Category Archives: Economics

“Kill the Dealers”

 

Image result for ian read

Why is this man smiling?

At a rally for the Republican candidate for Congress in Pennsylvania’s 18th District, Donald Trump performed his impersonation of Philippine president Rodrigo Duterte and Chinese president (for life) Xi Jinping.  At issue was the increasing number of U.S. deaths attributable to drug addiction and overdoses.  Trump’s target?  Drug dealers!  His solution?  The death penalty!

You kill 5,000 people with drugs because you’re smuggling them in and you are making a lot of money and people are dying. And they don’t even put you in jail.  That’s why we have a problem, folks. I don’t think we should play games.

Nice sound bite, Donald.  But, unfortunately you’ve misrepresented the target.  We’ll get to the solution later.

According to the CDC, using the most recently available figures for specific causes of medication-related fatalities (2014), the drug responsible for the most deaths in this country was alprazolam.  More commonly known as Xanax, alprazolam was first introduced in the United States in 1981, not by “smugglers,” but by Upjohn, now part of Pfizer.  So, if you’re looking for a drug dealer responsible for MORE THAN 5,000 deaths, look no further.  His name is Ian C. Read, CEO of Pfizer (pictured above).  And as Trump suggests, THIS drug dealer is “making a lot of money.”  His total compensation in 2014 was (drum roll) $23,383,084.

Donald, put away the dog whistle.  We know who you mean when you talk about “smugglers.”  And once again, you thought it was more important to rally your base than have an honest conversation about the opioid pandemic.  And what better place to infer Mexicans are the source of the opioid crisis than southwest Pennsylvania.  Just one problem.  The 18th congressional district is 95.8 percent White and 0.6 percent Hispanic.  In other words, the drugs that are killing the residents of the 18th district are not being distributed on playgrounds or street corners.  The more likely sources are pharmacies and the medicine cabinets in residential communities.

So, if you want to have executions to show the drug dealers we’re not playing games, let’s start with Ian Read.  Or the CEOs of other opioid manufacturers and distributors.   Maybe the real cartel is the unholy alliance between drug companies and the doctors who are rewarded for prescribing opioids.  According to a March 12, 2018 report on CNN.

In 2014 and 2015, opioid manufacturers paid hundreds of doctors across the country six-figure sums for speaking, consulting and other services. Thousands of other doctors were paid over $25,000 during that time.  Physicians who prescribed particularly large amounts of the drugs were the most likely to get paid.

Seems Mr. Read and executives of other pharmaceutical companies got a significant return on investment without smuggling their product into the country.  And they are probably safe from any future prosecution.  I wonder whether back alley drug dealers would receive the same protection if they had donated $1.0 million to the Trump inauguration as did Pfizer. (Source: Kaiser Health Center, April 21, 2017)

For what it’s worth.
Dr. ESP

Why We Need the CFPB

 

I know, there are many more important things to write about this morning, but I needed to share my interactions with J.P. Morgan Chase bank over the last 24 hours.  Especially, on a day when the Trump administration stripped the Consumer Financial Protection Bureau unit of its enforcement powers to pursue discrimination in lending cases.  This move follows a decision by the U.S. Court of Appeals for the D.C. Circuit to reject the administration’s claim the Bureau’s regulatory powers were unconstitutional.  You have to hand it to Trump and his hench-persons (though they seem to largely be white males).  They are persistent.  If they fail to undermine the law one way, they will just find another method of achieving their goal.

Back to my story.  Yesterday morning, I submitted an on-line transfer of excess funds in my Chase (no-interest) checking account to a (barely-interest) savings account in another bank.  Upon completing the transaction, I received an e-mail from Chase affirming it.  End of story?  If only.

Around 7:00 pm last night I received a call from someone claiming to be from Chase Bank who needed to verify I had submitted the transfer.  Keep in mind he called me on the phone number that is tagged to the account for the past six years.  But “for my security,” he asked me to give him:

  • The account number on the ATM/Cash Card associated with the account.
  • The expiration date on the card.
  • My ATM pin number.

When I reminded him his bank had sent me numerous security alerts to NEVER give that kind of information to a stranger, I also said I was willing to give him any other information to verify my identity.  He said the requested information was the ONLY method they accepted.  At which point, I said I am sorry but I would deal with the bank in the morning.

At 7:41 pm, I received the following email from Chase Online Banking Support.

We’ve sent an important communication to your Secure Message Center, available on Chase Online or on the Chase Mobile app.
The subject is: Transfer Cancelled
You can sign in to review this communication in your Secure Message Center until 05/02/2018.

This morning when I tried to log in to my account, I received a message that the account had been blocked and was given a phone number to talk with customer service.  After listening to the menu of actions totally unrelated to my issue, I finally got an agent who had to transfer me to another agent.  That was no surprise.  What came next was.

