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The Coronavirus signals need for reform of U.S. policies for approval of vaccines and advanced cures

I sent a message similar to this essay to Robyn Dixon, author of an article on Russian science and vaccine development in the Washington Post yesterday, February 9. 2021. The Dixon article cited scientist and journalist, Irina Yakutenko, saying that “you should do everything according to the protocols. It takes a long, long time. It takes a lot of money”. That has been true for U.S. policies that have required ten years to release new vaccines*. But the “miraculous” speed of vaccine development in 2020 tells us that those medical policies are grievously outdated and need to change. I copied this message to Senators Tim Kaine and Mark Warner, encouraging them to explore reforms with Senate colleagues and NIH Director Francis Collins. Republicans would likely agree about the importance of reform.

The length of time needed for vaccine development is due to the extreme rigor of U.S requirements for them and other critical cures. This in turn is attributable to concern to minimize adverse effects. The positive potential of a new vaccine can be confirmed in a dozen cases, but to rule out 1:1000 adverse effects may require years and trials with 6000 persons. The FDA operates in the world’s most litigious nation and is risk-averse. We saw what happened in 2020 when excess cautions were swept aside because of the emergency created by the coronavirus. The speed of the approval was startling for our system, but other nations produced vaccines in the same time frame. Sixty-three coronavirus vaccines have been reported in clinical development. Because of the U.S.’s overwhelming dominance in research funding and the rigor and reputation of the National Institute of Health, the sponsor of federally supported trials, our protocols are widely adopted in Germany and other EU nations.

A new vaccine can cost $500 million to $2 billion. This leads to exorbitant treatment costs and a lack of attention to rarer diseases that could be cured. An example is my wife, Lucy, who has a rare “SCA 8” ataxia that could be readily cured by gene editing – but it can’t get attention.

A sleeper factor also holds back treatment in America. The Washington Post article mentions scientific publication as being desirable for Russian medical development. To the extent that they report new knowledge and advances, scientific publications play critical roles.  But the U.S. suffers from a flood of excess clinical publications. Reports offer many promising new treatments “for the future” while there is a dearth of new treatment opportunities today. The reason is that it is more advantageous for medical researchers to apply for research funding and get their names in print or in the news for promising developments than to take the risks of moving to formal treatment. The latter receives little public recognition while it incurs major risks for lawsuits over new procedures. Risk adverseness operates on clinics as well as clinicians.

In 2016 I became personally familiar with a pioneering Austrian heart surgeon who saved the life of an American composer who had a heart attack while attending a concert in Vienna. Dr. Werner Mohl** developed a procedure for restoring heart tissue damaged in heart attacks. The American would probably have died in the U.S. because the procedure would not have been authorized until clinical trials proved its efficacy.

*Vaccines, 5th Ed., Philadelphia, Saunders 2008.

** https://esc365.escardio.org/Person/304114-prof-mohl-werner*

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American history Economy Environmental policy Industry

America’s Paradox: Low Taxes on Corporations — and Higher Taxes on the Execs Who Run Them Could Stimulate U.S. Manufacturing

U.S. progressives call for higher corporate and personal taxes. Conservatives want no tax increases. Given that the Biden “green” plan at its core requires a robust American manufacturing sector, we need a more nuanced tax scenario.

The Biden campaign proposal to increase the nation’s corporate tax rate to 28 percent would leave that rate below pre-Trump corporate tax levels but still put the United States above most European rates and leave American manufacturing at a competitive disadvantage.

Would federal policies that mandate the purchase of U.S.- made products offset this disadvantage? Mandates work mainly for subsidized activities. These tend to involve insider contracts rather than promote entrepreneurship. Germany has become an international manufacturing powerhouse — with large foreign exchange surpluses but industrial wage and benefit levels nearly double what U.S. corporations provide — without such mandates. Germany has a corporate tax rate of 15 percent, plus a 5 percent “solidarity” assessment.

