Google (GOOG) changed the game of many global GPS appliance makers this month by announcing a completely free and quite capable GPS // product as part of the Motorola Droid handset announced and now being sold by Verizon Wireless.

In what seems to be the norm for Google, it is once again disrupting an entire market by giving something away for free that’s both competitive and capable. TomTom and Garmin saw their share prices plummet upon Google’s announcement, and rightfully so.

Like the nearby Smithsonian National Museum of Natural History, the Newseum — Washington’s museum dedicated to journalism — displays dinosaurs. On a long wall near the entrance, the front pages of newspapers from around the country are electronically posted each morning — the artifacts of a declining industry. Inside, the high-tech exhibits are nostalgic for a lower-tech time when banner headlines and network news summarized the emotions and exposed the scandals of the nation. Lindbergh Lands Safely. One Small Step. Nixon Resigns. Cronkite removes his glasses to announce President Kennedy’s death at 1 p.m. Central Standard Time.

Behind a long rack of preserved, historic front pages, there is a kind of journalistic mausoleum, displaying the departed. The Ann Arbor News, closed July 23 after 174 years in print. The Rocky Mountain News, taken at age 150. The Seattle Post-Intelligencer, which passed quietly into the Internet.

What difference does this make? For many conservatives, the “mainstream media” is an epithet. Didn’t the Internet expose the lies of Dan Rather? Many on the left also shed few tears, preferring to consume their partisanship raw in the new media.

But a visit to the Newseum is a reminder that what is passing is not only a business but also a profession — the journalistic tradition of nonpartisan objectivity. Journalists, God knows, didn’t always live up to that tradition. But they generally accepted it, and they felt shamed when their biases or inaccuracies were exposed. The profession had rules about facts and sources and editors who enforced standards. At its best, the profession of journalism has involved a spirit of public service and adventure — reporting from a bomber during a raid in World War II, or exposing the suffering of Sudan or Appalachia, or rushing to the site of the World Trade Center moments after the buildings fell.

By these standards, the changes we see in the media are also a decline. Most cable news networks have forsaken objectivity entirely and produce little actual news, since makeup for guests is cheaper than reporting. Most Internet sites display an endless hunger to comment and little appetite for verification. Free markets, it turns out, often make poor fact-checkers, instead feeding the fantasies of conspiracy theorists from “birthers” to Sept. 11, 2001, “truthers.” Bloggers in repressive countries often show great courage, but few American bloggers have the resources or inclination to report from war zones, famines and genocides.

The democratization of the media — really its fragmentation — has encouraged ideological polarization. Princeton University professor Paul Starr traced this processColumbia Journalism Review. After the captive audience for network news was released by cable, many Americans did not turn to other sources of news. They turned to entertainment. The viewers who remained were more political and more partisan. “As Walter Cronkite prospered in the old environment,” says Starr, “Bill O’Reilly and Keith Olbermann thrive in the new one. As the diminished public for journalism becomes more partisan, journalism itself is likely to shift further in that direction.”

Cable and the Internet now allow Americans, if they choose, to get their information entirely from sources that agree with them — sources that reinforce and exaggerate their political predispositions.

And the whole system is based on a kind of intellectual theft. Internet aggregators (who link to news they don’t produce) and bloggers would have little to collect or comment upon without the costly enterprise of newsgathering and investigative reporting. The old-media dinosaurs remain the basis for the entire media food chain. But newspapers are expected to provide their content free on the Internet. A recent poll found that 80 percent of Americans refuse to pay for Internet content. There is no economic model that will allow newspapers to keep producing content they don’t charge for, while Internet sites repackage and sell content they don’t pay to produce.

I dislike media bias as much as the next conservative. But I don’t believe that journalistic objectivity is a fraud. I was a journalist for a time, at a once-great, now-diminished newsmagazine. I’ve seen good men and women work according to a set of professional standards I respect — standards that serve the public. Professional journalism is not like the buggy-whip industry, outdated by economic progress, to be mourned but not missed. This profession has a social value that is currently not reflected in its market value.

What is to be done? A lot of good people are working on it. But if you currently have newsprint on your hands, thank you.

