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Achieving a right balance between the needs for public health in developing countries- and the need for cost reduction in developed countries- with the need to keep innovation, is the challenge facing the Indian Supreme Court as it hears the Novartis case on its leukemia drug Gleevec. The efforts by Novartis and other western pharmaceutical companies to restrict the flow of low cost generic drugs from India. India stopped granting patents on drugs in 1970. It only resumed giving patents under a WTO agreement on patents. The Indian government denied the patent on Gleevec and the case is now coming up before the Supreme Court.

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This NYT editorial describes the failure of president Obama's immigration policy and the deportation of large numbers of illegal immigrants. It says Obama has deported more immigrants faster than any other U.S. president. And it says president Obama has used even the statement that he would look for ways to make the process "more humane" a delaying action. It says that after some 2 million deportations the whole situation is infuriating.

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The Bureau of Labor Statiistics puts out a statistic each month, called the JOLTS for Job Openings and Labor Turnover Survey, which shows how many job openings there are in the US. This statistic stood at 2.2% for February 2009, down from 3% in Feb 2008, and this is 2.2% of all the jobs in the USA, which comes to about 3 million. The Conference Board's report shows 3.2 million online advertised vacancies as of March 2009. The odd thing is that there are so many advertised vacancies when the unemployment rate has shot up in the same year from 4.8% to 8.1%. The implications are serious. First there is a mismatch in qualifications. As jobs are lost in construction and the financial industry and in retail, new jobs are appearing in health care, education, government and accounting. This structural shift is happening quicker than the market can respond, or faster than labor retraining has time to respond. And compounding this the severe housing market leaves people unable to sell their homes and move. This makes for a less mobile labor market than the US has had in the past. With the government stepping in to ease the burden of unemployment there may be even less incentive to move. And those that move will have to accept the lower pay in new careers , and employers will have to settle for imperfect fits in filling vacancies. To reduce the mismatch in qualifications governments will have to ramp up their job retraining programs. ...

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Glenn Hubbard, Professor at Columbia University and Bush adviser who helped design the Bush tax cuts, has an uneasy sense about the tax cuts today. He says the tax cuts have been undermined by years of deficit spending. The Bush tax cuts expire Dec 31st 2010 in the USA if Congress does not act. Macroeconomic Advisors estimates that letting the tax cuts expire will take 0.9% off the growth rate. Nobel Prize winning economist Paul Krugman prefers to let the tax cuts expire and provide more help to state and local governments to preserve jobs that are being lost due to budget shortfalls. But becuase of the political climate he prefers to let the tax cuts go on for a limited period. The Obama administration may decide to continue with the tax cuts rather than fight the serious battles for deficit reduction, after spending much of its political capital on health care reform. Hubbard also thinks in the current situation its best to keep the tax cuts even with the concern for the deficits. He says the spending during the Bush administration, especially the Medicare prescription drug benefit, which is estimated to cost $400 billion from 2004-2013, was a major problem. The incentives to business and investors for productive effort in the Bush tax cuts is uncertain, if it becomes clear that the price for these cuts is higher taxes later on to cover growing deficit spending. Hubbard does not see any serious action on the deficit till the next Presidential term and sees it better to keep the tax cuts till then, when some serious discussion can take place....

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"There is'nt another planet to export to," is what Paul Krugman of the New York Times says, when referring to the impossibility of all countries keeping up exports and reducing imports at the same time. In crises similiar to what the US faces today, countries have increased exports as a way to stage an economic recovery. But this time countries are depressing their currencies to gain or preserve a large share of global demand achieved through high exports. China has resisted demands for a significant revaluation of the yuan, and persists in efforts in currrency markets to keep the value of the yuan low. This cuts off one avenue of recovery. Bloomberg Business Week and Bloomberg News interviewed Edmund Phelps, Jan Hatzius, Krugman, and other economists, with the idea of figuring out how the US could stage an economic recovery. Krugman is not optimistic, considering the effects of the financial crisis being really protracted. Krugman points out that when comparing the US currently to the eaarly stages of Japan's lost decade, the US is doing worse. Unemployment is worse, and overall he says, a weaker policy response. And he says Japan is still a depressed fragile economy 18 years after its financial crisis. Jan Hatzius of Goldman Sachs, predicts that the unemployment rate will rise back to 10% in early 2011, with a 30% chance that the economy will fall back into a recession. He says that in the postwar economy, there has never been an increase in the unemployment rate of one third of one percentage point that did not result in a recession. Phelps and Hatzius see one way the US could stage a recovery is with replacement old structures and equipmet as wear and tear and obsolescence takes place. Phelps sees the possibility of technological innovation resultig in a new burst of activity. Robert Gordon of Northwestern University, is less optimistic about this, and predicts a lower growth rate of 1.5% over the next 20 years. ...