On personal taxes we have counterintuitive reasons for increasing progressivity in personal income taxes beyond Biden’s 39.6 percent. The first reason looks back to the 1970s when the United States suffered disproportionate deindustrialization. We hemorrhaged products and industries where we had traditionally excelled. Other European nations didn’t abandon traditional and new industries. Finland produces those beautiful cruise liners. Italy retains its shoe and clothing industries and leads in popular granite table tops and other stoneware. Sweden’s IKEA is the world’s leading home furnishings company, and Volvo ranks as the second biggest truck maker after Daimler. Sweden also shares with Denmark the distinction of having the world’s highest personal tax rates on high incomes. In the United States, we have one of the lowest.

The subsequent Reagan administration’s relegitimization of business may have been timely. But the Reagan reduction of top personal taxes from 70 to 28 percent led to executive pay becoming linked to corporate profits. This stimulated exponential increases in executive compensation (as well as lawyers’ and others’ pay) , and those increases, in turn, encouraged corporate executives to pursue short-term profits over long-term goals.

No U.S. top executive pursued short-term profits with more zest and celebrity than  General Electric’s CEO, Jack Welch, who would retire in 2001 with a record severance of $457 million. The culture Welch installed at GE created bubble growth and an ultimate crash for the historic manufacturing company.

In 2014 GE contracted to sell the last major U.S. suite of household appliances — its appliance division — to Sweden’s Electrolux, a move designed to gain cash for more profitable investments. Such investments earlier included high-finance and real estate ventures that brought GE profits along with a deemphasis on making products and meeting U.S. technological needs. GE’s German counterpart, Siemens, took a different course. It continued its traditional long-term strategies and today rates as a major global player across the technological spectrum, as well as a key partner in Germany’s proactive climate-change policies.

The learning I take from all this: America’s astoundingly high top incomes have a negative effect on our national productivity. Nor do top earners stimulate productivity. They buy expensive real estate like Bill Gates’ $147 million primary residence. They purchase foreign properties and luxury goods, art objects and Lear Jets, expensive security and financial services. They invest for personal income security and growth, but as Jack Welch demonstrated, investments for the highest possible returns do not necessarily serve national needs.

The incomes of our top earners have an additional negative impact. They grow our nation’s unsupportable inequality. Among advanced nations, we have the greatest disparity between rich and poorBefore 1970 the lowest income quintiles in the United States saw the fastest growth. In a post-war America where top-bracket personal tax rates never dipped below 70 percent, blue-collar breadwinners could support families on one income. Since 1970 incomes in our lowest quintile income have remained nearly flat in inflation-adjusted terms, with our bottom 50 percent owning a mere 1 percent of the nation’s wealth. Older families, the St. Louis Federal Reserve Bank reports, have 12 times the wealth of younger families.

These extremes have triggered record public support for more radical political policies, with disaffection concentrated among younger voters. We will have no economic and political stability in the United States until we correct these imbalances.

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Economy

Wealth And Taxes From Aristotle To Today

American billionaires are unlikely to appreciate Aristotle’s observations about wealthy people (On Rhetoric: A Theory of Civic Discourse Book 2, Chapter 16Transl. by George A. Kennedy, Oxford Press, 1991).

  1. “The wealthy are insolent and arrogant, being affected somehow by the possession of wealth; for their state of mind is that of those who have all good things; for wealth is a kind of standard of value for other things, so that all things seem purchasable by it.
  2. And they are ostentatious and pretentious: ostentatious because of luxury and the display of their prosperity; pretentious because all are used to spending their time doing whatever they like and admire and because they think everyone else has the same values they do. At the same time, this feeling is not unreasonable for there are many who need what they have. Thus, Simonides replied to the wife of Hieron, when she asked whether it was better to be rich or wise: ‘To be rich for he sees the wise waiting at the doors of the rich.
  3. Another result is that the rich think they deserve to rule for they think they have that which makes one worthy to rule [i.e. Money]. In sum, the character that comes from the rich is that of a lucky fool.
  4. The characters of the newly rich and those with old wealth differ in that the newly rich have all the vices to a greater degree and in worse form, for to be newly rich is to lack education in the use of wealth . . . . . . . . “

