Arc, 08/23/2006, by dbking;(5)Aghast, 08/28/2008, by Daveness98. Sphere: Related Content

Restoring Science

Many who work in research implicitly agree that the truth will set you free. And in one way or another this has driven a lot of us to science. But it's counterintuitive - the truth being thought to be objective and all - that the truth is so different depending on who's asking for it.

What then are we to make of Obama’s repeated desire to “restore science to its rightful place”? Josh Witten (over at Scientific Blogging) wrote a stimulating piece in which he contrasted a recent finding from efforts in federal Chinese science with Obama’s treatment of science. The former employed data on social disturbances, which was generously – almost surprisingly – released by the Chinese government. Looking at 51,000 social disturbances in 2007, sociologists were able to find patterns in the disturbances, which allowed them to successfully predict future ones.

Witten brings up the poignant question, to what end?. Would they use it for good in order to prevent civil unrest? Or would they use it to suppress their billion-plus citizens?

This concern, although hypothetical, is certainly valid for a government with such a corrupt history as China’s. In contrast, our government’s corruption - although not as oppressive as China’s and much smaller in degree - is more implicit and hidden. It's decentralized, just like the structure of the government - hidden away in an infinite amount of special interests, which collectively serve to chip away at the general interest. Indeed, to what end? is the question that we must ask about our own government’s science as well.

Conflicts of Interest

If economics has taught us anything, it’s that people respond to incentives. Almost anyone these days would be quick to point that out when discussing privately funded research. And over the past decade, scientists and academics have become sensitive about their own sources of funding. Scientific conflicts of interest these days are thought to arise mostly from private funding, in the form of corporations hiding negative findings so that they can profit at the public's expense.

But what about publicly funded research? Certainly it still abides by these same incentives, only they’re coming from the government. Hidden agendas in public research are not as explicit – there’s no CEO or central board pulling the strings – but this can make them all the more dangerous.

For instance, you can be certain that environmental scientists who have thought hard about global warming, and don't believe that it's man made, aren't going to receive much in the way of public funding, particularly under Obama’s new administration.

Or what about medical researchers who disagree with the CDC? Many claim that studies on the links between vaccines and autism are marred by confirmation bias - namely their conclusions are simply attributed to the objectives of the authors rather than to good science. Furthermore, vaccines are widely supported by public health officials who are associated with the government. Why would they fund any researchers who genuinely wanted to assess the negative effects of vaccines, when they not only disagree with them, but have everything to lose should their hypotheses be supported?

Every scientist has a unique perspective on the world, but how can we be assured that committees of them who disseminate funding aren't forcing their views onto others? If a researcher concludes in a study that government intervention in his field is ineffective, how is he going to be funded in the future?

A concrete example I recall is from a Chronic Fatigue Syndrome (CFS) researcher I once heard. To give a brief background, the CDC & NIH combined have espoused the view that CFS is no different from depression, although this has produced little in the way of useful research. The researcher was of the opinion that CFS wasn't very related to depression, and he wanted to run a well-devised study comparing different patients' etiologies. The study was eventually funded by the NIH - and his hypotheses were supported - but only he said, because after his grant application was rejected a few times, he re-focused it as if the study was meant to show that CFS was the same as depression, which was more in line with the opinions of the lead researchers at the NIH. It was a funny little anecdote when he told it, but then in all seriousness he said he would probably never receive NIH funding again.

The Doublespeak of Special Interests

Many people in the scientific community are joyful about Obama’s promises to science. And with good reason, because this gives them renewed vigor, along with added job security. But Obama’s vows to the scientific community are at best your average appeal to another special interest and at worst a hint at a more centrally planned scientific future. The web of the conflicts of interest portrayed above are not unique to science. They arise whenever the government overreaches into any special interest area.

Take the phrase “restore science to its rightful place”, and replace the word science with any other political buzzword: religion, agriculture, education, national highways, mail delivery, broadcast television. In this context, the statement’s meaning slowly becomes hollow to ears jaded from meaningless political promises. It does imply that money will be taken from other areas for the sake of science, but that’s about it.

But society thrives on science, where would we be without it? is the retort coming from a few people at Scientific Blogging, and I think it's the feeling generally shared by the scientific community. Once again, however, this argument rings hollow when you consider how many people have said that exact same thing – but for everything in addition to and on top of science, usually covering fields that they work in. Just the other day I heard a reporter say that federal mail service is integral in a democracy, as if to imply that we’d fall apart without it. This is essentially the same argument being espoused by the scientific community for more public science.

Any rigorous argument in favor of more public funds for science has to go beyond its import to society, and cover why it's more important than other specific areas that the government funds. Lobbyists and politicians, of course, act as if you can spend money on everything at once. When that power is abused society as a whole feels the ramifications, either directly through taxes or indirectly through poor monetary policy. Imagine for one moment that the government, just like a person or corporation, really did have a limited budged. Sure it would be necessary to spend money on some things, but why science and not some other thing?

The answer very well might be to spend on science, but it needs to be answered ahead of time and in this format (eg, in terms of opportunity costs). It can't just be assumed that the benefits outweigh the costs because science is good - or even because it's really super good. In the event that science is not the best thing to spend money on, then society as a whole loses (and at the expense of well-paid scientists). Even if all of those funds lead to very fruitful discoveries later, it doesn't automatically prove that they were still worth it, or that they were better than other investments. You would think that such fans of objectivity as scientists would embrace objective assessments like cost-benefit analysis. And they often do, but not always when it comes to their own work.

Well they're already cutting us the check, so why complain?

Academics and scientists feel they have an enlightened view of the world, and in a sense I agree. That's why it bothers me all the more that somehow many of them fail to see that the dirty politics and doublespeak of special interests applies to their discipline as well.

