From The Economist print edition
FOR years America’s fiscal problems had a surreal quality. No one disputed that an ageing population and health-care inflation could bust the budget, but that prospect was decades away and procrastination seemed painless. No longer. A giant hole has opened in the budget because of stimulus, bail-outs and a recession that has savaged economic growth and tax revenue. On current policies the publicly held federal debt, 41% of GDP last year, will double in the next decade. Total government debt will move well above the G20 average. In a few years the AAA rating of Treasury bonds, the world’s most important security, could be in jeopardy.
A sudden crisis is unlikely. Other rich countries with far bigger debts relative to the size of their economies, from Italy to Japan, have soldiered on without hitting a wall. Stable politics, transparent laws and economic dominance give America unequalled credibility with lenders. For all the anxiety the declining dollar drew from China this week, it has no serious rival as the world’s reserve currency. America has sensibly used this fiscal freedom to enact an aggressive stimulus programme. This should be maintained for as long as it is needed.
Barack Obama and Congress can pre-empt such corrosive uncertainty with a plan to reduce the deficit now. Far from requiring immediate spending cuts or tax increases, a credible plan would reassure markets and allow an orderly exit from fiscal stimulus. The Federal Reserve provides a model: it does not plan to tighten monetary policy in the near future, but has signaled its willingness to do so when inflation threatens.
America’s deficit problem is in essence a spending problem, so spending must bear the brunt of adjustment. An aging population and health-care inflation are inexorably driving up the cost of the country’s three big entitlements: Social Security (pensions), Medicare and Medicaid (health care for the elderly and the poor, respectively). Mr Obama has long promised that health reform would cover the uninsured without adding to the deficit, while reining in long-term costs. Unfortunately, the prospects for controlling costs are tenuous. Achieving large savings will require action on many fronts. Raising the retirement age for Social Security and Medicare would save money while encouraging Americans to work longer, thereby expanding economic potential. Medicaid could be converted to block grants, compelling states to assume more of the burden of cost control. Other spending should also be vigorously squeezed, to stop federal funds being wasted on highways of dubious value or trade-distorting farm subsidies.
Still, cold arithmetic suggests that spending cuts alone cannot deliver enough. Changes to entitlements take effect only gradually. And the scope for slashing non-defence discretionary spending is limited, since it makes up merely one-sixth of total outlays. So Americans are stuck with a budgetary conundrum: they seem to be opting for more government, at least in health care, yet they do not seem prepared to pay for it. Their leaders have indulged this fantasy. Mr Obama has foolishly sworn off higher taxes on 95% of households, and Republicans will not countenance them for anybody. This newspaper strongly prefers small government and low taxes, but if Americans are to have bigger government and a sustainable budget, tax revenues will have to rise.
Raising tax revenue will hurt less if the tax system becomes more supportive of economic growth in the process. Compared with other countries, America taxes consumption too little and income too much. Redressing this imbalance could, with time, help economic growth. First, broaden the income-tax base by eliminating exemptions, and if possible cutting rates. Second, introduce a carbon tax, the least distorting way to slow the growth in emissions. If that is not possible, sell rather than give away carbon-emission permits, or raise the federal fuel tax. A last resort is a broad consumption tax, such as a value-added tax. This is economically efficient, but could too easily become a politically convenient way to vacuum up more money and expand government.
The economics of fiscal reform are straightforward; it’s the politics that are tough. Mr Obama should start the process with a budget early next year that aims to stabilize, and preferably reduce, the debt-to-GDP ratio in the coming decade. The problem is getting Congress to pass the necessary laws. The polarisation of American politics has left Democrats more set on defending entitlements and Republicans determined to hold down taxes. With mid-term elections a year away, the incentive to compromise is shriveling.
One way to finesse these toxic politics would be to establish a bipartisan commission to fix entitlements and taxes, as proposed by Kent Conrad and Judd Gregg, respectively the most senior Democrat and Republican on the Senate Budget Committee. Its membership would be drawn from both parties, both chambers of Congress and the White House. Democrats and Republicans alike would have to make sacrifices. To preserve this grand bargain, Congress would be allowed only to approve or reject the commission’s proposal, not amend it.
This is no magic bullet. Although similar processes have been used to negotiate trade deals, the stakes in this case would be far higher, as would the chances of failure. Republicans in particular may balk at co-operating. The commission could deadlock, or see its proposal voted down, precipitating the sort of market disruption the scheme was meant to avoid. But that actually may be an advantage: politicians may conclude that failure is not an option. The best defence against a crisis is to act as though you are facing one.
Even as drug makers promise to support Washington’s health care overhaul by shaving $8 billion a year off the nation’s drug costs after the legislation takes effect, the industry has been raising its prices at the fastest rate in years.
In the last year, the industry has raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. That will add more than $10 billion to the nation’s drug bill, which is on track to exceed $300 billion this year. By at least one analysis, it is the highest annual rate of inflation for drug prices since 1992.
The drug trend is distinctly at odds with the direction of the Consumer Price Index, which has fallen by 1.3 percent in the last year.
Drug makers say they have valid business reasons for the price increases. Critics say the industry is trying to establish a higher price base before Congress passes legislation that tries to curb drug spending in coming years.
“When we have major legislation anticipated, we see a run-up in price increases,” says Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota. He has analyzed drug pricing for AARP, the advocacy group for seniors that supports the House health care legislation that the drug industry opposes.
A Harvard health economist, Joseph P. Newhouse, said he found a similar pattern of unusual price increases after Congress added drug benefits to Medicare a few years ago, giving tens of millions of older Americans federally subsidized drug insurance. Just as the program was taking effect in 2006, the drug industry raised prices by the widest margin in a half-dozen years.
“They try to maximize their profits,” Mr. Newhouse said.
But drug companies say they are having to raise prices to maintain the profits necessary to invest in research and development of new drugs as the patents on many of their most popular drugs are set to expire over the next few years.
“Price adjustments for our products have no connection to health care reform,” said Ron Rogers, a spokesman for Merck, which raised its prices about 8.9 percent in the last year, according to a stock analyst’s report.