In Aristotle’s time (384-322 BC) practically all wealth came from owning land. From it, one could produce goods that could be sold and traded. Aristotle might be a little more charitable about the United States, where wealth could be created by creative and industrious people who took risks. John D. Rockefeller was an industrial genius who created wealth for the nation as well as himself. Toward the end of his life, Andrew Carnegie gave away virtually all his wealth for socially beneficial purposes.

Taxes were trivial during the Gilded Age from 1870 to 1895. The U.S. moved to confiscatory tax rates on top income brackets during the Depression and World War II. 90% top tax rates remained in the 1950s. In Capital in the Twenty-First Century, the 2014 epic study of American income and wealth, French economist, Thomas Piketty observed that in the 1950s the U.S. had the lowest ratio of top incomes to worker incomes among advanced nations. Businesses nevertheless thrived, leaders valuing their status and identification with their business and industry more than high financial rewards.

This changed in the minimum-tax 1980s, when in the Reagan administrations top tax rates were slashed from 70% to 28%.  Compensation packages became a symbol of status for executives. In a paper in 2014 Piketty coworkers, Saez and Zucman reported that in 2012 the income of the top 10% topped 50% of the economy for the first time since 1927.  The change in time is  epitomized by the difference between  Lee Iacocca, who saved Chrysler Motors and was committed to workers, and Jack Welch, who transformed General Electric from one of America’s most advanced and sophisticated manufacturers to a banking giant. Welch became known along the way as “Neutron Jack” for his readiness to fire underproductive staff. His policies ultimately led to the unraveling of General Electric, which was dropped from the Dow Jones Index in 2018 after drastic decline in its market value. General Electric is said to have the most underfunded pension system among major American companies.

Werner von Siemens (1816-1892), founder of the German counterpart to General Electric, had a  different philosophy from Jack Welch. In 1872 he set up a comprehensive pension plan for Siemens’ workers and their families ten years before Germany’s national pension system was inaugurated. Siemens continues to advertise a philosophy of corporate responsibility that it implements in the developing nations where it operates.

Formerly socialistic Scandinavian nations were influenced by the United States and the spectacular growth of free-market Japan to adopt market methods in the 1980s. In 1986 Japan temporarily passed the U.S. in per capita income. The Scandinavians retained high personal income tax rates. Sweden, Japan, and Denmark have the highest top individual rates, but Belgium and Germany (a manufacturing powerhouse) have the highest average personal tax rates of 39% (Forbes.com and World Atlas.com). The president and CEO of Siemens has a salary of 1.2 million Euros per year. In comparison, a Wall Street Journal study in 2017 found the median salary of top executives of S&P 500 companies was $12.1 million.

 I have no interest in arguments about socialism vs. capitalism. However, it seems appropriate to quote one of Aristotle’s principles: virtue carried to excess becomes a vice. I suggest that the U.S. experience in carrying financial rewards for performance to extremes has run afoul Aristotle’s maxim.

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Economy Environmental policy Industry

The real story under the controversy over offshore drilling

On January 4 2018 Interior Secretary Zinke announced a plan to open up 90% of the U.S.’s offshore Exclusive Economic Zone, equivalent to more than three quarters of the land area of the United States to commercial recovery of oil and gas. The report (https://www.doi.gov/pressreleases/secretary-zinke-announces-plan-unleashing-americas-offshore-oil-and-gas-potential) stated that current moratoria put 94% of the this area under moratoria. Florida was to be excluded from the proposed open areas.