Goldman’s secret moral pathology

Today, his “Happy Conspiracy” of Wall Street plus co-conspirators in Washington and Corporate America are spreading a contagious “pathological mutation of capitalism” driven by the new “invisible hands” of this new “mutant capitalism,” serving their selfish agenda in a war to totally control America’s democracy and capitalism.

The “Goldman Conspiracy” is the perfect B-school case study of Wall Street’s secret contagious pathology, with insiders like Lloyd Blankfein, Henry Paulson and others pocketing billions more of the firm’s profits than shareholders, evidence the new “mutant capitalism” has replaced Adam Smith’s 1776 version which historically endowed the soul of American democracy as well as our capitalistic system.

Sadly for America Goldman’s disease is rapidly becoming a pandemic spreading beyond Wall Street’s too-greedy-to-fail banks, infecting our economy, markets and government as it metastasizes globally.

What are the symptoms of this growing “soul sickness,” this “pathological mutation of capitalism” Bogle fears? Recently we reviewed the consequences of this “soul sickness.”

Today we’ll paraphrase news reports about 15 symptoms spreading “soul sickness” beyond the boundaries of this Goldman case study: These are the 15 signs of a moral pathology undermining not just banking but American democracy and capitalism.

1. Gross denial of any moral damage caused by their rampant greed

Seeking Alpha: “Goldman is America’s most hated corporation.” We cheer as Rolling Stone’s Matt Taibbi calls Goldman “a giant vampire squid wrapped around the face of humanity.” Banks triggered a global crisis. Main Street suffers. Greedy bank CEOs raid the Treasury then stuff $30 billion in their bonus pockets, up 60% from last year. They are our 21st century General Motors, convinced “What’s good for Goldman is good for America.” We saw how that arrogance ended. Wall Street has similar suicidal symptoms.

2. Narcissistic egomaniacs with secret ‘God complexes’

London Times’ John Arlidge interviewed Goldman CEO Blankfein: “He paid himself $68 million in 2007, now worth more than $500 million, yet insists he’s a blue-collar guy. He says banking has a ’social purpose,’ just a banker ‘doing God’s work.’” When I was at Morgan Stanley in the 1970s the firm ran an ad: “If God Wanted To Do a Financing, He Would Call Morgan Stanley.”

Today, all of Wall Street is dual diagnosed: They’re morally blind money addicts who believe they’re “God’s chosen.” AA would say: They haven’t “bottomed,” won’t recover from their disease till a disaster hits, with another market meltdown and the “Great Depression 2.” Then maybe they’ll “quit playing God.”

3. Paranoid obsessives about secrecy, guilt and non-disclosure

Bloomberg: “New York Fed’s Secret Deal: Taxpayers paid $13 billion more than necessary when government officials, acting in secret, made deals with banks on AIG, buying $62 billion of credit-default swaps from AIG.” The government would eventually cover about $180 billion in AIG swaps backing toxic CDOs when Paulson and Ben Bernanke double-teamed to bailout Goldman, saving them from bankruptcy.

4. Power-hungry need to control government using Trojan Horses

Wall Street Journal: “For a year Goldman said it wouldn’t have suffered damage if AIG collapsed. But a new report kills that claim. TARP inspector general found that then New York Fed Chair Tim Geithner gave away the farm. If AIG had collapsed, Goldman would have had to cover the losses itself. They couldn’t collect on the protection of AIG swaps.” Yes, Goldman was bankrupt. But friends in high places always save them.

5. Borderline personalities who regularly ignore conflicts of interest

New York Times: “Before becoming Treasury secretary in 2006, Hank Paulson agreed to hold himself to a higher ethical standard than his predecessors. He specifically said he’d avoid his old buddies at Goldman where he was CEO. Later Congress saw many conflicts of interest, not just meetings but favorable treatment for his buddies at Goldman.”

6. Pathological liars incapable of honesty even with own investors

McClatchy News: “Goldman secretly bet on the U.S. housing crash after peddling more than $40 billion of securities backed by 200,000 risky home mortgages. But they never told their investors they were also secretly betting that a drop in housing prices could wipe out the value of those securities.” Paulson knew, stayed silent. “Only later did their investors discover Goldman’s triple-A investments were junk. Did Goldman’s failure to disclose its bets on an imminent housing crash violate securities laws?” Boston University Prof. Laurence Kotlikoff says: “This is fraud, should be prosecuted.” But it won’t be in the new “mutant capitalism.”