This year’s increases mean the average annual cost for a brand-name prescription drug that is taken daily would be more than $2,000 — $200 higher than last year, Professor Schondelmeyer said.
And this means that the cost of many popular drugs has risen even faster. Merck, for example, now sells daily 10-milligram pills of Singulair, the blockbuster asthma drug, at a wholesale price of $1,330 a year — $147 more than last year. Singulair is now selling at retail, on drugstore.com, for nearly $1,478 a year.
The drug companies “can charge what they want — it’s not fair,” Eric White, the 42-year-old owner of a small jewelry store in Queens, said as he left a pharmacy recently.
Despite having drug insurance, Mr. White says he now pays $110 a month out of pocket for two brand-name allergy medicines, even as he has cut prices in his jewelry store by at least 40 percent to keep customers coming through the door.
He shook his head. “What can I do?” he said. “I need my medicines.”
The drug industry has actively opposed some of the cost-cutting provisions in the House legislation, which passed Nov. 7 and aims to cut drug spending by about $14 billion a year over a decade.
But the drug makers have been proudly citing the agreement they reached with the White House and the Senate Finance Committee chairman to trim $8 billion a year — $80 billion over 10 years — from the nation’s drug bill by giving rebates to older Americans and the government. That provision is likely to be part of the legislation that will reach the Senate floor in coming weeks.
But this year’s price increases would effectively cancel out the savings from at least the first year of the Senate Finance agreement. And some critics say the surge in drug prices could change the dynamics of the entire 10-year deal.
“It makes it much easier for the drug companies to pony up the $80 billion because they’ll be making more money,” said Steven D. Findlay, senior health care analyst with the advocacy group Consumers Union.
Name-brand prices have risen even as prices of widely used generic drugs have fallen by about 9 percent in the last year, Professor Schondelmeyer said. But name brands account for 78 percent of total prescription drug spending in this country. And as long as a name-brand drug still has patent protection it faces no price competition from generics.
Ken Johnson, senior vice president of the industry association — the Pharmaceutical Research and Manufacturers of America — criticized the analysis Professor Schondelmeyer had conducted for AARP, saying it was politically motivated.
“In AARP’s skewed view of the world, medicines are always looked at as a cost and never seen as a savings — even though medicines often reduce unnecessary hospitalization, help avoid costly medical procedures and increase productivity through better prevention and management of chronic diseases,” he said.
But Professor Schondelmeyer’s analysis — which found prices for the name-brand drugs most widely used by the Medicare population rising by 9.3 percent in the last year, the fastest rate since 1992 — is in line with the findings of a leading Wall Street analyst, too.
Catherine J. Arnold, a drug industry analyst at Credit Suisse, said her latest study of the nation’s eight biggest pharmaceutical companies showed markedly similar results: list prices rising an average of 8.7 percent in the 12 months ending Sept. 30 — the highest rate of growth since at least 2004.
As does Professor Schondelmeyer, Ms. Arnold based her price calculations on reported wholesale prices and a formula that puts more emphasis on each company’s best-selling drugs.
Ms. Arnold said the prospect of cost containment under health care reform, as well as the tougher business environment, entered into the decisions of manufacturers to raise prices this year.
The industry stands to gain about 30 million customers with drug insurance from the legislation pending in Congress. But the industry also faces the prospect of tougher negotiations from both public and private buyers as the government tries to squeeze savings out of the health system.
“If you’re going to take price increases,” Ms. Arnold said, “here and now might be the place to do that, because the next year and the year after that might be tough.”
Mr. Johnson did not dispute the Credit Suisse study or deny Ms. Arnold’s finding that American drug makers have raised prices at the fastest rate in five years.
He said both studies were incomplete by failing to include rebates that drug makers give distributors. But Ms. Arnold, Professor Schondelmeyer and a 2007 Congressional study of Medicare said the rebates often accrue to the middlemen, not consumers, and higher manufacturer prices lead to higher retail prices.
And the drug industry’s own major consulting firm, IMS Health, has also reported a significant run-up in prices. Back in April, IMS predicted that United States drug sales might actually decline this year.
Billy Tauzin, president of the industry’s trade association, highlighted the gloomy prediction in a June 1 letter to President Obama shortly before striking the deal to cut drug costs by $80 billion. In negotiating the deal, the drug makers argued that they could not afford to give up more than that.
But in October, IMS made an unusual change in the middle of its forecasting cycle, saying it now believed United States sales would grow at least 4.5 percent in 2009 — or $21 billion more than expected six months earlier.
A major reason, IMS said, was higher-than-expected price increases for drugs in the United States.
The deficit problem
From The Economist print edition
FOR years America’s fiscal problems had a surreal quality. No one disputed that an ageing population and health-care inflation could bust the budget, but that prospect was decades away and procrastination seemed painless. No longer. A giant hole has opened in the budget because of stimulus, bail-outs and a recession that has savaged economic growth and tax revenue. On current policies the publicly held federal debt, 41% of GDP last year, will double in the next decade. Total government debt will move well above the G20 average. In a few years the AAA rating of Treasury bonds, the world’s most important security, could be in jeopardy.
A sudden crisis is unlikely. Other rich countries with far bigger debts relative to the size of their economies, from Italy to Japan, have soldiered on without hitting a wall. Stable politics, transparent laws and economic dominance give America unequalled credibility with lenders. For all the anxiety the declining dollar drew from China this week, it has no serious rival as the world’s reserve currency. America has sensibly used this fiscal freedom to enact an aggressive stimulus programme. This should be maintained for as long as it is needed.
Barack Obama and Congress can pre-empt such corrosive uncertainty with a plan to reduce the deficit now. Far from requiring immediate spending cuts or tax increases, a credible plan would reassure markets and allow an orderly exit from fiscal stimulus. The Federal Reserve provides a model: it does not plan to tighten monetary policy in the near future, but has signaled its willingness to do so when inflation threatens.
