The Federal Reserve (the Fed) – the United States’ version of a Central Bank – is a strange duck. It is the U.S. government’s most powerful regulatory agency. It, after all, regulates money and interest rates. Yet, its budget comes entirely from the banking industry and relationships with the financial industry. So Congress, which appropriates money for all other federal agencies, has little leverage over the Fed’s operations.
This independence – except from the big banks – is by design, when the Fed was devised by President Woodrow Wilson over one hundred years ago. The Fed, a secretive, private government inside a public government presents problems for a democratic society. The alternative was deemed worse by its boosters, allowing “politics” to determine the Fed’s Board of Governors decisions.
It is as if the Federal Reserve/banking complex does not deal with political power by its own definition. The Fed entrenches the power of the banks without accountability inside Washington. Ask Republicans in Congress whether they generally oppose government regulation of a business and most will say “yes.” Ask whether they want to deregulate the Federal Reserve and they will say “Of course not.” Somebody has to assure monetary stability.
But the Fed’s announced quarter of a percent cut in interest rates, which were already low by historical standards at 2.25 to 2.50 levels, will affect people, beyond abstract monetary theories. Tens of millions of Americans who rely on income from their savings accounts and money market accounts will receive less money. Some will jump into the high flying stock market, presumably to get more income and introduce real risk to their principal.
The $2.9 trillion Social Security trust fund will receive less income from lower yielding Treasury Bonds. That’s not good for seniors. It is also really bad for pension funds, not to mention the returns on certain life insurance policies.
The Fed mumbled something about the trade war and a recent small decline in manufacturing indices as reasons to head off trouble.
But companies are piling up idle capital without knowing what to do with it other than to spend trillions of dollars on unproductive stock buybacks. There is no shortage of capital. Lowering the interest rate will just encourage more unnecessary corporate debt, with its deductible interest payments, instead of corporations using their available equity.
Venerable business columnist Allan Sloan does not think that a quarter-point cut by the Fed “will generate job-creating investments in the United States by companies that are uncertain about the future because of trade wars, threatened trade wars, interrupted supply chains and other actual and potential instabilities” (See Allan Sloan’s article here).
Sloan gave other cogent reasons against a Fed interest rate cut, while conceding that it might help borrowers. That assumes gouging lenders (pay day loans, auto loans, credit card charges) pass the savings along.
Conventional critics of the Fed’s cut this week point to already low interest rates and what they call a hefty economy, modest inflation, and a low unemployment rate.
Some former Fed governors called out the Fed for not clearly and specifically explaining its decision to cut rates. As former Fed Governor and Deputy Secretary of the Treasury, Sarah Bloom Raskin, said: “The Fed has really had a bit of a communications blunder… If Americans don’t understand exactly what is happening and why, they may think that Chairman Jerome Powell is caving into presidential bullying.”
No kidding. Trump has been pounding the Fed and threatening to take away Chairman Powell’s Chair for months. He is demanding sharp reductions in interest rates. He renewed his denunciation after the Fed’s quarter of a percent cut this week, tweeting that it was nowhere near enough!
Presidents almost never do this publicly to the Fed. But Trump, the failed gambling czar knows better. Intimidation through the mass media again and again works for Trump.
Although the Fed wanted to resist his pressure, hey, why take greater chances with crazy Donald? Instead, they threw him a bone.
Big Pharma: Gouges, Casualties, and the Congressional Remedy!
The Congress can overturn the abuses of Big Pharma and its “pay or die,” subsidized business model for its drugs.
Big Pharma’s trail of greed, power, and cruelty gets worse every year. Its products and practices take hundreds of thousands of lives in the U.S. from over-prescriptions, lethal combinations of prescriptions, ineffective or contaminated drugs, and dangerous side-effects.
The biggest drug dealers in the U.S. operate legally. Their names are emblazoned in ads and promotions everywhere. Who hasn’t heard of Eli Lilly, Merck, Pfizer, and Novartis? Big Pharma revenues and profits have skyrocketed. In 2017, the U.S. consumers spent $333.4 billion on prescription drugs.
There are no price controls on drugs in the U.S. as there are in most countries in the world. Senator Bernie Sanders just took a bus tour to a Canadian pharmacy where insulin cost patients one tenth of what it costs them in the U.S. Yet, remarkably, drug companies, charted and operating in the U.S., charge Americans the highest prices in the world. This is despite the freebies our business-indentured government lavishes on Big Pharma. The FDA weakly regulates drugs, which are supposed to be both safe and effective, before they can be sold. Who funds this FDA effort? The drug industry itself— required by a law it has learned to love.
