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What Digby Should Know

I was checking Hullabaloo today and saw that Digby had written a cautiously optimistic post about Nancy Pelosi’s defense of Medicare:

With Republicans going far beyond line drawing to a full blown assault, a big Democrat finally digs in. Greg Sargent:

“It is a flag we’ve planted that we will protect and defend. We have a plan. It’s called Medicare.”

That’s from Nancy Pelosi, who called me from Wisconsin, where she’s holding events today defending Medicare in Paul Ryan’s back yard. On the call, Pelosi laid out a message on Medicare she hopes Dems will use for — well, forever…

Pelosi insisted that when all the smoke clears, the Democratic Party will still be standing by Medicare in a way liberals can accept. “The fight of this Congress and beyond will be to preserve Medicare and not have it abolished,” she said. “The three most important issues we should be talking about are Medicare, Medicare, and Medicare.”Finally — the Democrats have awakened to the fact that Paul Ryan’s plan is the best thing that ever happened to them, a major overreach of the kind that perfectly characterizes the Republicans’ greatest weakness: hubris.

Pelosi explained that when she had recently said that everything was on the table, she really meant “no benefits cuts.” Ok… But she did seem to feel that the Biden talks around the debt ceiling were going well, or at least weren’t leading to the one-sided agreement one has come to expect:

Now, Pelosi is right to defend Medicare but not just for political reasons.  It’s just the right thing to do for the country and seniors, current and future.  But what Digby doesn’t know is that the right wing noise machine has already done a number on Nancy Pelosi and the typical social conservative Fox News viewers who vote don’t believe a single thing that comes out of Pelosi’s mouth.  They’ve been conditioned with thought stopping ideas.  The new thought stopper has something to do with that stupid, ineffective,  healthcare reform bill and the application and granting of waivers:

HANNITY: All right, now, let’s start with the utter hypocrisy here. You know, I thought this was good for every American. I thought she was saying this is good for every American. As you look at it, you know, 20 percent of the waivers in the month of April for her district. Why should I be concerned?

MALKIN: Well, it is very news worthy. I think it is indicative of a problem that has been a hallmark in the age of Obama since day one. And that is that selective enforcement has been the law or the lawlessness of the land for this administration and for the Democrats.

You’re right, Sean, I think it’s a very basic point, but it deserves to be reiterated. If Obamacare is so good for everyone why is this escape hatch keeps getting bigger and bigger and bigger for an increasing number of big labor unions, companies, many of them which were foremost at the vanguard there of crusading for Obamacare in the first place.

And many of these noteworthy businesses in the ground zero district of a woman who foisted Obamacare on everybody else. Now, as you say, Nancy Pelosi denies that there’s any corruption, but I think it is inherently corrupt to have the system in place that is not transparent.

They can say it until they are blue in the faces that they are being transparent, but one thing we do not have is a list of all the people who applied for these golden tickets out of Obamacare and were denied.

Who else tried to get a pass and was denied for what reason? Are there any other members of Congress out there who have intimate knowledge about the waiver process? Did they intervene on any of these businesses or unions’ behalf? We don’t know and we need to.

HANNITY: Well, it seems particularly foolish to me because if they think that they are going to be able to hold this information from the public, we are going to know what it is. We are going to know who applied. We are going to know in the end who was denied. Then we are going to see whose districts benefited. I think if it can be shown that certain congressional districts or states like Harry Reid, benefited, I think they got themselves a big political problem for the very reasons you are citing here is that, you know, arrogant learjet limousine liberals. This law is good for you, but our friends get an exemption.

When is it going to sink into the Obama cheerleaders’ heads that the fact that no one likes the healthcare reform bill has nothing to do with the “bipartisan” flavor of the thing and everything to do with the fact that it is going to result in a lot of money going to insurance companies without true reform and cost savings for everyone else, including Medicare recipeints?

Anyway…

The SCFNV is not going to be too thrilled with the waivers granted to various states that Jay Ackroyd writes about today on Eschaton either. Ooo, look at that!  NEVADA made the list.  Talk about bad optics. So, Nancy Pelosi is responsible for the granting of these waivers to businesses in her district (not sure of all the facts so I can’t comment) and the senior conservative Fox News viewers (known from this point on as SCFNV’s because I’m tired of typing this out) are enraged by it.  If this is correct, the SCFNV has a point.  It’s a bad healthcare reform bill and it’s unfair to grant waivers to people who don’t want to participate in it.  It looks like favoritism.  Nevermind all the batshit crazy stuff Republicans do all the damn time.  They’re Bogarting the microphone right now.