America’s deficit problem is in essence a spending problem, so spending must bear the brunt of adjustment. An aging population and health-care inflation are inexorably driving up the cost of the country’s three big entitlements: Social Security (pensions), Medicare and Medicaid (health care for the elderly and the poor, respectively). Mr Obama has long promised that health reform would cover the uninsured without adding to the deficit, while reining in long-term costs. Unfortunately, the prospects for controlling costs are tenuous. Achieving large savings will require action on many fronts. Raising the retirement age for Social Security and Medicare would save money while encouraging Americans to work longer, thereby expanding economic potential. Medicaid could be converted to block grants, compelling states to assume more of the burden of cost control. Other spending should also be vigorously squeezed, to stop federal funds being wasted on highways of dubious value or trade-distorting farm subsidies.
Still, cold arithmetic suggests that spending cuts alone cannot deliver enough. Changes to entitlements take effect only gradually. And the scope for slashing non-defence discretionary spending is limited, since it makes up merely one-sixth of total outlays. So Americans are stuck with a budgetary conundrum: they seem to be opting for more government, at least in health care, yet they do not seem prepared to pay for it. Their leaders have indulged this fantasy. Mr Obama has foolishly sworn off higher taxes on 95% of households, and Republicans will not countenance them for anybody. This newspaper strongly prefers small government and low taxes, but if Americans are to have bigger government and a sustainable budget, tax revenues will have to rise.
Raising tax revenue will hurt less if the tax system becomes more supportive of economic growth in the process. Compared with other countries, America taxes consumption too little and income too much. Redressing this imbalance could, with time, help economic growth. First, broaden the income-tax base by eliminating exemptions, and if possible cutting rates. Second, introduce a carbon tax, the least distorting way to slow the growth in emissions. If that is not possible, sell rather than give away carbon-emission permits, or raise the federal fuel tax. A last resort is a broad consumption tax, such as a value-added tax. This is economically efficient, but could too easily become a politically convenient way to vacuum up more money and expand government.
The economics of fiscal reform are straightforward; it’s the politics that are tough. Mr Obama should start the process with a budget early next year that aims to stabilize, and preferably reduce, the debt-to-GDP ratio in the coming decade. The problem is getting Congress to pass the necessary laws. The polarisation of American politics has left Democrats more set on defending entitlements and Republicans determined to hold down taxes. With mid-term elections a year away, the incentive to compromise is shriveling.
One way to finesse these toxic politics would be to establish a bipartisan commission to fix entitlements and taxes, as proposed by Kent Conrad and Judd Gregg, respectively the most senior Democrat and Republican on the Senate Budget Committee. Its membership would be drawn from both parties, both chambers of Congress and the White House. Democrats and Republicans alike would have to make sacrifices. To preserve this grand bargain, Congress would be allowed only to approve or reject the commission’s proposal, not amend it.
This is no magic bullet. Although similar processes have been used to negotiate trade deals, the stakes in this case would be far higher, as would the chances of failure. Republicans in particular may balk at co-operating. The commission could deadlock, or see its proposal voted down, precipitating the sort of market disruption the scheme was meant to avoid. But that actually may be an advantage: politicians may conclude that failure is not an option. The best defence against a crisis is to act as though you are facing one.
The sandwich-shop chain agrees to pay $95 million to settle class- action lawsuits.
Denver-based Quiznos has agreed to settle — for up to $95 million — a series of class-action lawsuits brought by disgruntled sandwich-shop franchisees.
Attorneys said the settlement could help end years of acrimonious relationships between Quiznos and its store operators, who said they were maltreated by the chain.
Franchisees and others who wanted to open a store — about 6,900 are covered by the class-action lawsuits — claimed the chain overcharged for required supplies and failed to provide adequate marketing support. As a result, the lawsuit claims, expenses were inordinately high and profit margins low.
According to plaintiffs’ attorneys, the biggest part of the settlement — up to $57.5 million — is earmarked for an estimated 2,300 operators who had paid to acquire Quiznos franchises but never opened stores after site-selection disputes with Quiznos.
In addition, Quiznos will contribute $19.4 million to its advertising and marketing trust funds and offer credits or payments of up to $17.85 million to existing and former franchise owners.
The chain also will pay up to $11 million in plaintiffs’ attorneys fees.
“It’s a pretty significant settlement for the franchisees,” said Justin Klein, one of the plaintiffs’ attorneys. “Not only is there financial value, but there are business changes that have been agreed to that will benefit the operators.”
Among the changes are an annual review by independent auditors of Quiznos’ food and supply prices charged to franchisees, a dispute-resolution program and an easier method for store operators to buy food outside of Quiznos’ mandated supplier network.
Quiznos in a statement said it is “pleased with the terms of the settlement. Litigation is a time- consuming process that shifts valuable time and resources away from our most important focus — great-tasting food, franchise-owner profitability and customer satisfaction.”
The deal is subject to approval and is scheduled to be heard in June by U.S. District Court Judge Rebecca Pallmeyer in Chicago.
The case combines a series of lawsuits filed since 2006 in Colorado, Wisconsin and Illinois. Quiznos franchisees operate about 4,500 restaurants that generate annual revenue of about $1.7 billion.
Tuesday, November 24, 2009
The top U.S. general and the U.S ambassador in Afghanistan have been told to prepare to testify before Congress as early as next week, according to White House and other U.S. officials, giving an indication of how and when President Obama plans to announce his war strategy.
Even as drug makers promise to support Washington’s health care overhaul by shaving $8 billion a year off the nation’s drug costs after the legislation takes effect, the industry has been raising its prices at the fastest rate in years.
A blog from The New York Times that tracks the health care debate as it unfolds.
In the last year, the industry has raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. That will add more than $10 billion to the nation’s drug bill, which is on track to exceed $300 billion this year. By at least one analysis, it is the highest annual rate of inflation for drug prices since 1992.
The drug trend is distinctly at odds with the direction of the Consumer Price Index, which has fallen by 1.3 percent in the last year.
Drug makers say they have valid business reasons for the price increases. Critics say the industry is trying to establish a higher price base before Congress passes legislation that tries to curb drug spending in coming years.
“When we have major legislation anticipated, we see a run-up in price increases,” says Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota. He has analyzed drug pricing for AARP, the advocacy group for seniors that supports the House health care legislation that the drug industry opposes.