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A new CBS-New York Times opinion poll in June 2012 shows 44% of those polled approve the job the Supreme Court is performing and about three fourths say the decisions of justices of the court are influenced by their political and personal views. By comparison only 15% approve of the job done by the U.S. Congress in the most recent poll. Only one in eight say the justices make decisions based solely on legal analysis. About 60% say they agree that life tenure for justices is bad because it gives too much power to justices. On the health care law two thirds of those polled say they hope some or all of the 2010 Obama health care law is overturned.

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Tom Brokaw is perplexed by the absence of the war in Afghanistan as a campaign issue in 2010 US elections. Especially because the war is in its 9th year, has caused 5000 dead, 30,000 wounded, and cost over $1 trillion dollars. He reasons that this is because the vast majority of Americans can opt out of fighting the war on the ground. The all volunteer service draws from 1% of the population, with the majority from working class or middle class backgrounds. This has an unintended effect in making the costs of the war less visible, when actually it is taking a toll in other ways. The US is short of funds to build much needed infrastructure or update infrastructure. States and local governments are laying off teachers because of budget shortfalls, and the national budget deficit makes less money available for solving pressing problems in carbon emissions, energy, and infrastructure. Only recently New Jersey Governor Christie put on hold a new tunnel into New York City because of a lack funds. Pressing infrastructure issues elsewhere will be postponed in this manner. And the outlook for the next 20 years, according to Robert Gordon of Northwestern University, is not going to be better with slower growth at an average of 1.5%, leaving less money for the kinds of projects that defined America from the Erie canal to interstate highways. Brokaw says, the country would benefit from an effort to discuss what happens next, in the continued expenditure of blood and treasure. A discussion of what happens next in this effort to deal with Islamic rage....

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Krugman points out that the federal tax rate for the top 1% is 34% in 2013, according to the Congressional Budget Office, because president Obama let the high end Bush tax cuts to expire. It is the number to remember says Krugman- 34. In 2008 the figure was 28.2. Under Hillary Clinton the average tax rate for the top 1% would go up by 3.4 percentage points, according to the Tax Policy Center. Some of this would help pay for the tution plan to provide access to the middle class to public universities. Under populist Trump, Krugman points to the elimination of the inheritance tax and tax rates going down substantially, and no such programs to promote the upward mobility that everyone is talking about, and no way to pay for a big infrastructure building effort for growth and jobs- upward mobility that is the focus of every candidate's election campaign including Sanders, Trump in appealing to older white working class families, Clinton, Ryan, Bush, and others in both parties.   ...

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Krugman points out the gains on three fronts evident from the Census Bureau report of 5.2% gain in median income of households in the U.S. He says the first is the growth in incomes of ordinary working class and middle class families, second the large decline in the poverty rate, and third the further rise in insurance coverage in 2015 for people without health insurance. He points to the steady efforts of the Obama administration to improve lives of ordinary families as working based on the Census report though results have taken time, and could have been better. The Stimulus, says Krugman could have been larger following the blow of the 2009 financial crisis and increased unemployment at the time. Janet Yellen at the inequality conference of the Boston Fed in 2014 pointed out the problems of 62 million households having net worth of about $10,000, and why this was running against the American idea of a better life for all Americans. In that sense the Census report is a movement in the right direction but a lot remains to be done.   ...

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Meltzer points to the huge impact on wages in the U.S. from the millions of workers added to the global economy- as people from India, China and other developing countries competed for the same jobs as American workers- as a principal cause for increasing income inequality. The wages of the one percent were insulated from this and actually benefitted in the case of banking and finance. Current pricing practices in health care insulated the medical and hospital related professions. The effects of the global financial crisis- loss of construction jobs, foreclosures, and effects on savings hit the middle class and working classes hard, something Meltzer overlooks.