The Interior announcement set off heated opposition from environmentalists and governors of many states. Lena Moffitt, senior director of the Sierra Club’s Our Wild America campaign, said Monday in an email. “This debacle has further highlighted Donald Trump and his administration’s incompetence and failure to take the health, safety, and economic well-being of coastal communities seriously” https://thinkprogress.org/ryan-zinke-goes-rogue-1f353bd0fa5d/.

As a long-time researcher on offshore environmental policy I suggest that current objections to offshore drilling have less to do with real environmental hazards than with a unique US ideological conflict that emerged in the 1980s. Democrats became the party of environment and Republicans became the party of industry. Opponents to drilling declare that drilling will devastate the coastal environment and economy and throw every possible argument against it, justified or not. Industry and its conservative supporters are no angels either. They long ago abandoned public debate in favor of lobbying and behind the scenes networking on short-range goals.

Compare the 94% of U.S. under offshore moratorium up to the recent Interior Department action with Norway, an international environmental leader. Norway leases all potentially productive offshore areas except off the Lofoten Islands, north of the Arctic Circle, where there are cod spawning grounds. Its offshore oil industry coexists with Norway’s important fishing industry. Norway’s huge fund from petroleum revenues now covers the national pension system.

U.S. Geological Survey assessments show that potential hydrocarbon resources off Maryland are in the Mesozoic Taylorsville basin off Virginia and southern Maryland. They are primarily natural gas, not oil. Had Virginia and Maryland leased their offshore areas years ago and dedicated revenue from lease sales to renewable energy projects like offshore wind turbines and carbon burial they could have been national environmental leaders, even if no commercial production resulted (see state offshore sectors in figure from the Bureau of Ocean Energy Management (BOEM) http://www.virginiaplaces.org/boundaries/ocs.html..

If the U.S. had not become embroiled in our battle-to-the-death conflict over natural resource policy it would now probably be a world leader against global climate change instead of a black sheep – with nearly the lowest proportion of renewable energy to total energy consumption among advanced nations. Whereas 3200 offshore wind turbines operate in European waters our regulatory and ideological impasses mean that we recently only got our first offshore wind farm off Block Island in 2016. Is it time to crawl out of our ideological caves and start acting rationally?

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American history Economy Policy and Politics

The U.S. has entered a 21st Century “Gilded Age”. Can earlier history offer insights on reform?

The “Gilded Age” from 1870 to ~1890 was a time of rampant public and private corruption. Congressional seats could be bought and sold. “Robber Barons” made giant killings through monopolies and manipulation – and brought on devastating panics.

The signposts are all around us that ethics in government and society have deteriorated. In recent years record increases in the proportion of national income going to the ultra rich (Fig.1), appointment of partisan political loyalists rather than competent officials to high level agencies,  the rising influence of money on elections and politics, and flagrant public and private lapses in ethics have caused  a number of economists and historians  to refer to U.S. society as having gone into a “New Gilded Age”. Many citizens are angry and looking for change. How can such change come about? 

My recent research comparing developments in the old Gilded Age with the New Gilded Age  (1) shows that reform was out of reach as long as the public accepted the extravagant promises and  favorable treatment they got from politicians. A turnaround became possible only after a wave of revulsion on the part of the public over events in the early 1870s (Grant administration)  allowed real reformers to be elected to high public office. This process began with  the election of 1877, but it took two decades to bring about clean, competent governmental agencies and even-handed executive actions (Theodore Roosecelt) that gained widespread public trust.

Postscript: Since this essay was last edited in January 2014, evidences of public dissatisfaction and anger in both parties have emerged in terms of the 2016 Primary election campaign. This may be be a precursor to real reform.

 

POLITICAL HISTORY

Experts agree that the founders of the United States represented a flowering of political talent and statesmanship that forged a new government system designed to anticipate human fallibilities affecting democracies. Historians have suggested that the writing of the Constitution was aided by the fact that while American colonists inherited Enlightenment ideas from Great Britain, they were largely self-governing and free from the deep corruption that characterized politics in the mother country (until the middle of the 19th Century).