A Harvard health economist, Joseph P. Newhouse, said he found a similar pattern of unusual price increases after Congress added drug benefits to Medicare a few years ago, giving tens of millions of older Americans federally subsidized drug insurance. Just as the program was taking effect in 2006, the drug industry raised prices by the widest margin in a half-dozen years.
“They try to maximize their profits,” Mr. Newhouse said.
But drug companies say they are having to raise prices to maintain the profits necessary to invest in research and development of new drugs as the patents on many of their most popular drugs are set to expire over the next few years.
“Price adjustments for our products have no connection to health care reform,” said Ron Rogers, a spokesman for Merck, which raised its prices about 8.9 percent in the last year, according to a stock analyst’s report.
This year’s increases mean the average annual cost for a brand-name prescription drug that is taken daily would be more than $2,000 — $200 higher than last year, Professor Schondelmeyer said.
And this means that the cost of many popular drugs has risen even faster. Merck, for example, now sells daily 10-milligram pills of Singulair, the blockbuster asthma drug, at a wholesale price of $1,330 a year — $147 more than last year. Singulair is now selling at retail, on drugstore.com, for nearly $1,478 a year.
The drug companies “can charge what they want — it’s not fair,” Eric White, the 42-year-old owner of a small jewelry store in Queens, said as he left a pharmacy recently.
Despite having drug insurance, Mr. White says he now pays $110 a month out of pocket for two brand-name allergy medicines, even as he has cut prices in his jewelry store by at least 40 percent to keep customers coming through the door.
He shook his head. “What can I do?” he said. “I need my medicines.”
The drug industry has actively opposed some of the cost-cutting provisions in the House legislation, which passed Nov. 7 and aims to cut drug spending by about $14 billion a year over a decade.
But the drug makers have been proudly citing the agreement they reached with the White House and the Senate Finance Committee chairman to trim $8 billion a year — $80 billion over 10 years — from the nation’s drug bill by giving rebates to older Americans and the government. That provision is likely to be part of the legislation that will reach the Senate floor in coming weeks.
But this year’s price increases would effectively cancel out the savings from at least the first year of the Senate Finance agreement. And some critics say the surge in drug prices could change the dynamics of the entire 10-year deal.
“It makes it much easier for the drug companies to pony up the $80 billion because they’ll be making more money,” said Steven D. Findlay, senior health care analyst with the advocacy group Consumers Union.
Name-brand prices have risen even as prices of widely used generic drugs have fallen by about 9 percent in the last year, Professor Schondelmeyer said. But name brands account for 78 percent of total prescription drug spending in this country. And as long as a name-brand drug still has patent protection it faces no price competition from generics.
Ken Johnson, senior vice president of the industry association — the Pharmaceutical Research and Manufacturers of America — criticized the analysis Professor Schondelmeyer had conducted for AARP, saying it was politically motivated.
“In AARP’s skewed view of the world, medicines are always looked at as a cost and never seen as a savings — even though medicines often reduce unnecessary hospitalization, help avoid costly medical procedures and increase productivity through better prevention and management of chronic diseases,” he said.
But Professor Schondelmeyer’s analysis — which found prices for the name-brand drugs most widely used by the Medicare population rising by 9.3 percent in the last year, the fastest rate since 1992 — is in line with the findings of a leading Wall Street analyst, too.
Catherine J. Arnold, a drug industry analyst at Credit Suisse, said her latest study of the nation’s eight biggest pharmaceutical companies showed markedly similar results: list prices rising an average of 8.7 percent in the 12 months ending Sept. 30 — the highest rate of growth since at least 2004.
As does Professor Schondelmeyer, Ms. Arnold based her price calculations on reported wholesale prices and a formula that puts more emphasis on each company’s best-selling drugs.
Ms. Arnold said the prospect of cost containment under health care reform, as well as the tougher business environment, entered into the decisions of manufacturers to raise prices this year.
The industry stands to gain about 30 million customers with drug insurance from the legislation pending in Congress. But the industry also faces the prospect of tougher negotiations from both public and private buyers as the government tries to squeeze savings out of the health system.
“If you’re going to take price increases,” Ms. Arnold said, “here and now might be the place to do that, because the next year and the year after that might be tough.”
Mr. Johnson did not dispute the Credit Suisse study or deny Ms. Arnold’s finding that American drug makers have raised prices at the fastest rate in five years.
He said both studies were incomplete by failing to include rebates that drug makers give distributors. But Ms. Arnold, Professor Schondelmeyer and a 2007 Congressional study of Medicare said the rebates often accrue to the middlemen, not consumers, and higher manufacturer prices lead to higher retail prices.
And the drug industry’s own major consulting firm, IMS Health, has also reported a significant run-up in prices. Back in April, IMS predicted that United States drug sales might actually decline this year.
Billy Tauzin, president of the industry’s trade association, highlighted the gloomy prediction in a June 1 letter to President Obama shortly before striking the deal to cut drug costs by $80 billion. In negotiating the deal, the drug makers argued that they could not afford to give up more than that.
But in October, IMS made an unusual change in the middle of its forecasting cycle, saying it now believed United States sales would grow at least 4.5 percent in 2009 — or $21 billion more than expected six months earlier.
A major reason, IMS said, was higher-than-expected price increases for drugs in the United States.
Where Did Trick-or-Treating Come From? In 2008, Americans spent an estimated $5.77 billion on Halloween costumes, decorations, candy, and pumpkins.
In fact, the National Retail Federation says that only five holidays beat Halloween for retail sales in the USA: the winter holidays (including Christmas and Hanukkah), Mother’s Day, Valentine’s Day, Easter, and Father’s Day. Every Halloween, we wonder, how did this multibillion-dollar collection of candy by colorfully costumed kids get started? When did children start donning masks and threatening us with “tricks” if they didn’t get “treats”?
Spook-tacular History Some historians point straight to ancient Celtic traditions like Samhain, a fall festival that celebrated the harvest and honored the dead. They note that the ancient Celts dressed in animal pelt “costumes” during their Samhain celebrations, perhaps, they think, to fool evil spirits.
