Date posted: April 18, 2008 - Friday
Title: TW3 04/18/08
Current mood: discontent
How Sharp Is That Pencil?
When I was a kid I heard it somewhere. It is one of those phrases you hear that most often is attributed to a wise grandmother. I can't say it came from my grandmother, but I know I heard it.
"Figures don't lie, but liars can figure."
And we all know who the biggest liars around are. So …
The news comes out that maybe the government's measure of inflation may not be that accurate. Right now the current administration (the Department of Labor) says the level of inflation is 4%. This in the face of record gas prices and higher prices for food staples. And it is only slightly higher than the rate for 2007; 4.1% which was the highest rate of inflation in this decade.
But never fear. The "core" inflation rate is just 2.4%. The "core" rate is determined by not including figures for things like energy and food prices which are considered too volatile. Never mind the prices fuel and food are the things that impact the lower end of earners the most.
"Food prices and the price of gas are really eroding the purchasing power not just of the working class, but people in the middle class, who are already beginning to have a hard time making ends meet," said business-trend consultant Joel Kotkin.
But if things get to look too bad there is always the opportunity to change the way you figure inflation.
Apparently that is exactly what the Regan and Clinton administrations did in 1982 and 1998. Over the past 25 years the government has changed the way price increases are calculated. The changes include measuring the cost of shelter by rental prices instead of home prices (and we all know until recently housing prices have been on the rise). The government also gave as much weight to high-ticket items like cars and electronics as it did to daily necessities such as food and gasoline.
What's the bottom line? Well if you go back to pre-1982 methods of figuring inflation the rate today would be 11.6%. And if you only go back to before the Clinton administration changed the methods the inflation today would be 7.3%
When was the last time any of us got a raise, or an increase in income that would negate an inflation rate of 11.6% or even 7.3%?
I'll Just Have The Catfood Entrée
Sound outrageous? Maybe not.
The need for corn to produce ethanol has raised the prices of things like meat, eggs and poultry. Now comes the word it probably won't be any cheaper to become a vegetarian.
Rising costs for fertilizer are putting a hurt on vegetable growers across the country. Some in the Midwest are surviving because they are getting higher prices for their products used to produce ethanol.
What's causing the rise in fertilizer prices? Increased demand from countries like China and India who are using the fertilizer to produce feed for meat-producing animals. Guess our exporting of things like McDonald's franchises and having foreign countries develop a taste for more meat are having a bad effect on our own food supply.
California growers have seen increases in fertilizer prices of 20% from one delivery to the next - only two weeks apart. California is the nation's leading agricultural state. And fertilizer distributors say they are getting several price increase notices per day from their suppliers. For the moment growers have been absorbing the price increases, but that can't go on forever.
Predictions are vegetable prices will be going up. And there is the possibility that you won't even be able to find some vegetables. Those crops that become too expensive to grow and can't be sold for a profit might just disappear from your store.
Watch Out For Those Buried Benefits
Help is on the way for homeowners caught in the economic crisis. Well, a tiny amount of help is contained in the Senate Foreclosure Prevention Act.
While the bill senators approved last week will take what are called "modest steps" toward bailing out troubled homeowners, it's the fine print that makes it interesting.
Fine print, you ask? Yep, billions of dollars in tax breaks for automakers, airlines, alternative energy producers and other struggling industries; including home builders.
Excuse me, but how does bailing out automakers and airlines help the guy who is about to default on his mortgage?
As usual, the Senate blows the chance to do something to help the average citizen in favor of helping out business and the lobbyists who represent them.
Everyone knows the housing industry is in crisis and homeowners are suffering. And this presents a perfect opportunity for lobbyists to pressure Congress because they know it has to act on all the cries from a troubled public.
Soon enough the Congress will grind to a halt because of the upcoming elections. That means there is only a short period of time to draft and possibly pass legislation that address the mortgage crisis. And apparently lobbyists took full advantage of the populist imperative driving legislation.
How beneficial is the Senate Bill? The nation's largest home builders, some on the verge of bankruptcy, would get huge tax breaks. The companies could write off current loses against huge profits gained in previous years and gain monumental tax refunds. Other industries would be able to take advantage of the Alternate Minimum Tax which has been out of their reach up till now.
Legislation in the House of Representatives doesn't include the business-friendly provisions of the Senate bill. The House bill actually gives more help to people trapped in the mortgage crisis, but it is expected over the next few weeks representatives will be under a "full court press" from lobbyists to keep the provisions of the Senate in whatever final bill makes it through Congress an onto the President's desk for signature.
It will be interesting to see if troubled homeowners actually ever get any relief. And what industries are successful in squeezing more sugar out of Congress.
But Can They Govern?
Silly season has hit the political campaigns.
Outside the normal hoo-ha-ha of debates, political speeches and photo ops there were some "unique" events happening on the campaign trail this week.
Over the years the political campaign has evolved as politicians found new way to get their 'message' in front of the public. (This presupposes they actually have a message and not just a sound bite for the evening news.)
So this week we were treated to the sight of Barack Obama playing basketball on an HBO sports show and talking about how the sport is a great part of his life. And we saw John McCain's wife on "The View."
I guess it's no worse than when candidates would pose kissing a pig in farm country or posing in an Indian headdress while campaigning in the Midwest, but it sure looks silly to me. And it doesn't say a thing about the qualities or qualifications of the candidates.