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Andy Grove of Intel teaches a class at Stanford- he taught aclass earlier this year- and talks about his experiences. Some see Grove's disciplined management style as areflection of his experience escaping the Nazis from Czechoslovakia. Dr Grove says it comes from his experience at the CIty COllege of New York He recounts this in one of his books, where aparticular Professor helped mentor him but who was in the beginning very tough on the young Grove. Grove says that what impressed him most in those early years at City College was the way hard work and talent were rewarded and where students challenged their Professors without any attention to rank. Interestingly this is still true at many universities, and meritocracy prevails there. The opposite is true when one thinks of this at many corporations which gradually fall into astultifying mode where senior managers are not challenged and politics prevails. GM is a good example. Grove says he experienced this at Fairchild -where he worked with computer chip pioneers Moore and Noyce -with its elitist, back-stabbing and lax corporate culture. Senior executives at Fairchild walked in whenever they felt like, and younger employees were penalized or fired for similiar behaviour. When he took charge at Intel Grove imposed a strict arrival time of 8 am with latecomers forced to sign asheet. He also did not go along with trends like flexi-time and teleworking. He became known as ablunt and demanding manager, but afairminded boss who rewarded good ideas whatever the source. Asked about the strict arrival time Grove says that people don't understand that he was never that disciplined himself and he was not even amorning person. His view is that he wanted to avoid what he saw as aoutrageous double standard at Fairchild. With a better culture he was able to attract the best talent to Intel, and he used the strong discipline to improve the lousy manufacturing at Intel. Three decisions shaped Intel. The first, is the recognition of the strategic inflection point when current strategy is no longer viable, because unanticipated external forces make an existing business strategy obsolete. This happened when Intel got clobbered by the Japanese in the memory chip field it had dominated. And at such moments there are internal forces and inhibitions to overcome that make starting over or doing something totally different extremely difficult. For Intel this was the habit forming tendencies from having done one thing so well- the companies roots and the founders and engineering staff's knowledge and preferences lay in memory chips- such that that it became an emotionally stormy thing to break from this past. Grove made a complete U turn to go in another direction which he describes so well in his book -Only the Paranoid Survive. Timing is critical, and instinct and judgement is all that you have got to rely on. Its like a group of hikers in the woods and after suspecting that they are on the wrong track one of them says, "Hey guys I think were lost." Grove even describes the scene with acomparison to a scene in the World War II movie Twelve O'Clock High, where a new commander is called in to straighten out an unruly and undisciplined squadron of fliers in sel-destruct mode. The commander on his way to take charge, stops his car, steps out smokes acigarette while gazing into the distance. Then he he throws the cigarette down, grinds it with his heel and tell his driver "Okay Sergeant, lets go." Grove says he related to this scene in this decision at Intel, with every fiber of his being experienced this crisis personally, and learned what it takes to claw your way through a strategic inflection point, inch by excruciating inch. He says it takes objectivity, the willingness to act on your convictions, and the passion mobilize people into supporting those convictions. The second and third decisions was less gruelling but also courageous. The Intel Inside advertising campaign meant building abrand with customers even though Intel had never done this before. The decision to not have secondary suppliers and press the issue of manufacturing quality within Intel till Intel got it right also had never been done before. Andy Grove's strategic inflection point is what GM missed and set the process in motion towards bankruptcy. See the links in Intelilinks. The management style is also relevant to that discussion. Grove also provides insights in the Cross-Industry Insight Mechanism. He sees strategic inflectionpoints in autos and health care industries. He says the auto industry is going to be increasingly divorced from oil and the next big company will come in the auto battery technology field. He also believes health care and the pharmaceutical industry can learn from chipmaking. The clinical trials in pharmaceuticals take way too long, are slow-moving and bureaucratic. The pharmaceutical firms can learn from the fast "knowledge turns" in chipmaking, so that cycles of learning are accelerated....