Other historians point to the Middle Ages, when many people in the British Isles went “guising,” dressing up as saints and devils for Hallowmas. The poor would also go “souling,” going door to door offering to exchange prayers for “soul cakes.” Could these traditions have come to America with the emigrating descendants of the Celts in the 19th century?
The Devil’s in the Details The problem is the link isn’t that direct. A review of early 20th-century American literature shows no mention of trick-or-treating. A 1907 article in St. Nicholas magazine makes many suggestions for a successful Halloween party, including games for telling the future and harvest games like bobbing for apples. The article even suggests making jack o’lanterns from hollowed pumpkins, gourds, and cucumbers! But the author mentions costumes only in passing: “The guests may be received by someone dressed as a witch, or garbed in a white sheet to represent a ghost.”
Images show the kids in dresses, jackets, and ties, not costumes—and not once was it suggested that children ask the neighbors for candy handouts. In 1919, The Book of Hallowe’en described tricks, but not treats. The book said mischievous spirits choose Halloween “for carrying off gates and other objects, and hiding them or putting them out of reach. . . . Bags filled with flour sprinkle the passers-by. Door-bells are rung and mysterious raps sounded on doors, things thrown into halls, and knobs stolen.” Halloween Postcard, Before Trick-or-Treating Source: Vintage Halloween Postcard Candy Boo-nanza So, when did our modern trick-or-treating begin?
The first mention comes in a 1927 newspaper article from Alberta, Canada: “The youthful tormentors were at back door and front demanding edible plunder by the word ‘trick or treat.’”
The first mentions in the USA were also in the Northwest—in Oregon and Montana—in 1934. From there it spread, but the practice was still not universally accepted. In the 1940s, people often referred to trick-or-treating as a “racket,” organized “begging,” and a “nightmare.” Some adults wanted the practice banned, but communities saw it as preferable to the tricks that were getting out of hand. By the 1950s, trick-or-treating was entrenched in American pop culture, appearing in cartoons, movies, and TV shows.
Today, a chief complaint of adults is the holiday’s vast commercialization. Still, children love dressing as princesses, pirates, and superheroes—and they love the candy. —Rebecca Bigelow
To try to contain the damage, the Federal Reserve said Monday that it will extend into 2010 a program to help investors buy commercial property loans. But some say that will have limited impact.
“We seem to be nearing the end of the recession but the situation in the commercial real estate market is getting worse,” says Patrick Newport, an analyst at IHS Global Insight.
About $83 billion of office, retail, industrial and apartment properties have fallen into default, foreclosure or bankruptcy this year, says research firm Real Capital Analytics. The default rate for commercial mortgages jumped from 1.62% to 2.25% in the first quarter and should hit 4.1% by the end of the year, says Sam Chandan, president of Real Estate Econometrics. The carnage will likely cut half a percentage point off economic growth this year and in 2010, Newport says.
Fueled by easy credit, developers built too many shopping malls and office buildings from 2004 to 2007. As the economy soured, vacancy rates rose. Property values are down about 40% from their 2007 peak, Deutsch Bank says, and loans for commercial properties have come to a virtual standstill.
Islamist attacks in Nigeria
VIOLENCE has often disfigured religion in Nigeria. Usually, it has been a matter of bloody confrontation between Muslims and Christians in the middle of the country, where the largely Muslim north rubs up against the mainly Christian south. This week, however, Nigeria experienced its most serious outbreak of another kind of religious violence, provoked by Islamic fundamentalists who take their inspiration from the Taliban of Afghanistan. At least 180 people were killed in five days of clashes between militants and the police.
The fighting started on July 26th in Bauchi state after the police arrested several suspected leaders of an Islamist sect called Boko Haram, a local Hausa term that means “education is prohibited”. In particular, the group is against Western education and influence. It wants to impose a pure Muslim caliphate on Nigeria. In retaliation for the arrest of their leaders, militants went on the rampage in several northern states, attacking the police with anything that came to hand, from machetes to bows and poison arrows.
The police fought back, killing, so they claimed, 39 militants in Bauchi. Fierce fighting took place in Maiduguri, capital of Borno state, where the sect has its headquarters. On July 28th the army was called in to shell the compound where the sect’s leader, Muhammad Yusuf, has been based. As well as killing scores of Boko Haram fighters, the police arrested hundreds of suspected members of the group. Mr Yusuf himself was arrested on July 30th reportedly while hiding in a goat pen at a relative’s house. He was taken into custody and promptly shot dead, according to police as he “tried to escape”.
The “Black Taliban”, as such groups are dubbed in Nigeria’s northern states, have carried out isolated attacks for several years. This time the violence has been more widespread and prolonged. Muslim sharia law was introduced in 12 northern states after general elections in 1999, but the states’ Muslim rulers have usually been cautious in applying it. This has prompted the militants to demand a more extreme form of Islamist rule and for sharia to be extended to the whole of Nigeria.
Nigeria’s federal government, along with Western intelligence agencies, has long worried that extremist groups in the north may link up with Islamist terrorist groups elsewhere in Africa, in particular with al-Qaeda in the Maghreb. This outfit grew out of the blood-soaked struggle by Islamists to overthrow Algeria’s government in the 1990s. Such connections raise the spectre of a concerted Islamist threat against Nigeria, a close ally of America and a large oil exporter. But the links have not been proved and little is known about groups such as Boko Haram.
On this occasion Nigeria’s president, Umaru Yar’Adua, acted swiftly. But it was the exception to his presidential rule. Now halfway through his four-year term, the former governor of the northern state of Katsina has achieved little. His administration is beset by indecision and drift.
This week’s violence in the north comes on top of unceasing violence in the southern Niger Delta region, where an insurgency by militants demanding a bigger share of the country’s oil wealth continues to disrupt oil exports. By some estimates, Nigeria now exports only half of what it should: Angola has taken over as sub-Saharan Africa’s biggest producer.