The first six presidents maintained George Washington’s policies of basing appointments of federal employees on competence. President Andrew Jackson broke with this tradition. His administration (1829-1837) introduced the “spoils system” that led to turnover in government appointments in subsequent administrations.

Public and private corruption peaked in the administration of Ulysses S. Grant (1869-1877). It marked the beginning of a “Gilded Age” of unprecedented veniality after the Civil War. An example is the Salary Grab Act of 1872. It doubled President Grant’s salary to today’s equivalent of $900,000/year, and awarded each Congressman a one-time bonus equivalent to $90,000 in today’s dollars. Public outrage forced its repeal and helped support the rise of reform candidates in the subsequent presidential election. President Rutherford B. Hayes (1877-1881) committed himself to a single term in order to focus on reform of the federal government. Subsequent reforms culminated in the administration of Theodore Roosevelt (1901-1909). They brought about a system of efficient government operation with independent federal agencies that operated largely free of arbitrary interference.

Stresses on federal government operations after World War II included growing environmental concerns, the assassination of President Kennedy in 1963, and other developments. An environmental crisis triggered by the Santa Barbara offshore oil spill of 1969 caused Congress, in effect, to take over responsibility for environmental management from federal and state professional agencies through unprecedentedly detailed laws. Rigorous centralized intervention in basic economic activities and expanded roles for federal courts politicized environmental policy. The Democratic Party became the party of environment, and the Republican Party became the party of industry. Both parties reintroduced patronage systems with turnover in federal agency administrations after elections.

RECENT “GILDING” TRENDS 

 Income disparities. Economic researchers Thomas Piketty and Emmanuel Saez have shown that the share of U.S. national income received by the top 10% bracket reached 50% in 2007, values last seen in 1927.

Role of money in elections. A recent CNN report showed the average cost of Congressional campaigns increased from $360,000 in 1986 to $1.6 million in 2013 for a seat in the House of Representatives. The Supreme Court’s “Citizens United” decision in 2010 lifted restrictions on political contributions by independent corporations, associations, and labor unions. 

Interest groups dominate policymaking. Over the past 40 years decisionmaking by Congress and official agencies in the U.S. has been increasingly influenced by partisan politics and diverse interest groups ranging from drug companies and gun lobbies, to environmentalists and trial lawyers. Special interest policies are promoted by lobbyists whose aggregate payments were recently estimated at $3.2 billion per year, by litigation, mass mobilization for campaigns, and cultivation of influential officials. The system has led to flawed decisionmaking and conflict, including Congressional gridlock. Courts and judges have increasingly come to decide issues outside their intended roles, and where they have no professional expertise. 

Federal and state governments increasingly ignore the spirit or letter of laws. For decades the IRS has required payment of taxes on gambling winnings by individuals in states where gambling was illegal. To maximize compliance it pursued a de facto policy of not disclosing information on these payments to states. States, in turn, received taxes from illegal immigrants, turning a blind eye to their status and avoiding disclosure of information to the Immigration and Naturalization Service.  Twelve states have passed laws legitimizing marijuana that directly violate federal law. 

Presidents get around laws. Besides the Watergate scandal that led to Richard Nixon’s resignation in 1974, Democratic and Republican presidents have increasingly pursued policies in conflict with the spirit or letter of the law. In a retrospective essay ardent environmentalist Jimmy Carter reported that as President he asked his Secretary of the Interior, Cecil Andrus, to find ways to sequester Alaskan land. He then used the obscure American Antiquities Act of 1906, originally designed for parcels like the Statue of Liberty, to protect 60 million acres of federal land in Alaska from economic use through designations as “National Monuments”. The Act specifies that parcels “in all cases shall be confined to the smallest area compatible with proper care and management of the objects to be protected”.  Carter acknowledged that Ronald Reagan was furious about his action, regarding it as a “land grab”.