Free-market economist Milton Friedman argued that special interests tear apart the moral fabric of society. They're particularly dangerous because of the covert nature of their corruption: They don't lead to an outright abuse of power, but they create the incentives for many smaller ones. Take from the individual examples above - the scientist who is skeptical about man-made global warming, the doctor who wants to thoroughly assess vaccines, or the CFS researcher who disagreed with the NIH - none of these examples alone attests to the extent to which government funds can harm science. You have to look at the combined effect of such individual missteps, across every field affected, and multiplied over time. The overall picture is not unlike communism in its waste, inefficiencies, moral decay, and potential for corruption, the only difference being that the process is slower and more subtle - but nonetheless real - in regards to special interests.

Even with its extra funding, what is science’s rightful place anyway? Is it just to be well-funded? What does this place look like? Will we shuffle our focus in science - alternative energy for a while, then say obesity - just like 5-year plans in Soviet Russia? Obama strikes me as confident and intelligent, but there's a subtle Orwellian tinge to his promise, if only because science is so important and can be used for so many different ends. Unfortunately this is the last question people seem to ask of Obama’s promise - to "restore science to its rightful place", alright, but to what end?

-KJ

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Media (in order of appearance)

Photo: (1) Essay: Elevating Science, Elevating Democracy(New York Times), 01/26/2009, MashGet; (2) "We need a president who believes in science.", 03/21/2008, Snil Garg; (3) Crowd Policing, 08/12/2006, by Dom Dada; (4) Poster from the 2006 documentary about global warming, An Inconvenient Truth; (5) USPS Logo; (6) Rockefeller Research Building: Example of a building constructed over a highway, 01/01/2008, by Zachary Korb; (7) Berlin Wall, 03/20/2006, by David Hunter; (8) 柏林墙 - The Berlin Wall - Berliner Mauer, 11/12/2007, by siyu. Sphere: Related Content

Obama and the Post-Baby Boomer World

Look at the tears of the cold-hearted Jessie Jackson.

We all know that Obama’s inauguration marks a new age of race relations in the US. I was even tempted to vote for him solely because of his skin color (this coming from a Caucasian). The political race card isn’t superficial: Imagine if every black person in the US felt just a bit more “welcome” here with a black president. Just think about the economic implications.

Obama’s presidency comes at a time when America’s demographics are changing. America is becoming less white. It’s no coincidence that our first black president was elected when he was: The baby boomers are moving on. The passing of the baby boomers, I suspect, will mark Obama’s presidency more than anything else in the US, even more than race relations. The baby boomers are the largest age cohort in the US. It’s not just that they’re more white. They’re also wealthier. And older.

In 1969, Nixon claimed that he appealed to a silent majority of constituents – hard-working older Americans who didn’t protest the war and who had real American values. That silent majority was in fact the baby boomer generation. And they’ve been skewing politics ever since. Young liberal protesters – some even the children of baby boomers – have been dumbfounded by them, ever since protesting the Vietnam War.

How sharper than a serpent's tooth it is
To have a thankless child (King Lear, Act I, Scene IV)

But you have to hand it to the baby boomers. They were born right after one of the scariest times in history, and America’s post-World War II growth in opulence is mostly attributable to them. In their time our economy has shifted even further from being based on physical labor to skills. This shift allows individuals to have longer careers. It gives women a larger role in the workplace. It puts a premium on education. Most of all, it puts a premium on experiential knowledge. Unlike previous generations, it allows the older to be wealthier. The baby boomers’ passing – both literally and figuratively – will be like the loss of a father or a mother to society.



The economic effects are just being realized, and barring any major changes in immigration policy, it will likely extend far beyond weighing down an inefficient health care system. Competent older workers are the most valuable people in our economy. Think about how their loss will have idiosyncratic effects in every industry in the economy.

I can’t help but suspect that the world will have a new feel to it. Maybe this is just because I’m in my mid-20’s and I’ll be experiencing that world in the fullest. But I suspect that the election of Obama is merely our first taste of the world after baby boomers. I suspect that there have been cultural shifts and movements that have been stifled because society has disproportionally more older people, who carry much more economic weight. I wonder whether our economic growth in previous decades was fueled by the disproportional size of the baby boomer generation. I wonder whether we’ll still be one of the wealthiest countries in the world. I suspect that the we’ll become even more technology and internet-oriented.

I think part of it might be a little like the shift from Microsoft to Apple. See, a few years ago my mom bought an iPod, and she still can’t figure it out, this following multiple lengthy lessons from myself. But that’s understandable, because iTunes originally made the most sense for people with large CD or digital music collections. Nonetheless, Apple has become one of the world's largest tech companies in spite of all the people like my mom who aren’t attracted to it. Just imagine what the world will look like when everyone can use an iPod.

Maybe we were all so amazed that we elected a black president that we didn’t catch onto this. But in retrospect it’s obvious: Barack Obama is the first president to be elected by primarily non baby-boomers. It’s not just that lots of young people supported him – young people have always leaned liberal – it’s that those people finally outweighed enough other people. Looming large is the question: what will the post-baby boomer world look like?.

-KJ

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Media (in order of appearance)

Photo: (1) Rev. Jesse Jackson in tears, 11/05/2008, by Andrew Mager; (2) Richard Nixon in the Oval Office, 1972; (3) BlackAppleLogo, 07/25/2008, Ken Fager; (4) Crowds on 18th Street - 2009 Presidential Inauguration, 01/20/2009, by Agnostic Preachers Kid; (5) Obama Poster Painted on Brick..., 05/03/2008, by Hattie Page.

Video: (1) Music video, 05/28/2008, Penguuinz, of the song "The Long Day is Over", by Norah Jones, from her 2002 album Come Away with Me. Sphere: Related Content