The second agent said that in order to verify my identity, he was going to send me a code via text that I needed to read back to him.  Okay, they have a phone number for me.  But NO, he asked me to which number I would like him to send the code.  At this point, I asked him to start recording our conversation, in case it was not already being monitored.  I gave him a number not tagged to the account.  He sent me the code.  I read it back.  And he said, “Good, how can I help you?”  My response.

You realize what just happened.  I called you.  I just gave you a phone number, which you have no idea whether it belongs to the actual person listed on the account.  You sent me a code.  I read it back.  And now I can direct you to do something with my account?  You have my social security number, my address, my date of birth, the answer to three secret questions and this is what you do to protect me.  I am not blaming you, but this is why I wanted the conversation recorded.

But just to make sure I understand.  If I had fraudulently scheduled smaller transfers over several days, you would be fine with that.

He admitted that was probably true and then unblocked my account and offered to reinstate the transfer.  I could not let this moment pass.  I thanked him, but asked him NOT to reinstate the transfer, explaining that based on their security measures I was no longer confident I was the person who initiated the transfer.  I could be anybody.

And Donald Trump and Mike Mulvaney do not believe we need regulatory oversight of financial institutions.  Just saying.

POSTSCRIPT/DO THE MATH

While we are on financial topics, let me take this opportunity to share what I believe is one more example of collusion, except this time it is between the Trump Administration and its donors.  On Wednesday, Lowes announced it was joining the list of company who are distributing bonuses (up to $1,000) to hourly employees because of the Republican tax cuts.  Sounds great, right?  Just a minute.  Here are the facts.

  • It is a one-time bonus.
  • The bonus varies depending on full- versus part-time work and length of service.  Only full-time employees with 20+ years of service will receive the full $1,000.  (How many of those do you think there are?)   A full-time employee with less than two years service will receive $150.  (CNBC, January 31, 2018)
  • The average hourly wage for customer service associate is $11.56.  A sales associate makes $11.70/hour.
  • The total hours worked each year by a full-time employee equals 2080.  If Lowes had raised salaries by just one dollar, each full-time employee would receive an additional $2,080 EVERY year, not a one-time bonus.  Remember that full-time employee with less than two years of service.  His $150 bonus is the equivalent of a $0.07/hour raise.
  • If Lowes used its reduced tax liability to start paying a living wage of $15.00/hour, a full-time sales associate would receive an annual salary increase of $6,864.
  • In anticipation of the tax cuts, Lowes raised the annual dividend on its stock from $1.40/share to $1.64/share.
  • So, if I owned 10,000 shares of Lowes stock, I would receive an increased dividend of $2,400 in 2018 (2.4 times the amount of a one-time benefit for a full-time salaried worker with 20+ years service).
  • The single largest shareholder of Lowes stock is a Vanguard Index fund with over 20 million shares.  Participants in that fund will receive an INCREASE of $4.8 million in dividends next year and likely every subsequent year.
  • Oh, I forgot, those qualified dividends will be tax free.  Heaven forbid, the bonus recipients have a household income over $24,000/year.  They will owe both income tax and employment taxes (FICA and Medicare) on their largesse.

So much for the middle class and workers being the primary beneficiaries of the tax cuts.

For what it’s worth.
Dr. ESP

 

What ROI?

 

Let me ask you a question.  Assume you are the largest and most powerful company in a specific market sector.  You have been outspending the competition for years.  Much of that investment has been spent on technology, new equipment that was supposed to give you an even greater edge against the competition.  But instead of higher profits, you are losing customers.  The competition has increased investment but not nearly at the rate you have.  And they are establishing footholds in markets which were thought to be your anchors. In other words, the return on investment (ROI) was not what one would expect. What would you do?

As I’ve written on several occasions, I wish those who constantly advocate running the government like a business would use the metrics employed by the private sector to make spending decisions.  Ask any CEO, “Would you continue to investment in the same factors of productions if your record of success over 70 years was less than stellar?”  Of course not.  Yet, that is exactly what Donald Trump and GOP Congress tell us is at the heart of the upcoming vote on a continuing resolution to keep the federal government open.

On Tuesday morning, the flipflopper-in-chief tweeted, “The Democrats want to shut down the Government over Amnesty for all and Border Security. The biggest loser will be our rapidly rebuilding Military, at a time we need it more than ever.”  On Monday, it was reported, “The Pentagon is planning to develop two new sea-based nuclear weapons to respond to Russia and China’s growing military capabilities, according to a sweeping Defense Department review of nuclear strategy.  (Wall Street Journal, January 15, 2018)” The proposed White House defense budget for FY2018 is $647 billion, a 5.4 percent increases from FY2017.  (NOTE:  This does not include an additional $183.5 billion for veterans benefits and $88.9 billion for amortization of unfunded liabilities.) According to the Center for Strategic & International Studies, “The request includes $21.8 billion for atomic energy defense activities to maintain the nation’s arsenal of nuclear warheads and bombs.”