Members of AA say you know when an alcoholic is lying: Their lips are moving. Same with Wall Street: Think liar’s poker. It’s in their DNA. They’re compulsive liars trapped in a culture of secrecy. They lie, the lies cascade, memory slips, more lies are necessary, they cannot stop lying. Goldman sure can’t … look, their lips are moving again.

7. Sole fiduciary duty to insiders, not investors, never the public

New York Examiner: “Goldman was at the heart of the subprime market, selling subprime junk as no-risk AAA bonds, then gambling, hedging, shorting their investors. Goldman traded like Enron. That set up the meltdown. The Fed and Goldman’s ex-CEO at Treasury saved Goldman. Taxpayers got stuck with the bill. Bailout overseer Elizabeth Warren called this reckless gambling. Trend forecaster Gerald Celente calls it mafia-style looting.

8. Moral issues are PR glitches, violations of ‘don’t get caught’ rule

USA Today says “Goldman Sachs should be celebrating. Yet, the mood at the investment bank seems to be one of crisis about the public backlash over employees’ bonuses.” So Goldman’s on a PR blitz in a bid to undo the damage. They canceled their Christmas party. Also launched a $500 million program for small businesses. Get it? They can’t see their moral failings, only a PR problem, so they hire PR agents and crisis managers first.

9. Charitable donations are tax and PR opportunities, not moral issues

New York Times: Examined Goldman charitable foundation’s tax filing: Thick as a phone book with more than 200 pages of trades. “Never seen anything like it,” said Verne Sedlacek, president of Commonfund, a $25 billion fund for universities and nonprofits. The money to Goldman’s foundation is dwarfed by insiders’ bonuses. The foundation got $400 million, gave away $22 million. Bonuses were 20 times more. Even the New York Post said “Goldman’s Born Again Image is Laughable.” They’re sleaze-ball cheapskates.

10. When exposed in a massive fraud, feign humility, fake an apology

CBS MoneyWatch: “Blankfein now says he’s ’sorry for the role Goldman played in the housing crisis: We participated in things that were clearly wrong.’” Wrong? Sounds more like he’s admitting to something “clearly criminal.” Reread: Isn’t he admitting guilt to a fraud; cheating millions of homeowners, shareholders, taxpayers? Then laughs at us with phony “restitution,” a fund of $100 million annually for five years to small-business owners. Financial Times says “$100 million is the profits from one good trading day. In 3Q ‘09 they had 36 days better than that.” Unfortunately, these crooks will get away with it.

11. When bankruptcy threatens, bribe friends in ‘Happy Conspiracy’

Barron’s: While Geithner was “showcasing what a great investment Washington made in Goldman, the 23% return on the $5 billion of the taxpayers money, Warren Buffett’s deal made him a fabulous 120% return. Goldman’s stock ran up to $180 from $115, a gain of $2.8 billion. Add 8% discount on warrants, another $3.2 billion to him.”

12. Engage co-conspirators to cover up, distract, do your dirty work

Reuters: “Former Merrill Lynch CEO John Thain was fired after a scandal over the billions in Merrill bonuses. He says big insider bonuses don’t cause excessive risk-taking nor the financial crisis.” He blames “poor risk management, excessive leverage and too much liquidity for too long. But even if they tie bonuses to long-term performance, that won’t prevent the next collapse.” Why? They’ll find new ways to break the moral code.

13. As money-hungry vultures they will prey on vulnerable Americans

McClatchy News: “An obscure Goldman subsidiary spent years buying hundreds of thousands of subprime mortgages, many from the more unsavory lenders. They repackaged them as high-yield bonds. The bottom fell out. Now, after years of refusing to disclose they owned the mortgages, the secret is out and Goldman has become one of America’s biggest, greediest foreclosers.” Yes, the vampire squid wants pounds of flesh.

