Despite the President's claims, his executive order (EO) does not extend the expired federal ban on evictions or provide more funds to tenants or landlords to cover lost rent payments. In fact, the EO doesn't do anything that would immediately help people pay their rent and avoid evictions — though Administration officials are recklessly claiming that renters are now protected from evictions. That must be particularly concerning for the likely millions of people struggling to pay rent in August.
The EO claims to help renters who have suffered income or job loss due to COVID-19 and the resulting economic recession. The EO, however, merely asks federal agencies to "consider" and "review" if measures to halt evictions are needed; it does not specify what actions agencies can take to halt them. It also directs the Housing and Urban Development and Treasury departments to identify available funds to provide rent relief, singling out landlords, affordable housing developers, public housing authorities, and federal grant recipients for assistance. But without congressionally approved funding, it's unclear what funds they can redistribute to protect these recipients, let alone renters.
Some 21 percent of all adult renters were behind on their rent in July, the most recent data show. That's before the eviction moratorium and enhanced unemployment benefits, enacted under the CARES Act of March, expired. Without these protections, a wave of evictions may be imminent, experts fear.
The nation faces serious rental housing problems that this executive order doesn't solve. Instead, policymakers should take a comprehensive approach to address them adequately. Such an approach would include:
We are still very much in the middle of the pandemic, with the U.S. seeing tens of thousands of new infections daily, and the world experiencing hundreds of thousands of new infections. However, it is not too early to look at areas where we need to reevaluate public policy, most importantly in financing the research and development of new drugs and vaccines.
The accepted wisdom in policy circles has been, that while the government can finance basic research, we need to rely on government-granted patent monopolies to pay for the actual development and testing of new drugs. The argument is that we want private companies to compete to develop new and better drugs, with the rents earned from their patent monopolies compensating them for the cost of research and testing, as well as compensating them for the risk that they will not develop a marketable drug.
The logic of this position relied on the claim that somehow government financing of the later stages of research and testing is essentially the same thing as throwing money in the toilet. The industry acknowledges the value of the research funded by the National Institutes of Health (NIH), and in fact is the biggest lobbyist for it. But they say that if NIH were to move downstream and actually finance the development of drugs and do clinical trials, they would turn into a bunch of bureaucratic bozos who couldn't do anything right.[1]
The behavior of the government in this pandemic seems to indicate that this is not the case. The government, through Operation Warp Speed, is directly funding the research on vaccines, as the research takes place. This is most visible with Moderna, the country's leading contender to develop a vaccine. The government paid $483 million to Moderna for pre-clinical research and Phase 1 and 2 testing. It then coughed up another $472 million to cover the cost of phase 3 testing.
If any policy types thought this direct government funding of the research and development of a vaccine was just throwing money in the toilet, they have not been very visible in expressing this view over the last four months. It is true that Moderna will also get a patent monopoly, allowing it to collect even more money for its effort, but the direct funding from the government is clearly the key here. This funding paid for the research and testing. It also meant that the government took all the risk. If Moderna's vaccine turns out to be ineffective, the government will be out the money, not Moderna.
Since policy types can apparently accept that when the federal government directly pays for the development and testing of new drugs and vaccines it is not the same as throwing the money into the toilet, maybe we can move forward and ask the next question as to how efficient direct public funding is relative to patent monopoly financed research. The issue here is how much the government would have to spend on advanced funding to get the same results as we see with patent monopoly financed research.
Before considering what the ratio of relative effectiveness might be, it is worth getting some idea of what is at stake. We will spend over $500 billion in 2020 for drugs that would almost certainly cost us less than $100 billion in a free market without patent monopolies or other forms of exclusivity.[2] It is rare that drugs are actually expensive to manufacture and distribute. The drugs that sell for tens of or even hundreds of thousands of dollars for a year's treatment would typically sell for just a few hundred dollars if they were sold in a free market without patents or related protections. The potential savings of $400 billion a year come to more than $3000 per household.