I just had this conversation about Pelosi and waivers last night with a SCFNV who is my bellwhether on all things right wing crazy and take it from me, Pelosi is completely discredited in their eyes. This is the right wing’s MO.  Make something up, pin it to your target, beat it relentlessly and watch your target waste their time trying to get past the filter on any topic, even when they’re trying to save a good program like Medicare. Republicans might be the most arrogant jerks on the planet but they own the media and they’re fiendishly good at planting ideas in the heads of unsuspecting viewers.  When Democrats had their majorities in Congress, the first thing they should have done was make an effort to restore balance to the messaging apparatus.  They did not.  Big mistake.  Pelosi is going to be completely ineffective in spreading the message that Medicare must be saved at all costs.  Your typical SCFNV’s rage button is going to be tripped any time they see her on TV defending anything.

Better plan: turn off all TV news when your SCFNV is around and buy her a copy of The Speech instead.

Thursday: We’re not seeing things after all

Yves Smith at Naked Capitalism wrote a post about a study that confirms what we’ve been thinking for years: Short term thinking is destroying whole industries and will have severe repercussions down the road.

Andrew Haldane and Richard Davies of the Bank of England have released a very useful new paper on short-termism in the investment arena. They contend that this problem real and getting worse. This may at first blush seem to be mere official confirmation of most people’s gut instinct. However, the authors take the critical step of developing some estimates of the severity of the phenomenon, since past efforts to do so are surprisingly scarce.

“A short-term perspective is tantamount to applying an overly high discount rate to an investment project or similarly, requiring an excessively rapid payback. In corporate capital budgeting settings, the distortions are pronounced:

Most recently, in 2011 PriceWaterhouseCoopers conducted a survey of FTSE-100 and 250 executives, the majority of which chose a low return option sooner (£250,000 tomorrow) rather than a high return later (£450,000 in 3 years). This suggested annual discount rates of over 20%. Recently, Matthew Rose, CEO of Burlington Northern Santa Fe (America’s second biggest rail company), expressed frustration at the focus on quarterly earnings when locomotives lasted for 20 years and tracks for 30 to 40 years. Echoes, here, of “quarterly capitalism”.”

Haldane and Davies argue the effect is significant:

“First, there is statistically significant evidence of short-termism in the pricing of companies’ equities. This is true across all industrial sectors. Moreover, there is evidence of short-termism having increased over the recent past. Myopia is mounting.

Second, estimates of short-termism are economically as well as statistically significant.
Empirical evidence points to excess discounting of between 5% and 10% per year.

The result is that projects with long-term payback, beyond the 30 to 35 year timeframe, are treated as having no value. No wonder we don’t fund basic science, infrastructure, or climate change related projects”.

The writers point out the first order bad effects: good projects don’t get funded, and those projects are often the ones with the highest potential for broad social impact (would we ever build the US highway system now?). But the knock-on effects are if anything more pernicious. The fact that most investors employ overly high discount rates produces is the same result you’d see with oligopoly pricing: overly high returns with restricted output. And this is consistent with the picture we see in most of the world. Perversely, the corporate sector has been a net saver for nearly a decade in the US, longer than that in some other economies. As we wrote with Rob Parenteau last year:

Over the past decade and a half, corporations have been saving more and investing less in their own businesses. A 2005 report from JPMorgan Research noted with concern that, since 2002, American corporations on average ran a net financial surplus of 1.7 percent of the gross domestic product — a drastic change from the previous 40 years, when they had maintained an average deficit of 1.2 percent of G.D.P. More recent studies have indicated that companies in Europe, Japan and China are also running unprecedented surpluses.

This fits nicely with what we R&D professionals have been seeing.  Its effects are especially profound with respect to the pharmaceutical industry because almost by definition, pharmaceutical research is a long term affair.  *Maybe* you can design a better silicon chip in a faster timeframe if everyone gave up sleep but with life sciences related research, Harvard’s Law applies:

Under the most rigorously controlled conditions of pressure, temperature, volume, humidity, and other variables, the organism will do as it damn well pleases.

You can’t make money in the short term in research.  Therefore, research must be cut.

It’s logic only a financier could love.

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