The Big Pharma lobby doesn’t always get what it craves. In the nineteen seventies, Dr. Sidney Wolfe, director of Public Citizen’s Health Research Group, produced two paperbacks for a wide television audience (e.g. he appeared on the Phil Donahue Show). They were titled, Pills That Don’t Work and Over-the-Counter Pills that Don’t Work. Because of Dr. Wolfe’s tireless efforts, hundreds of different pills were removed from the market, saving consumers billions of dollars and sparing them the side-effects.
Big Pharma’s greatest strength is its hold over Congress. That is where it gets its huge bundle of subsidies and monopolistic privileges. During the first term of George W. Bush, the drug companies got the Republicans and some spineless Democrats to forbid Medicare from negotiating volume discounts with the drug companies, as the Pentagon and VA have done for years. Big Pharma had over 1,200 lobbyists swarming over Capitol Hill to get these handcuffs on Uncle Sam. Lobbyists combined with campaign cash donated by Pharma industry players sealed the deal.
Your Congressional representatives gave the drug giants much in return: Lucrative tax credits to pay Big Pharma to do what they should do anyway—engage in research and development. Drug companies are profitable recipients of taxpayer-funded government research on developing new drugs – and then given monopolies that enable them to impose sky-high prices, even when the purchaser is the very government that funded the invention of the new drugs in the first place.
The drug industry has also made sure there are no price controls on their drugs—whether gifted to them by NIH or developed by drug companies internally. The absence of price controls accounts for new “blockbuster drugs” going for $100,000, or higher, per patient per year. Many drug prices generally increase faster than inflation.
Greed is infinite for Big Pharma. In addition to tax credits, free drug R&D (compliments of the federal government), and no price restraints, the drug companies have moved much production to China and India. No antibiotics are manufactured in the U.S.—a clear national security risk to which the Pentagon and Trump should pay heed. Two new books, China Rx and Bottle of Poison, document the safety risks of poorly inspected labs in those countries exuding pills into your bodies without your minds being told of “country of origin” on the label.
The great hands-on humanitarian organization Doctors Without Borders, operating in 70 countries often under dangerous armed conflicts, lists “Six Things Big Pharma Doesn’t Want You to Know,” in its recent alert letter.
- Costs of developing new medicines are exaggerated tenfold or more.
- You’re paying twice for your medicines—first as taxpayers and second as consumers or through your government programs.
- Drug companies are not that good at innovation. About two thirds of new drugs (called “me-too drugs”) are no better, and may be riskier, than the ones already in pharmacies. But they are advertised as special.
- Monopoly patents are extended by clever lawyers to block more affordable generic versions. This maneuver is called “ever greening.”
- Pharma bullies low and middle income countries like South Africa, Thailand, Brazil, Colombia, and Malaysia that try to curb its rapaciousness. These drug companies use trade rules and the U.S. government towards their brutal goals. In the nineteen nineties, a small group of consumer advocates led by Jamie Love, Bill Haddad, and Robert Weissman persuaded Cipla, an Indian drug firm, and Ministries of Public Health to lower the price of AIDS medicines from $10,000 per patient per year price down to $300 (now under $100). The U.S. drug companies were quite willing to let millions die because they couldn’t pay.
- Big Pharma always says they have to have large profits to pay for R&D and innovation. Really? Why then do they spend far more on stock buybacks (one of the metrics for executive compensation), on marketing and advertising than on R&D? Dr. Wolfe exposed this malarkey years ago.
Yet exposure has not stopped the worsening behavior of Big Pharma. Good books by Katharine Greider (The Big Fix) and Dr. Marcia Angell (The Truth About the Drug Companies) are devastating critiques of Big Pharma’s practices. Despite this, the books reach small audiences and are brushed off by the drug giants. Big Pharma is able to ignore these books because it controls most of Congress—candidates rely heavily on the industry for campaign budgets.
But the American people outnumber the drug companies and only the people can actually vote come election time. Focused voters mean more to politicians than campaign money. The August recess for Congress means your lawmakers are back home having personal meetings. Visit them and make known your demands against the “pay or die” industry. Tell them your own stories.
Or better yet, make them come to your town meetings. Remember: “It’s your Congress, people!”
One galvanizing move by an enlightened billionaire could establish a 20 person advocacy group on drug pricing, focusing on Congress and mobilizing citizens back home. Its effect would be decisive for taming the drug industry’s gouging. Any takers: if so contact Public Citizen at email@example.com.
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