In exchange for this $400 billion in higher drug prices, we get around $90 billion in research spending by the industry. These numbers are shown in the figure below, along with the $40 billion annual budget (pre-pandemic) for the National Institutes of Health. This is an understatement of federally funded bio-medical research, since we spend several billion more through Biomedical Advanced Research and Development Authority (BARDA) and other government agencies.
These figures are shown below along with the $60.4 billion that we spent on food stamps (SNAP) in 2019. The food stamp budget is included as a point of reference since many people in policy debates seem to believe that our spending on food stamps is a really big deal.
Source: Author's calculations: see text.
Anyhow, the basic story is that we come out ahead with publicly funded research if it is at least one quarter as productive as patent monopoly supported research. In other words, if four dollars of direct publicly funded research is at least good as one dollar of patent supported research, we would be better off switching to a system of publicly supported research.
There are actually good reasons for thinking that on a per dollar basis government funding would be more efficient. First and foremost, the government could make it a condition of funding that all results are posted on the Internet as quickly as practical. This would allow researchers to quickly learn from each other's work, building on successes and not wasting effort pursuing dead ends. This was the practice with the Bermuda Principles in the Human Genome Project. This sort of open-research in the early days after the coronavirus was first discovered led to much more rapid progress than would ordinarily be the case.
The other major reason why publicly funded, open-source, research is likely to be more efficient on a per dollar basis is that there would be no incentive to develop copycat drugs as a way of sharing patent rents. While it is often desirable to have more than one drug to treat a specific condition, since some patients may respond poorly to an initial drug or it could have harmful side effects, trying to engineer around a patent will generally not be a productive use of resources from a social standpoint. If research funding was being paid upfront, with no patent rents to compete over, there would be no incentive to develop a duplicative drug, except where there was a medical reason.
This raises another reason for believing that direct funding of research will lead to better health outcomes than our current system of patent monopoly financing. When drug companies can sell their drugs at patent monopoly prices they have an enormous incentive to promote their drug even in circumstances where it may not be the best treatment for a specific medical condition. This means that they have a reason to conceal evidence that their drugs may not be as effective as claimed or could even be harmful.
We saw this story with the opioid crisis, where several major pharmaceutical companies are alleged to have misled doctors and the public about the addictiveness of their new generation of opioids. Unfortunately, this is not an exception. There have been many instances where drug companies paid large settlements over allegations that they deliberately misled doctors and patients about the safety and effectiveness of their drugs.
In the absence of patent monopolies, no one would have any substantial incentive to make misleading claims about the quality of drugs. Furthermore, since all the research and test results would be fully public, they would likely not be able to get away with false claims even if they tried.
There is one additional source of waste that would be eliminated if we directly funded the research and allowed drugs to be sold at free market prices. We would not need insurance to cover drug costs. When drugs can cost, hundreds, thousands, or even tens of thousands of dollars, people need insurance to cover this potential expense. However, if most drugs sold for ten or twenty dollars per prescription, insurance would not really be needed. (Lower income people would still need assistance in paying for drugs.)
Since insurers take on average 20 to 25 percent of health care spending to cover their administrative costs and profits, having drugs sell at free market prices would save us tens of billions annually on insurance costs. This also has to be factored into any comparison of the relative efficient of direct public funding and patent monopoly financing.
If we do consider direct public financing of research, the Trump administration has not provided us with the best model. We don't want companies selected through a closed door process with no clear criteria. My ideal model would be to have companies contracting for large sums to pursue research in specific areas for a substantial period of time. For example, a company may get a contract for $20 billion over a twelve-year period to pursue research for new drugs to treat liver cancer.
This sort of long-term contracting should insulate companies for political pressure, since once a contract was granted, they could not lose the funding, barring outright fraud or other serious forms of malfeasance. The awarding and renewal of contracts would be based on clear and fully public criteria. (This system is described more fully in chapter 5 of Rigged.)
It will be a long jump from where we are now to a system of open-source publicly financed biomedical research, but we opened the door for this switch with the financing of treatments and vaccines for the coronavirus. Once we acknowledge that direct public funding of the development of new drugs is not the same thing as throwing money into the toilet, then we can start asking questions about the relative effectiveness of direct public funding and patent supported research.