After Carter’s defeat in the 1980 election, Reagan appointees sought to roll back the tide of environmental regulations and sequestration of federal land by slashing enforcement budgets and curtailing (mandated) enforcement of 1970s environmental laws by the Environmental Protection agency. When opposition at hearings got in the way of implementing expansive new leasing policies, Secretary of Interior James Watt simply stopped holding hearings.

President George W. Bush set new records for “signing statements”, i.e. signing Congressional laws with reservations signaling that he did not intend to abide fully by the laws’ provisions. The White House and other federal agencies tried to influence or inhibit science and regulatory agency reports, actions that were formally censured by the Comptroller of the United States and Interior’s Inspector General.

With support from his Attorney General, President Obama declared that he regarded the Defense of Marriage Act (DOMA) unconstitutional, and therefore would not enforce it. Regardless of the merits of this view, no such discretion is given to the President by the Constitution. Arbitrary interpretations or circumvention of drug and immigration laws have followed.

Financial scandals. In the early 1990s bad judgment and fraud closed 747 of the nation’s 3200 savings and loan banks.  In 2003 a multiagency settlement implicated ten of the nation’s largest investment firms in wrongdoing. Prolonged, unprecedented lapses in financial and ethical judgment on the part of the nation’s private and public economic and financial leaders led to the financial crash of 2008 and the worst recession since the great depression of the 1930s. The semi-public lending institutions, Fannie Mae and Freddie Mac were involved in the fiscal meltdown. Notwithstanding tightened controls since 2008, a record fine of $2.6 billion for deceptive practices was recently levied against the iconic J.P. Morgan Chase bank.

Breakdown of moral and ethical standards. The above actions are signs of erosion of a sense of community that remained strong in the U.S. for a time after World War II. Over the past 30 years behaviors of previously unthinkable kinds, like wanton killing of innocent students and school children have increased. Government employees without ties to foreign governments have taken it upon themselves to release vast amounts of classified and highly sensitive documents in response to perceived governmental abuses.

HISTORY’S INSIGHTS FOR FUTURE REFORM 

 The U.S. is showing increasing disillusionment with political institutions. Experience from the earlier reform period suggests that meaningful restructuring of government must be comprehensive. Government is now vastly larger than in the past and the serious reform may seem unlikely. However, we can gain insights on pathways to reform if and when it comes, from earlier history.

How earlier change came about. Reform after 1877 took place through committed political leaders and influential citizens. Reform measures often met resistance, including that of the public, which liked aspects of the patronage system. As reformer Carl Schurz observed, the public often created barriers to meaningful change. Serendipitous events  were often keys to creating changes in opinion favorable to action. For example, the assassination of President Garfield by a disgruntled office seeker ultimately aroused the public and Congress to pass the monumental Civil Service (Pendleton) Act of 1882. Reform leaders generally prepared reform measures with balance so that once enacted they would be effective and gain support by the public and politicians.

Predictions about the future of reform. We should not expect governmental reforms from a Congress that is unable to reform its own operations. Academic researchers on government and policy have become dispersed in fragmented disciplines that study real-world politics from a safe distance and whose publications are not used by decision makers. Nor should we expect reform from popular movements. These, like Occupy Wall Street, and The Tea Party can register disapproval or demand specific actions, but are unlikely to have the in-depth knowledge and balance to produce effective policies. Moreover, Gallup polls in 2013 showed that while voters gave Congress as an institution all-time low approval ratings – approaching 10%, 60% of voters liked their own Congressman. This kind of relationship was already described in the 1830s by the famous French observer of U.S. society, Alexis De Tocqueville. He noted in his book, Democracy in America, that the surprising lack of vision in U.S. politicians could be explained by the fact that voters were often poorly informed and preferred politicians who served their immediate purposes and told them what they wanted to hear. If history is a guide, urgency about improving governmental operations must reach a point where genuine reformers can gain influence and be preferred over the charisma or ideological appeal of alternative candidates for high office. We may need deeper crises in order to reach that point.