In the last year for which data is available, the total global military spending was $1.6 trillion in 2015, of which the U.S. share was 37 percent (Source: National Priorities Project).  U.S. expenditures eclipsed the total of the next seven nations and was 277 percent higher than the that of China which ranked #2. With that kind of advantage, one would think the United States would be cleaning the competition’s clock.  But, let’s look at the ROI from this massive investment.

  • Despite a three-year war (oops, police action), Korea remains divided and the North now has nuclear weapon capacity, something that every administration for four decades has vowed they would never have.
  • An American supported invasion at the Cuban Bay of Pigs in 1961 to overthrow the Castro regime resulted in the Castro brothers continuing to lead the country 56 years later.
  • After military engagement in Vietnam from March 8, 1965 to April 30, 1975 and the loss of over 54,000 American soldiers, today a unified Vietnam under communist rule is both politically and economically stable.
  • After 16 years in Afghanistan, the Taliban remains an insurgent force.  Even MOAB (the mother of all bombs) has not deterred the Taliban and ISIS in the region.
  • Thirteen years in Iraq is best described as an ebb and flow between somewhat friendly and highly unfriendly forces.  The recent double suicide bombings in Baghdad suggests that despite the overwhelming U.S. military power availability to the Masum government, Iraqis live in fear of continued ISIS insurgency.
  • Formal and informal branches of global jihad are an increasing threat worldwide, not shrinking.

I know, you might argue we are facing a different kind of military threat.  Insurgent forces organized in cells is different from conventional forces operating under national flags.  Absolutely correct.  And that’s my point.  Trump and the GOP Congress still think we are Kodak and FotoMat, wondering why nobody is buying 35 millimeter film or bringing undeveloped rolls to our kiosks to process.  They have proposed a defense budget which suggests the problem is not enough FotoMat store fronts or an under-supply of negative and chemical-based photographic supplies.

Nothing is absolute.  I know there are units within the Pentagon who are focused on non-traditional responses to the real threats we face.  Cyber-security and counter-intelligence resources have increased.  For FY2017, the Obama administration asked for a 15 percent increase for cyber-security operations raising the expenditure level to $6.7 billion.  Compare that to the $122 billion in the Trump budget for procurement of NEW weapons systems.  I guess, little boys do love their shiny toys.

For what it’s worth.
Dr. ESP

 

The Expendables

 We are the shadows and the smoke, we rise. We are the ghosts that hide in the night.

~Barney Ross

Image result for the expendablesJust in case the name “Barney Ross” doesn’t ring a bell, he was the commander of a team of retired mercenaries hired to take down a South American dictator in the 2010 action film The Expendables.  I thought about Ross (Sylvester Stallone) and his baby boomer band of brothers as I was reading an article in the December 13 issue of the Washington Post titled, “Fracking Sites May Raise the Risk of Underweight Babies, New Study Says.”

The referenced study was jointly conducted by Janet Currie (Princeton), Michael Greenstone (University of Chicago) and Katherine Meckel (UCLA). The analysis was based on data covering more than 1.1 million births in Pennsylvania between 2004 and 2013.  Their conclusion?  Babies born within one kilometer of active fracking sites had a 25 percent higher risk of poor birth outcomes including low-birth weight and other health issues.  Similar though less frequent maladies were reported within three kilometers of active sites.

Last weekend my wife and I visited family in the northern panhandle of West Virginia.  Evidence of fracking activity was apparent throughout the region.  There were multiple “pads (i.e. staging areas)” along every two-lane rural road.  Extended-stay motels have become home for out-of-state workers eager to take the relatively high paying jobs in the industry.

And then it hit me.  Not far from the pads was an abandoned coal mine where workers and residents were once exposed to equally severe environmental hazards.  The correct analogy for residents of Appalachian Pennsylvania and West Virginia is NOT The Expendables, but the sequel The Expendables 2, when the mercenaries are again recruited to face danger in the interest of national security.  Except in the case of fracking, the same residents who suffered black lung and other respiratory diseases to power the 20th century are again being put at risk for national ECONOMIC security.

The Post quotes Greenstone as saying the researchers’ goal was not to condemn fracking but to promote practices, such as converting from vertical to horizontal drilling, which would lessen the negative impacts.  But what about the children who are subject to physical ailments and the families who face financial distress from medical bills?  And there lies the major difference between Ross’ “ghosts that hide in the night” and the casualties of the battle for American energy independence.

In an exchange between Ross and Trench Mauser (Arnold Schwarzenegger), the two haggle over how high the compensation needs to be for the latter to join the expedition.