This seems to raise uncomfortable questions for many people in policy debates. They, and their friends and family, tend to be among the group of people who benefit from patent and copyright monopolies in drugs and other areas. However, if we want to have serious policy discussions, and not just protect existing patterns of inequality, government-granted patent and copyright monopolies have to be on the table.
[1] This view persists in spite of the fact that many important drugs have actually been developed on NIH grants and the agency has financed hundreds of clinical trials.
[2] There are a variety of mechanisms other patent monopolies that allow drug companies to have exclusive rights to sell a drug. The most important of these is data exclusivity, which prohibits generic manufacturer from relying on the test data from a brand drug to show that a chemically equivalent drug is safe and effective.
The post Financing Drug Development: What the Pandemic Has Taught Usappeared first on Center for Economic and Policy Research.
Donald Trump calls himself the "law and order" president, but when it comes to white collar crime, he has overseen a significant decline in enforcement.
The prosecution of securities fraud, antitrust violations and other such crimes has hit a record low as the pandemic slows the courts, according to one tracking service. But even before the coronavirus, the numbers were falling under the Trump administration.
The average annual number of white collar defendants was down 26% to 30% for Trump's first three years in office from the average under President Barack Obama, according to data from the Justice Department and Syracuse University, respectively. The trend also shows up in fines on corporations, which fell 76% from Obama's last 20 months to Trump's first 20 months, according to Duke University law professor Brandon Garrett.
"Mr. Trump sets the tone," said John Coffee, a professor at Columbia Law School whose new book, "Corporate Crime and Punishment: The Crisis of Underenforcement," analyzes the decline.
Trump's Justice Department has even presided over a plunge in deferred-prosecution agreements, Coffee said. In a DPA, a company is charged with a crime but prosecutors agree to drop the case later if it admits wrongdoing, pays a penalty and makes required reforms. The administration has also brought fewer white collar racketeering and money-laundering cases, crimes that carry harsher penalties, he said.
"All that is an indication that white collar crime is not a priority," Coffee said. "If you want to celebrate corporations as leading our economy and the stock market up higher and higher, you don't want to indict them."
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The Justice Department says it hasn't eased up at all.
Prosecutors "continue to bring federal charges in white collar and other cases according to facts, the law and the principles of federal prosecution," said Peter Carr, who was a spokesman for the department's Criminal Division until moving recently to the Department of Homeland Security.
The Department of Justice "can't vouch for TRAC's methodology," Carr said, referring to Syracuse University's Transactional Records Access Clearinghouse, which monitors trends in federal law enforcement and whose records reflect a decline of about 30% in prosecutions under Trump. He added that TRAC data "routinely differs" from the reports of the U.S. attorney offices, the U.S. Sentencing Commission and the U.S. Courts, among others.
TRAC's tallies are based on "hundreds of millions of records" from each U.S. attorney's office, said the group, which has been following the data for more than two decades. Cases are counted based on when they're recorded in a prosecutor's database, following the DOJ's own practice, it said.
DOJ spokesman Matt Lloyd said the Criminal Division's Fraud Section, which focuses on white collar crime, "has achieved record numbers of individual and corporate criminal cases and resolutions over the past three years," including a 59% increase in individuals charged between 2016 and 2019 and a jump of more than a quarter in those convicted. He didn't comment specifically on the 26% decline reflected in the data published by the U.S. attorney offices nationwide, which cover a much larger set of white collar prosecutions, but called the Fraud Section's achievements "a key indicator of the department's commitment" to the issue.
Read More: U.S. Charges Four Chinese Military Members Over Equifax Hack
Prosecutions have been declining for the past decade but have never been so low.
The Justice Department under Trump has shifted its focus from traditional white collar cases, like big securities prosecutions, to immigration and the sort of corporate espionage targeted by the DOJ's China Initiative, said Robert Anello, a white collar defense lawyer in New York. Immigration-related offenses accounted for more than half of federal prosecutions in fiscal 2018, Anello said.
A crackdown on financial fraud starting decades ago spurred reforms and increased corporate compliance, which became "one of the trademarks of American companies abroad," Anello said. He warned that could now fade with waning vigilance.