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Italian born Canadian Sergio Marchionne, a former tax consultant turned auto executive who joined Fiat in 2004, planned the acquisition of Fiat in 2009. GM's payout to Chrysler following a decision not to acquire Fiat, and the U.S. government's need to merge Chrysler with another auto company after a bailout, gave Marchionne the opportunity to acquire Chrysler on favorable terms. Hard bargaining with the government led to acquiring Chrysler for free, using the $2 billion from GM to show the government that it would make the needed investments to bring Chrysler back from bankruptcy. This decision, the bringing in of outside talent, and the revival of the auto industry following the bailout, has led to the success of Fiat Chrysler.  Sergio Marchionne had the right instincts to persuade the government that Fiat with its small cars including the Fiat 500 was the right company to run Chrysler, and supporting president Obama's fuel efficiency goals gave him the right credentials with the Obama administration. A chain smoker of cigarettes who also gulped down espressos, her was a workaholic sometimes carrying 5 smartphones. He passed away at the age of 66 from health complications. Ironically the Dodge Dart was presented as the car that would get 40 miles per gallon. Other efforts at fuel efficient automobiles have not happened in the way it was envisioned by the Obama administration. The Dart did not become popular. Only the redesigned Fiat made it as a hit in Europe. The plan to import small Fiats to the U.S. remained only on paper. As the auto industry revived Marchionne canceled plans to make nearly all of the Chrysler cars and shifted production to more popular Jeeps and Dodge Ram, a move followed by Ford and GM. Fuel efficiency issues from the bankruptcy period are still alive today with the decision to leave small car manufacturing to Japanese and German carmakers, and the efforts of the Trump administration to turn back the Obama administration fuel efficiency targets.  ...

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CEO's of more than 80 large U.S. companies have come together behind a plan that would reduce the U.S. federal deficit with tax revenue increases and reduced spending. The CEO statement was organized by the Fix the Debt campaign, a bipartisan effort inspired by Republican Alan Simpson and Democrat Erskine Bowles of the 2010 Simpson-Bowles Deficit Commission. The CEO statement calls for an overhaul of the U.S. tax code to eliminate or reduce deductions, credits and loopholes (reduction of tax expenditures also referred to as "broadening the base"). The CEO statement says any fiscal plan to succeed has to control increases in health care spending, make Social Security solvent, and include "comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues and reduces the deficit." This is the first time a large group of business leaders have supported raising taxes as part of an overall solution. This puts together elements of the Bowles-Simpson plan, reduces deductions and loopholes, lowers rates as part of overall tax reform and cutting spending. The CEO statement says the Simpson Bowles recommendations for $3 in spending cuts for every $1 in tax increases was an "effective framework" for tackling a problem that affects the economic well being and security of the U.S....

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The borrowing costs of Italy declined sharply as 9 billion euros of Italy's government bonds were auctioned at a yield of 3.25 percent on Dec. 28, 2011, compared to 6.50 percent at a prior auction in November 2011. The rate on 1.7 billion euros of two year bonds auctioned declined to 4.85 percent from 7.81 percent in November. This follows action by the ECB providing a large infusion of low cost funds to European banks charging only 1 percent on three year loans.

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Richard Thaler, a Professor of Economics at the Booth School of Business, University of Chicago, on the reasons why millions of homeowners under water- owing more on their homes than their homes are worth- have not defaulted in large numbers. In places like Nevada nearly two thirds of homeowners are under water. Changing a home, changing school for children, losing one's credit rating, social stigma. He points out that the costs are outweighed by the benefits of getting out of an underwater mortgage, and research has shown this is contagious once the process of defaulting has started. So once the neighbors are defaulting its much easier to do so and the proces picks up momentum, the psychic costs simply decline. So he says the result is that we may face a tsumani of strategic defaults. Professors Posner and Zingales of the University of Chicago have a proposal. Banks should be required to provide loan modifications in neighborhoods with home prices having dropped over 20%. Banks would reduce the payment by the average price reduction in the area and get in return 50% of the average gain in prices when the house is eventually sold. This requires Congress to pass legislation....

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Paul Krugman points out that the Bush tax cuts if continued in the US for all income levels will cost $680 billion over the next decade. This estimate is from the Tax Policy Center.

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The National Association of Realtors reports that sales of previously owned homes dropped by 27.2% from June, to seasonally adjusted annual rate of 3.83 million homes. House prices gained ameasure of stability in 2009, after dropping since 2006. Now that measure of stability may be lost as house prices weaken. The expiry of a home-buyer tax credit was expected to dampen sales but not by this much. Paul Dales of Capital Economics expects a further drop of 5% in house prices. Combine this with sluggish consumer spending and prospects of deflation in 2011, a weak Obama administration HAMP homeowner relief program, fading stimulus and the likelihood of no further stimulus because of deficit fears; and the picture shows serious problems. The underlying picture of housing is not changing. One in four homeowners with mortgages owe more than their house is worth. Banks are handling over 5 million loans that are delinquent, if these loans are modified or short sales are permitted by banks, there would be support for housing prices. HAMP has failed in this regard, see the link to this....