Despite floating various well-meaning plans to pacify the Delta, the government has failed to stop the region’s unrest. The fall in tax revenues, as a result of illegal bunkering and the sabotage of pipelines, means that Mr Yar’Adua has even less chance of tackling his country’s other problems, such as a chronic lack of electricity. The insurgency in the Delta has thrived on the back of dire poverty and high unemployment in what should be a relatively wealthy region, were it not so poorly governed. Some fear the Islamist militants in the north may profit from the same lack of opportunities, which saps the morale of young Nigerians and makes so many of them prey to extremists.
A battery fueled by air June 2009 From Economist.com
MOBILE phones looked like bricks in the 1980s. Indeed, they were so cumbersome that most were installed in cars. That was because the batteries required to power them were so hefty. When lithium-ion batteries were invented, mobile phones became small enough to be carried in a pocket or slipped into a handbag. Now a new design of battery that uses oxygen from ambient air to power devices could provide even smaller and lighter sources of power. Not only that, such batteries would be cheaper and last for longer between charges.
Lithium-ion batteries have two electrodes immersed in an electrically conductive solution, called an electrolyte. One of the electrodes, the cathode, is made of lithium cobalt oxide; the other, the anode, is composed of carbon. When the battery is being charged, positively charged lithium ions break away from the cathode and travel in the electrolyte to the anode, where they meet electrons brought there by a charging device.
When electricity is needed, the anode releases the lithium ions, which rapidly move back to the cathode. As they do so, the electrons that were paired with them in the anode during the charging process are released. These electrons travel around an external circuit to which the battery is attached and power it.
Peter Bruce and his colleagues at the University of St Andrews in Scotland came up with the idea of replacing the lithium cobalt oxide electrode with a cheaper and lighter alternative. They designed an electrode made from porous carbon and lithium oxide. They knew that lithium oxide forms naturally from lithium ions, electrons and oxygen, but, to their surprise, they found that it could also be made to separate easily when an electric current passed through it. They exposed one side of their porous carbon electrode to an electrolyte rich in lithium ions and put a mesh window on the other side of the electrode through which air could be drawn. Oxygen from the air took the place of the cobalt oxide.
When they charged their battery, the lithium ions migrated to the anode where they combined with electrons from the charging device. When they discharged it, lithium ions and electrons were released from the anode. The ions crossed the electrolyte and the electrons traveled round the external circuit. The ions and electrons then met at the cathode, where they combined with the oxygen to form lithium oxide that filled the pores in the carbon.
Because the oxygen being used by the battery comes from the surrounding air rather than having to be carried around inside the battery, the device that Dr Bruce’s team has designed can be a mere one-eighth to one-tenth the size and weight of modern batteries, while still carrying the same charge. Alternatively, batteries using the new technology would last eight to ten times longer than modern batteries of the same size.
Performance and size are not the only expected improvements. Although they are not yet commercially available, making such a battery is expected to be cheaper. Lithium cobalt oxide accounts for 30% of the cost of a lithium-ion battery. Air, however, is free.
LONDON, England — If Rob Spence achieves his goal, technology will change his view of the world — literally.
Eyeborg: Documentary filmmaker Rob Spence has created a working prototype of his camera-embedded eye.
Spence, who lost an eye in a childhood accident, is in the process of installing a tiny camera into his prosthetic eye. He announced his plan last year, and now he’s a step closer to fulfilling his aim.
“It’s been an expensive and laborious process to make this thing. But fortunately we have leveraged the right people and have a working prototype,” he says.
A documentary filmmaker based in Toronto, Spence wants to use the wireless camera in his eye to make films and examine where “recorded image and video intersect with humanity.” Although, he says, the prototype containing delicate electronics isn’t ready for frequent use yet.
Spence, who calls himself the “eyeborg,” is the latest example of the convergence of human and machine. No longer restricted to the realm of sci-fi novels and movies, technology is increasingly being integrated into the living body.
Human kind has been using technology to improve the power of their senses since the days of cave men, according to James Geary, author of “The Body Electric: An Anatomy of the New Bionic Senses.”
He loosely describes bionics as any device that extends, repairs or enhances natural sensory abilities. For him, that includes everything from cochlear implants that provide deaf people with a sense of sound to the wireless gadgets people use today to talk on their mobile phones hands free.
In recent years, technology has helped create smaller, more power efficient electronic devices. As a result, there has been a “big conceptual shift towards inserting these components inside, instead of outside the body,” says Geary.
Spence will not be augmenting his senses in the traditional bionic sense — his vision won’t improve at all because his retina was damaged to the point where he had his eye replaced with a prosthetic.
But a California company, Second Sight, has developed a device that can restore limited vision for some blind people. So far, the company says it has implanted the device in 21 people around the world who have retinal degeneration.
The device, which is still in clinical trials, consists of a camera mounted on a pair of glasses. Captured images are transmitted to electrodes implanted in the retina, which then send images to the brain. The device gives patients the ability to perceive patterns of light, which are then interpreted as images.
Retinal implants, mind-controlled limbs, electrodes inserted in the brain — they’re just a few examples of next-generation technologies that may speed up the integration of body and machine. 
See photo gallery of bionic devices »
Dr. Miguel Nicolelis is a neuroscientist at Duke University. He has spent the last decade investigating the links between brain activity and devices, an area of research known as brain machine interface.
He hopes developments in the field will lead to the creation of the next generation of mind-controlled limbs. “We hope to restore mobility to those who have lost the ability to send messages to the brain and their muscles,” he tells CNN.
Scientists have already shown that monkeys with probes inserted in their brains are able to control artificial devices like robotic arms with their minds. They’ve found that computer software can interpret signals picked up by the electrodes.
Brain machine interface ultimately could help restore mobility to quadriplegics and others, such as those suffering from spinal cord injuries, says Nicolelis.
He’s involved in a global project called Walk-Again that aims to develop a wearable exoskeleton that paralyzed users could control with signals from their brain.
Finding a way to safely insert electrodes and probes into human brains remains an obstacle. But scientists are constantly working on finding ways to better integrate devices in living organisms.