The change is clear, according to seven ex-prosecutors who handled securities fraud and asked not to be identified in discussing their former offices' work. Veterans of the DOJ's antitrust and fraud divisions have left, and younger lawyers need time to learn how to build a complicated case, they said.
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The Internal Revenue Service, too, has suffered from attrition over the years, although it got a budget increase last year. Its Criminal Investigation division helps send people to prison for crimes such as tax evasion, money laundering and identity theft. The agency saw a 36% decrease in new criminal investigations from fiscal 2015 to 2019, IRS records show.
One factor in the decline in traditional white collar prosecutions is an important change to what's known as the Yates memo.
In 2015, under Obama, Deputy Attorney General Sally Yates required companies seeking leniency to help develop evidence against their employees and turn over possible suspects. In 2018, under Trump, the Justice Department softened the criteria. For instance, in the Yates memo, a company in a price-fixing case had to be the first to cooperate. Now it doesn't, said Columbia Law's Coffee.
"The old rule was, we're gonna be really tough," he said. "You can get off, and your officers can get off, if you turn the co-conspirators in and confess." Now, Coffee said, companies are getting "tremendous sentencing credits" simply for having a corporate compliance plan.
"Those things just require a good lawyer to spend two nights writing one up," he said.
—With assistance by Chris Strohm and Justin Sink
-- via my feedly newsfeedAcross the swamps of time, revolutions, colonialism, neo-colonialism, imperialism, world wars, industrializations; through the trials and zig-zags of both socialist and social-democratic experiments in working class leadership in society, comes an idea of Vladimir Lenin. In 1921, the "command" economy of the Russian revolution and civil war was in collapse, forcing a retreat to a socialist form of state monopoly capitalism. This model, called the New Economic Program, lasted until 1928 in the USSR, when it was terminated under Stalin's leadership.
The essential idea was that Communists armed with science could manage market successes and failures better than capitalisms. A basic premise of the proposal was that mixed economies – advancing public and market/capitalist sectors – were unavoidable, and indeed necessary for the transition and development of conditions permitting fully humane relations.
This idea has more than once been treated as heresy within the Communist movement. To some, the compromises of the New Economic Policy compromised the the socialist ideal of abolishing capitalism and feudalism, and was unprincipled. Even Deng Xiaoping, who would later lead the Chinese Communist Party in expanding and developing Lenin's idea, was branded a "capitalist-roader" during Mao's Cultural Revolution.
In China's transformation, Lenin's intuition bore fruit. The socialist goal of a "harmonious and moderately prosperous society" adopted by the CCP gave state-led capitalist development a purpose that the essential anarchism of markets alone cannot achieve.
Thus was born a concept of market socialism, and more generally socialist-motivated industrial policy in mixed economies.
All governments have an industrial policy: the state's plan for essential manufacture and resource development. Whether for profit, or paid whole or in part by the state, the priorities for national investment, if not a purely market model, must provide: defense, security, food, shelter, clothing, and a plan for future progress. If you cannot produce them, you must acquire them from someone who does.
Billionaires, even the liberal ones, despise state-led investment, both in theory and by intuition: bourgeois liberty was founded historically in opposition to Royal monopolies, taxes, and regulation. "Governments are bad at picking winners", they like to chant. But they are learning otherwise. In the current pandemic depression, the socialist enhancement of industrial policy proved in China, Vietnam, and most of the social democracies that it can out-perform capitalist-led societies, in both growth and especially in recovery from crisis. One thing billionaires are good at is sensing power. They sense it with China. They are indeed inspired to emulate its inevitable successes.
What does that mean?
It means there is more than one enlightened billionaire, not just fascists, who are thinking "authoritarian" thoughts about this crisis, and about the paralysis of US democracy. They are drawing the conclusion that more powerful, directed, supervised, industrial policy, like China,'s, can save America. In their vision, that policy would be benign, rational, pro-science, cosmopolitan rather than racist, free from Trumpism but also without the socialist ideals of harmony and equality.
Let's look at a couple of examples.