14. Treat everyone not in the ‘Happy Conspiracy’ with tough love

HuffPost’s Leo Leopold warns: “Each day reveals how we’ve traded away our sense of decency and the common good in exchange for pure greed. Unemployment means hunger. The Agriculture Department reports 49 million Americans don’t have enough food, up 13 million over the last year, highest number ever.” Wall Street treats anyone not in the “Happy Conspiracy” as morally defective capitalists in need of “tough love.”

15. Addicts consumed by money: ‘Jesus would throw them out …’

New York Times’ Maureen Dowd: “Goldman’s trickle-down catechism isn’t working. We have two economies. In the past decade Wall Street’s shared little with society. Their culture is totally money-obsessed. There’s always room for a bigger house, bigger boat. If not, you’re falling behind. It’s an addiction. And Washington’s done little to quell it. Geithner coddles wanton bankers. Obama’s absent. ‘Saturday Night Live’ was tougher. And as far as doing God’s work: The bankers who took taxpayer money, pocketing obscene bonuses: They’re the same greedy types Jesus threw out of the temple.”

Warning: Washington, Main Street, none of us has “clean hands.” We’re all in bed with the “Happy Conspiracy,” touched by greed, turning a blind eye to Wall Street’s rapidly metastasizing moral and spiritual pathology: So ask yourself, do you believe America’s widespread “lack of a moral compass” will eventually trigger another, bigger market and economic meltdown, pushing America into the next “Great Depression II?”

The deficit problem

Dealing with America’s fiscal hole

From The Economist print edition

Don’t cut the deficit now—but explain how, eventually, you will.

Jon Berkeley

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.

Where the cutting should begin

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.

Taxing politics

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.

Quiznos forks over millions to franchisees

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.

U.S. to attend conference held by war crimes court

Administration will engage with ICC but not join it, official says

Washington Post

For the first time in nearly eight years, the United States will participate in a conference with members of the International Criminal Court, a decision that signals growing U.S. support for a war crimes tribunal the Bush administration once shunned.

Stephen J. Rapp, the U.S. ambassador at large for war crimes, told reporters in Nairobi on Monday that the “United States will return to engagement with the ICC.” But he said that the United States has no intention of joining the court in the forseeable future and that it will not allow an international prosecutor to try American personnel.

Still, the decision marked a significant step by the Obama administration in showing its willingness to engage with the rest of the world on difficult negotiations, according to court supporters. Rapp and the State Department’s top legal adviser, Harold Koh, will lead a U.S. delegation of observers to the Assembly of States Parties meeting in The Hague starting Wednesday and running through Nov. 26. The United States will also attend a major treaty review conference in Kampala, Uganda, in late May and early June.

The world’s first international criminal court was established in 2001 to prosecute war crimes, crimes against humanity and genocide. Its chief prosecutor is pursuing war crimes cases in Congo, Uganda, the Central African Republic and the Darfur region of Sudan.

Member nations are considering adding the crime of aggression — unprovoked military action by one state against another — to the court’s jurisdiction. The United States prefers that the U.N. Security Council have that authority.

Human rights advocates welcomed the U.S. decision to reengage the court but said a push for greater authority by the Security Council would dilute the power of the court. “That’s a chokehold that would undercut the court’s legitimacy,” said Richard Dicker, a court advocate at Human Rights Watch.

Although U.S. officials have come to support prosecutions of specific cases, such as in Darfur, they have long worried that an international criminal court might seek to constrain U.S. military action around the globe by carrying out politically motivated prosecutions of American soldiers. “There remain concerns about the possibility that the United States . . . and its service members might be subject to politically inspired prosecutions,” Rapp told reporters in Nairobi.

Despite such concerns, the Clinton administration signed the treaty establishing the court in Dec. 31, 2000, about two weeks before President Bill Clinton left office. The Bush administration actively sought to derail the court during its first term. In 2002, it sent a letter to the United Nations stating that the United States had no intention of joining the court and had no legal obligations to it.

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.

 

Stephen W. Schondelmeyer, a pharmaceutical economics professor at the University of Minnesota, said, “When we have major legislation anticipated, we see a run-up in price increases.”

 

A blog from The New York Times that tracks the health care debate as it unfolds.

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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.

 

 

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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.