Trench: Only an idiot would do this job.
Barney Ross: How much?
Trench: Like I said.

In the current situation, some families have received cash payments and/or royalties for transferring mineral rights to the oil and gas companies.  If the industry with government approval wants to continue fracking in the poorest regions of the country the least they could do is provide parents with the help they need to give their children the medical care they deserve.  And it’s not like they need to create a new state or federal program.  The Children’s Health Insurance Program (CHIP) already does that.

All Congress needs to do is renew it.  And it would happen tomorrow if the governors and state legislatures in fracking states threatened to shut down fracking activity until CHIP is reauthorized and fully funded.  The parade of oil and gas lobbyists from K Street to Capitol Hill would put Disney to shame.

It’s time pro-life advocates become pro-health care champions.  Especially for children.  They are NOT EXPENDABLE.

For what it’s worth.
Dr. ESP

 

Peter Principle Reconsidered

 

Related imageIt has been nearly a half-century since the publication of Lawrence J. Peter’s (1919-1990) management opus The Peter Principle: Why Things Always Go Wrong.  The main thesis of the best-selling book, according to Wikipedia, is:

…the selection of a candidate for a position is based on the candidate’s performance in their current role, rather than on abilities relevant to the intended role. Thus, employees only stop being promoted once they can no longer perform effectively, and “managers rise to the level of their incompetence”.

Most of the text focuses on the negative impacts on the organization or system in which the now under-qualified manager is employed.  For example, the best sales person in a business is elevated to the position of vice-president for sales, a job which is not about managing assigned customer accounts but scaling the company’s entire sales infrastructure  The company now suffers because their best salesperson has been pulled off the street and the overall sales effort deteriorates because the new VP has never been responsible for identifying, recruiting and training talent.

Peter spent minimal time trying to understand the impact on the individuals who now might as well have a “Scarlet I (for incompetence)” sewn on their business attire.  One can imagine the whispers among employees, not just those under the new VP’s supervision, but everyone whose livelihoods depends on the success of the sales department.  After all, that is where the revenues originate.  Put yourself in the the shoes of the VP.  Sleepless nights?  Self-isolation?  Denial?  Not willing to seek help for fear of being viewed as weak?

This private hell violates every cannon of good business management.  Numerous business gurus have written the happiest and most successful members of an organization are those in positions when they feel both capable and challenged.  But fortunately, it is a PRIVATE hell.  Corporate managers, except in the instance of major failure or scandal, are not covered by the media.  And rarely are they the butts of late night humor.  Yet even in cases when those with knowledge of a manager’s shortcomings is a relatively small circle, the deterioration of the principal’s physical and mental state soon becomes apparent.  In short, the negative impact, when someone rises to their level of incompetence, can be equally destructive for that individual as it is for the organization.

This is why successful organizations develop career ladders with incremental promotions.  In the above case, no salesperson would immediately be promoted to VP for sales.  Instead, they may first be given responsibility for a regional team of company representatives.  And, under the tutelage of the VP for sales, learn what it means to motivate others, present and explain company directives and fill vacancies when they occur.

Now imagine a different scenario where the sales VP’s every decision, action, words and memos were shared openly.  And immediately become fodder for every news outlet — broadcast, digital and print.  And are fodder for writers of the opening monologues of every late night talk show.  That PRIVATE hell has now gone PUBLIC.  And not to make matters worse, the newly anointed manager has multiple skeletons in his/her closet which, if exposed, would ruin both the individual’s career and personal life.

Welcome to Donald J. Trump’s PUBLIC hell.  He is that VP with one major exception.  No individual or board of directors appointed him to his current position.  He was the one who decided to take over the sales department.  And then spent his first year bringing in middle managers who also did not understand the task or worse felt the company did not need a sales department.  He disparaged those who had devoted their careers making sure the unit was a success.  And finally, he is cooking the books to make stockholders believe he is the “greatest VP of sales” in the company’s long history.

I make this comparison for one reason only.  Not to reiterate Trump’s lack of knowledge about his responsibilities or to explain what appears to be his spiraling decline into irrationality or worse.  Others have taken up that mantle.  It is time to focus attention on those who are watching this debacle and doing nothing.  At the head of the list is the so-called “donor class” who will soon become the primary beneficiary of the emerging tax scam.  They would NEVER tolerate this situation in their own organizations.  They know the effect such a rotten apple will have on the entire barrel of fruit.  And they would immediately pull the contaminated product off the shelves.

Yet they have no qualms about putting the country and the rest of us at risk by continuing to underwrite a dangerous product.  And they wonder why an increasing number of young Americans question the value of capitalism.  Strangely, in this case, an NRA analogy is most appropriate. “It is not the theory or system that is killing capitalism, it is the people who are misusing and abusing the system for their own purposes.”

For what it’s worth.
Dr. ESP