About eight years ago, Bill Gates wrote a tribute to a celebrated biography of Deng Xiaoping. The biography charts Deng's struggle to develop an economic and political recovery strategy following the failures of the Great Leap Forward. His theories were heavily influenced by Lenin's New Economic Program, and the results were staggering: exceeding 10% annual growth rates uninterrupted by business cycles or externalities for more than 20 years! But neither Deng nor China would not call it a miracle: it is demonstration, that a scientific, fact-based industrial policy guided by socialist goals can outperform capitalist led societies.
Gates' greatest praise is not for Deng's market reforms but his advances in state-directed education, health care and technology innovation.
Here is Gates' assessment of Deng Xiaoping:
Although Deng's transformation of China cannot be separated from the violent attacks that he administered under Mao's rule or the brutal approach he took to stopping the Tiananmen Square student protests, the economic reforms have improved the livelihoods of millions of people. China has capitalized on advances in education, healthcare, agriculture and innovative technology to help accelerate their own development and transition beyond the need for aid. To have done this essentially in one generation is an unbelievable accomplishment and is unique in the history of the world.
The most important sentence is the last. It shows that one of the world's wealthiest men has broken with the presumption of socialism's failure following the collapse of the USSR. Gates replaces that narrative with a new one: socialism with Chinese characteristics is an astounding success. (We should note, too, that there is more than one way to read Gates' caveat about the Tiananmen repression – and not necessarily as a criticism).
Not long after, in 2015, Thomas Piketty was a panelist at an American Economics Association meeting in Boston. After being artlessly red-baited by Harvard economist Greg Mankiw (Chair of the Council of Economic Advisors under Bush), the renowned French economist countered by recounting a dialog with Bill Gates on the subject of the wealth tax, a reform Piketty considers essential to "manage aggravated inequality tendencies" in capitalism.
Gates: I agree with nearly everything in your masterpiece, except the wealth tax. I support a progressive income tax. But why will the government make better use of my wealth than I have, or will, through my foundation, and company?
Piketty: If you are right, perhaps we should just eliminate all taxation on ALL billionaires, in the national interest?
Gates: [after pause]: You may have a point. I will think about it. Did you know I am a fan of China's leader, Deng Xiaoping?
Piketty: As am I.
As Piketty's example illustrates, the curse of the billionaires, even the ones more humanistic in outlook, is that their main adversaries in pursuing a humanistic vision are the reactionary billionaires. But they cannot destroy them without undermining their own position with regard to the privileges of wealth.
Bill Gates is not the only billionaire taking a new look at China. Bloomberg News published the following in an unsigned editorial (which we can interpret, I think, as approved by Michael Bloomberg, the firms's owner and fourth-richest man in the world):
When China began allowing private businesses and foreign investment four decades ago, many outside the communist country expected that as its economy became more capitalist, its politics also would become more democratic. They didn't. Instead, the Chinese system, which puts stability and cohesion ahead of individual freedoms, became adept at delivering prosperity, with the Communist Party still firmly in control. For Beijing, its success legitimizes its model as an alternative to the liberal values of the West, an idea the U.S. and its allies have resisted. It's a debate that's been intensified by the Covid-19 pandemic.
It's striking how the terms of the debate have changed in the current health and economic crisis, from socialism vs. capitalism to "authoritarianism" vs. liberalism. And the conclusion seems to be that "authoritarianism" is now a legitimate political model. Here again, though, it is important to recognize that state-led investment for U.S. billionaires would not be inspired not by the socialist vision of "a harmonious and moderately prosperous society," but by Microsoft, Google, and Amazon.
U.S. progressives, too, are challenged by Chinese socialism to confront basic issues of democracy and national unity in the midst of economic and institutional collapse. The formation of the "more perfect union" proclaimed by President Barack Obama is not far in spirit from the Chinese Communist Party's goal of "a harmonious and moderately prosperous society."
Under the weight of gaping class, racial, gender and nationality inequities, and injustices, it is difficult to imagine other than a strong mission guiding strong hands to return in earnest to the "more perfect union" path. The two-party system may not survive this trial unless a new equilibrium is achieved. The limits of civil division in the US have been reached, if not breached.