Seamlessly fusing engineered devices into living tissue can be challenging since devices usually are metal, hard and flat, according to David Martin, a professor of materials science and engineering at the University of Michigan.
“This is where the real interesting scientific frontier is — implanted devices integrating themselves in the brain, ear, eye and in muscle. The question is whether we can do that and not cause too much cell damage,” he says.
The technology being developed is cutting edge and pushing boundaries, but there are potential pitfalls. Since it’s still early days, no one knows how bodies will react over the long term to inserted devices.
Furthermore, people have a heightened awareness when it comes to their body, and privacy concerns are already being raised, according to Geary.
“We’re just really sensitive about anything we put in our bodies,” he says. In science fiction, the cyborg is almost always the bad guy. The big barrier is overcoming that fear, he says.
#CNN NEWS#
Bank regulation in America
Mar 26th 2009 | NEW YORK
From Economist.com
TIM GEITHNER has not had an easy time of it, but he is probably too busy to dwell on his tribulations. Three days after unveiling a plan to cleanse banks of their troubled loans and securities, America’s treasury secretary was back in front of a congressional committee outlining proposals to extend the government’s grip on the financial system. These would mark the biggest expansion of federal regulation since the 1930s.
The new framework has four parts: containing systemic risks; protecting consumers and investors; streamlining the regulatory structure; and international co-ordination. Mr Geithner had little to say about the last three, promising details in the coming weeks. Instead he focused on systemic risk, in part because that will be a focus of discussion at the G20 summit in London next week—and European countries have been pressing the Americans to tackle the issue—but also because the Obama government itself sees it as the priority in the wake of Lehman Brothers’ failure and the messy rescue of American International Group (AIG).
Mr Geithner urged Congress to help him enact “new rules of the game”, not “repairs at the margin”. His priorities are twofold. First, the government needs the authority to take over troubled non-banks whose failure could destabilise markets and to wind them down in an orderly way by selling assets, renegotiating contracts and so on. It is largely because it lacked such power that the AIG bail-out has been a fiasco. The Treasury, which has financial heft, suggests sharing this authority with the Federal Deposit Insurance Corporation, which has experience handling failed banks.
The other pressing issue is the creation of a “systemic-risk regulator”. This would help to police large financial firms of all stripes and keep a lookout for emerging dangers across the system, such as the shoddy loan underwriting and credit bubble that helped to cause this crisis. Government officials want the Federal Reserve to take the job on, but its central role in the AIG scandal has weakened its credentials in congressional eyes.
One way to strengthen the system, Mr Geithner believes, is to force banks to plump up their capital cushions. They should do this “counter-cyclically”, building up their defences in good times so they have more protection against losses in downturns, thus dampening rather than amplifying credit cycles. The rules currently work the other way, allowing banks to sail closer to the wind when times are good.
For the first time, the administration also plans to throw a regulatory net over non-bank pools of capital, such as hedge funds. They may not have caused the crisis, contrary to fears beforehand; indeed, they have been hurt more by the demise of banks and investment banks than the other way round. Nevertheless, the government wants all funds over a certain size to register with the Securities and Exchange Commission and provide it with more information about their assets and leverage. The very largest, if deemed systemically important, could become subject to “stringent” capital requirements. These rules may be extended to money-market funds—a huge and supposedly stable industry that wobbled alarmingly after Lehman’s fall.
The last plank of the proposed systemic framework is stronger oversight of derivatives, such as the credit-default swaps that detonated within AIG. Those that are traded over the counter (away from exchanges) will face federal regulation, and supervision of dealers will be tightened. To cut “counterparty risk”, all standardised over-the-counter contracts will have to be cleared through a central entity. Firms are already jostling to win this business. “The days when a major insurance company could bet the house on credit-default swaps with no one watching and no credible backing…must end,” said Mr Geithner in his testimony.
Many details remain to be hammered out. It is not clear, for example, who would pay the costs of handling bust non-banks; one idea is to charge a fee to all firms deemed systemically important. Some question whether a risk regulator would really be able to do much about looming dangers it identifies in good times, when everyone else is too busy enjoying themselves. Moreover, the politics of regulatory reform are sure to be messy—and most of the government’s proposals require legislation.
There is also a debate to be had about where regulation needs to be tougher, and where it should simply be smarter. As Mr Geithner acknowledged, “there were failures where regulation was extensive and failures where it was absent.” Banks, after all, blew up spectacularly despite being covered in red tape. Nevertheless, this week’s proposals make clear that the accent for years to come will be on re-regulation more than innovation. For the past quarter of a century, politicians and regulators stood back from financial markets, trusting them to set their own tolerance for risk. They are now wading back in.
California’s budget crisis could turn out to be a good thing for the state, Gov. Arnold Schwarzenegger said Thursday, because it will give voters a chance to approve reforms that could stop another fiscal emergency from happening again.
Schwarzenegger, joined by legislative leaders from both parties, met with The Chronicle’s editorial board to ask for support for all six budget measures on the May 19 special election ballot.
The measures, numbered 1A to 1F, stem from the Legislature’s efforts this year to close a nearly $42 billion budget gap. If passed, the measures would provide an estimated $5.8 billion in borrowing and revenue transfers and authorize an extension of temporary state taxes to bring California an additional $16 billion in new revenue.
It’s important to pass all six budget measures, Schwarzenegger said.
“They’re all interconnected,” he said. “It’s not like going to the grocery story where you can pick and choose.”
Even so, Proposition 1A is the key to the package. By putting a cap on new state spending and creating a new, larger rainy-day fund, the measure will smooth out a decadeslong cycle of boom and bust in California’s budget that has brought financial chaos to the state, the governor said.
That proposed measure “would never have happened without the economic crisis,” Schwarzenegger added. “Crisis brings opportunity.”
But opponents of the measure say they’ve heard the governor’s claims before. In 2004, Schwarzenegger put a pair of budget measures, Proposition 57 and Proposition 58, on the ballot, promising that they would solve forever the financial problems he said were caused by a free-spending state Legislature.
The measures passed, but the troubles didn’t end.