Yeah, But We Made A Lot Of Money
Food and Drug Administration commissioner Andrew von Eschenbach, testifying before Congress, this week said a blood thinning drug was deliberately contaminated in an effort to increase profits.
The drug, heparin, from Baxter International, Inc. has been linked to deaths and allergic reactions. Sixty two people given heparin have died since 2007 after suffering allergic reactions or low blood pressure.
The drugs' main ingredient is pig intestines imported from China. Apparently a cheaper substance obtained from animal cartilage was substituted for the pig intestines and contaminated the drug. Originally the FDA said it wasn't sure if the contaminating ingredient was added intentionally or just as a means of boosting profits.
"It was apparently, we suspect, done by virtue of economic fraud," von Eschenback said.
But, after the hearings, von Eschenbach backtracked on his statements and said the FDA couldn't really say if the contamination was intentional because it didn't have the evidence to back up such a claim.
I guess the FDA can't find a smoking gun at Baxter International.
On another front, two teams of researchers going through thousands of documents say they have uncovered evidence that Merck & Co. waged a campaign of deception to promote its' painkiller Vioxx. Reports show the company moved slowly to warn patients of the possible hazards and at the same time dressed up in-house research and presented it as the work of independent academic researchers. By claiming the research was conducted at medical schools results would have been given more credibility when published in medical journals and boosted the profile of Vioxx in the crowded painkiller market.
Vioxx went on the market in 1999, grew to a $2.3 billion product and then was withdrawn from the market in September of 2004 when it was shown the drug increased the risk of heart attack and stroke in people using it. Since the withdrawal Merck has been named in 26,500 lawsuits by people saying they were harmed by the drug. Merck has created a $4.95 billion fund to settle claims involving the drug while not admitting it caused heart attacks, strokes or death.
The two published studies drawn from the internal Merck documents claim to provide a look at practices that are widespread in the pharmaceutical industry.
Merck, of course, has dismissed the studies as being the result of work by "people in the pay of trial lawyers."
More bad news from the world of health and drugs came this week with the revelation that insurance companies are changing their policies on pricing for some of the most expensive drugs. Something that started in the Medicare system (Tier 4 drug pricing) has now spread to other areas of health insurance. Instead of charging a modest co-payment for drugs that can save a patient's life or slow the progress of a serious disease, insurance companies are now asking patients to pay a higher percentage of the cost and it can run into thousands of dollars. Some of the percentages can run as high as 20 or 33 percent.
And we are not talking about drugs used to treat uncommon diseases. Some of the drugs falling under these new procedures are used to treat such things as multiple sclerosis, rheumatoid arthritis, hemophilia, hepatitis C and some cancers.
Something like 86 percent of health insurance companies have adopted Tier 4 pricing and some even have a Tier 5 pricing schedule. Essentially the new plans charge patients with serious illnesses more and other patients are charged less for their coverage. James Robinson, a health economist at the University of California Berkeley, said, "It is very unfortunate social policy. The more the sick person pays, the less the healthy person pays. This is an erosion of the traditional concept of insurance. Those beneficiaries who bare the burden of illness are also bearing the burden of cost."
Yep, America's wonderful health care system in action.
Quickies
Another sign the financial crisis is moving forward. Here in the San Diego area where housing prices have gone out of sight for years, the median price of a home fell last month to below $400,000. It's the first time the median price has dropped that low since 2003. Prices are down $20,000 from February and 19.4% from the same time last year.
Despite a planned Presidential veto, Democrats passed a bill this week that would prevent the IRS from using outside firms for debt collection. The bill also would tighten rules on tax-free health saving accounts and require the agency to take steps to make the income tax process simpler and fairer.
The Supreme Court is on a collision course with the Bush administration and the EPA, but it could all be moot by the time a decision is reached. The Court agreed to review a case which ruled against the EPA decision to let power companies use a cost benefit analysis in determining how they would combat heat pollution in rivers and streams used to cool generating plants.
Power companies had determined that closed-system cooling systems which would keep heat pollution from harming wildlife in rivers and streams was too expensive. The Court expressed skepticism about the findings and agreed to rule on challenges to the EPA ruling.
Unfortunately, with an extremely crowded docket this term, the court isn't expected to hear arguments until December and not to rule until next March. By that time the Bush administration will be gone and a new administration could take a whole new direction with the EPA.
A new study has shown large corporations have less to fear from the IRS than they used to. The IRS' scrutiny of the nation's biggest companies is at a 20-year low according to the study conducted by Transactional Records Access Clearinghouse. The study points to "a historic collapse in audits." It found major corporations - defined as those with assets of at least $250 million - have about a 1-in-4 chance of being audited, down from about 3-in-4 in 1990.
The study findings suggest the IRS is shifting its' focus away from large companies to smaller companies and private partnerships.
Britney Spears is back in the news. She is about to lose a lot of money. Already under a court order to pay K-Fed's divorce lawyer $375,000 (the lawyer wanted $500,000) the court commissioner in her conservator ship ordered her to pay another $372,000 to lawyers. Most of it is going to lawyers appointed during her conservator ship to look after her interests.
I hope the commissioner kissed Britney. I was always told it only polite to kiss a woman if you were going