I think economist Dani Rodrik adequately summarizes the progressive adaptation of the idea behind Lenin's New Economic Policy, though without attribution and using the lingo of progressive capitalism more than market socialism. He is a serious student of Chinese development, however. As he often writes, the choices of political models tend to be "path dependent." In other words, history matters; what has occurred in the past persists because of resistance to change. As Rodrik puts it:
For starters, we must recognize that a mixed, state-driven economic model has always been at the root of Chinese economic success. If one-half of China's economic miracle reflects its turn to markets after the late 1970s, the other half is the result of active government policies that protected old economic structures – such as state enterprises – while new industries were spawned through a wide array of industrial policies.
The path of recovery for the United States will depend on how much our current path gets wrecked, and how much can be salvaged. Looking down the path we are now on, the wreckage is not over. The project of recovery, to say nothing of the larger task of transformation, requires political harmony to achieve, and that is something capitalist billionaire-led approaches are unlikely to produce.
Why has the US attitude toward China changed so profoundly?
The origins lie in the 2008 financial crisis. The relatively stable and benign period of US-China relations between 1972 and 2016 was underpinned by two American assumptions.
First, China would never pose a threat to the US' global economic dominance; and second, China's rise would become unsustainable unless it adopted a Western-style political system.
Neither of these things happened.
On the contrary, the financial crisis took place in the US, not in China, and China's political system has proved highly successful and sustainable. The 2008 crisis led to the undermining of support in the American governing elite for its previous policy toward China. A growing mood of hegemonic angst concerning China took hold in the US. China was increasingly seen as a threat to the US' global dominance, a process that culminated in US President Donald Trump's election in 2016 and China coming to be seen as the enemy.
It is abundantly clear that the US cannot accept any threat to its global hegemony. The US as number one is regarded as fundamental to its DNA. But this is unsustainable.
The US is in relatively rapid decline. It can no longer enjoy a monopoly of primacy in the world. It is determined, however, to resist any diminution in its authority. We have entered a dangerous, volatile and unpredictable period as the US seeks at all costs to resist the inevitable.
As a result, we can no longer take world peace for granted. World peace is at risk for the first time since the Cold War. The COVID-19 crisis, furthermore, will surely result in an even bigger shift in power from the US to China than happened after 2008. That could result in an even more desperate American response. Until the US comes to terms with the new reality - that it must share primacy with China - the global situation will be very unstable. Declining imperial powers find it extraordinarily difficult to come to terms with their diminished position, as Britain since 1945 exemplifies. The same is true with the US but in a much more dramatic and dangerous way.
We are already in a new cold war - in trade and technology, and, as the closure of China's Houston consulate demonstrates, in diplomacy. Recent statements from the likes of US State Secretary Mike Pompeo amount to the declaration of a new cold war against China. The US has opened up many fronts against China.
What is deeply worrying is the unpredictability, volatility and desperation of Trump. Driven by his fear of losing the presidential election in November, Trump sees nothing is off the table as far as he is concerned. Anything is possible.
This cold war will not be a rerun of the previous one between the US and the Soviet Union. In the old Cold War, the two countries lived in almost entirely separate worlds, in hermetically sealed compartments, that economically, for example, they had very little connection with each other. Much as the hawks in the Trump administration would like to reinvent such a world by means of a complete economic decoupling, that is beyond them.
Furthermore, it is clear that in the integrated global economy of today, China is a bigger economic player than the US. Whereas in the old Cold War, the Soviet Union was always far weaker economically than the US, the situation is completely different today, with China already enjoying the upper hand in key respects and, more importantly, very much on the rise in contrast to a US in decline.
There is another important difference between the two cold wars. Wrongly, the Soviet Union sought to compete militarily with the United States, a disastrous strategy given that it was far weaker economically than the latter. China has not - and will not - make that mistake. Whatever the US spends, China will spend much less - concentrating its resources on the defense of its own borders and territory. And in the long run, economic power invariably trumps military force.
The article is an excerpt of Martin Jacques's webinar lecture on July 25 titled "A new cold war against China is against the interests of humanity." Jacques is former senior fellow at the Department of Politics and International Studies at Cambridge University. opinion@globaltimes.com.cn
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