“We’re hearing the same argument the governor made (in 2004), that this is the answer to the state’s problems,” Jon Coupal, president of the Howard Jarvis Taxpayers Association, told reporters earlier this week. “But this is a $16 billion tax increase masquerading as tax reform.”
Two of the leading GOP candidates for governor, state Insurance Commissioner Steve Poizner and former eBay CEO Meg Whitman, have come out against Prop. 1A, as have the League of Women Voters and several Democrat-leaning labor unions and advocacy groups.
But in 2004, no one could have predicted the worldwide recession that has drubbed the California economy over the past year, Schwarzenegger said Thursday.
“This is an unusual situation for us to get into,” with the deficit growing month by month as the economy tanked, he said. “It was extraordinary to see … the budget balanced in (February) and by March find it’s out of whack by $8 billion.”
Complaints about the measures are to be expected, said Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County).
“All constituencies on both sides of the aisles are up in arms about different things,” she said.
State Sen. Dave Cogdill, R-Modesto, lost his job as Senate minority leader because of his support of the budget deal. But he joined Schwarzenegger on Thursday in talking about the importance of the special election.
When people say they oppose the budget measures, “ask them what is the alternative … and tell us how it can be done politically,” he said.
While recent polls have suggested the budget measures could be in trouble on election day, Schwarzenegger believes that only means more work is needed to let voters know how this election can change California’s future.
“I’m programmed only for victory,” he said. “I’ll travel up and down the state and work my butt off to let people know about this.”
Second time lucky
Mar 23rd 2009 | NEW YORK
From Economist.com
AP
WILL it be second time lucky for Tim Geithner? On Monday March 23rd, six weeks after being heckled for a maddeningly vague bank-rescue plan, America’s beleaguered treasury secretary at last gave details of a public-private partnership to invest in the troubled assets clogging up banks’ balance-sheets. Cleaning up this mess is seen as a prerequisite of financial and broader economic recovery, and the Americans were keen to unveil a proposal before leaders of the G20 countries meet to seek a way out of the crisis, in early April. The new plan is certainly a lot meatier than the February effort, and markets for both debt and equities gave it an initial thumbs-up, the Dow Jones Industrial Average rising by almost 500 points and credit-derivative spreads signalling a lower risk of bank defaults. There are, alas, several reasons why it may struggle to succeed.
In a sense, America has come full circle, reviving the asset-buying component of the original Troubled Asset Relief Programme (TARP), a $700 billion rescue fund created last October which was quickly refashioned into a bank-recapitalisation vehicle. This time, however, private investors will do the buying, not the government, though they will get plenty of help, through co-investment by the Treasury, cheap loans from the Federal Reserve and debt guarantees from the Federal Deposit Insurance Corporation. For every private dollar invested in impaired loans, a matching dollar of equity and $12 of other financing will come from the public purse. And the loans will be non-recourse, meaning investors who walk away from loss-making deals lose only their initial investment.
Paradoxically, at a time when private firms are furiously cutting back on debt, the government sees this “leverage”, or borrowing, as the best way to unfreeze the market for mortgages and related securities. In theory private buyers, bidding in competition with one another, should be better than the government at determining the real value of assets; the government is more likely to overpay. Moreover, by combining private and public capital, the government hopes to generate up to $1 trillion of buying power using $75 billion-100 billion of TARP money.
Will private investors nibble? The potential returns look juicy, even though they must share profits equally with the taxpayer. Big firms that would be in the running to manage funds in the programme, such as BlackRock and PIMCO, have given it a cautious welcome. But others, such as hedge funds and private-equity groups, are wary of participating in government-backed plans after witnessing the hysteria whipped up over bonus payments at American International Group (AIG), a clapped-out (and now government-controlled) insurer.
Government officials have tried to quell these concerns by calling potential asset-buyers “good guys” and providing assurances that they will be exempt from pay restrictions aimed at recipients of taxpayer largesse. But fear abounds that they will become the next target of self-righteous politicians, especially if they are seen to be reaping windfalls. “The political risks are scary,” says one hedge-fund manager, who also points out that some of the plan’s details are still missing: for instance, the interest rate and duration on loans for mortgage-backed securities have yet to be determined.
Another question is whether banks will sell. Many are still holding assets, particularly whole loans, at unrealistically high values. With government help, buyers will be able to offer more than they would if relying solely on their own resources. But it may still not be enough to persuade banks to sell, since any amount below the carrying value would force them to take a write-down and deplete precious capital. (This is a bigger issue for stodgy commercial banks than it is for Wall Street firms such as Goldman Sachs and Morgan Stanley, which have aggressively marked down duff assets.) There may be a way round this impasse, thinks Michael Feroli, an economist with JPMorgan Chase: regulators could use the results of the “stress tests” they are currently conducting on large banks to force them to sell assets, in the process topping them up with fresh capital in return for a bigger government stake.
Moreover, the new plan may not be big enough to deal with the bad-asset problem. The sum of $1 trillion may sound a lot, but at least double that amount is in danger of souring in America as house prices continue to fall, unpaid credit-card debts mount and more companies slip into bankruptcy. With the chances of wringing more money out of Congress for troubled banks low and falling, the new plan could hit a funding wall. To date, just under half of the TARP’s $700 billion has been disbursed. Add in other commitments and the toxic-asset plan, and the total climbs to as much as $608 billion. Fine, except that more than the remaining $92 billion may be needed to plug banks’ capital holes once the stress tests are completed.
So Mr Geithner could face some hard choices. He will desperately want the new plan to succeed, not only because cleansing banks of toxic assets is so important to reviving confidence, but also because its failure could unseat him. He is already reeling from criticism that he was slow to put a lid on the pay furore at AIG. Barack Obama has been forced to defend Mr Geithner against calls for his resignation.
If the public-private partnership proves to be a damp squib, Mr Geithner can expect to face a barrage of complaints that he took the wrong course. He rejected both the standard “bad bank” model, in which the government takes on rotten assets, and takes over the banks most riddled with them; and the asset-insurance approach favoured by Britain, in which the state takes on the risk of a credit portfolio for a fee. Whether that is a decision he comes to regret will become clearer in the coming weeks.
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