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Leonhardt says that there is little reason to think that the flatter rates are better always. With the need to finance Medicare and health care for all, the government can use the extra dollars from taxing the very wealthy, the very rich in different tax brackets. The top bracket in 2008 started at 357,000, and you paid 35% whether you made 400,000, or $4 million, or $40 million. So basically the upper middle class was lumped in with the extremely wealthy. And considering the cost of college tutions for 2 or 3 kids, the upper middle class is only middle class. It makes sense not to lump the two together. Considering that there has been a lot of wealth accumulated at the the very high end, it would also reduce inequality, generate tax revenues for health care, and not have much effect in the incentives for generating economic growth. It is something he says the Obama adminisstration may and should consider.

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Six cities have rejected the Olympics, with Calgary in Canada being the last one. The problem with hosting the Olympics is how much it costs. Cost overruns are common. 20141 Sochi WInter Olympics estimated budget was $10 billion, in the end it cost $51 billion. 

Brazil is the latest example of the problem. With huge needs in sanitation, epidemic prevention, infrastructure and public services, the country did badly by spending money on new soccer stadiums in the northeast which were not used after the World Cup soccer championship, and in the summer Olympics. 

Learning from these lessons voters in Calgary, Canada, rejected hosting  the Winter Olympics. Voters or local councils in Innsbruck, Austria, Rome, Italy, Bern, Switzerland, Hamburg, Germany, Oslo and Stockholm have rejected the idea of hosting the Olympics. Other problems are the environmental impact with deforestation to create Olympic sites.

 

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In this essay in Der Spiegel, Charles Hawley says that the Trump movement has become a movement of patriotic downtrodden whites, with a whole range of interests-of extreme right talk show hosts, Tea Party politicians, white power supremacists, those left out by globalization in the working class especially in the midwestern states. The danger he says is that this movement of which Trump has become a part, rejects the narrative on which America is based of the Constitution and the Founding Fathers establishing a country based on principles of "the inalienable rights of man," that have evolved through the years to include black people, women, and minorities.  To put this in perspective, president Obama writing for The Economist magazine in October 2016, puts this movement in a different context- that of the Alien and Sedition Acts of 1798, Know Nothing Movement of the 1800's, the anti-Asian sentiment in the late nineteenth and early twentieth century, periods when anti-immigrant or anti-foreign sentiment gained prominence. Obama's view is that it is not fundamentally economic. In this he is right in that some of the forces on the far right do not stem from globalization. Yet he would be missing a great deal if he did not address the economic problems for the middle and working class that have given such views the support of a broad segment of the population, especially in some midwestern and older industrial states compared to say the economy of California or New York. Obama is aware of the problems in his essay as he points to the problems of workers trying to get a decent wage, of job losses through globalization, and the aggravation of these problems by the financial crisis of 2008 when some of the potential physicists and engineers as he calls them went into the financial sector to create faulty mortgages. Yet he goes back to the free trade and global networks of supply chains as having reduced global poverty, without showing a keen awareness of how it has through a combination of events and decades of policy indifference to manufacturing communities in the U.S.- as documented by experts and shown in Lyrarc, with David Autor and Gordon Hansen in the WSJ, 2016- 08-16. A Gallup Study, WSJ, 2016-05-16, supports Obama's assertion by showing that many of Trump supporters are actually self-employed and not in economic distress. Yet the movement would not have taken its proportions without the merging of different groups particularly largely disadvantaged working class voters, and fortunately Hillary Clinton, Bernie Sanders, have a better sense of this than the president. It is by their efforts that income and wealth disparities can be tackled in a way that restores the social fusion of all parts of society- in Hillary Clinton's emphatic words in the final debate by "growing the middle," growing the middle class. This is the task of the next decade, or possibly two decades. (For Gallup study see WSJ, How Economic Anxieties Explain Trump's Appeal- And Where They Fall Short, Nick Timiraos, 08-16-2016. And for Autor, Hanson, see Tallying the Toll of U.S.-China Trade, Justin Lahart, 08-27-2011)   ...