Wednesday, July 15, 2009

Big Pharma Gets Played: Congress repays business silence with price controls

Big Pharma Gets Played. WSJ Editorial
Congress repays business silence with price controls.
WSJ, Jul 16, 2009

As an old Washington hand, pharmaceutical lobbyist Billy Tauzin should know better than to trust a politician. His corporate clients and their shareholders may soon pay for his attempt to get cozy with ObamaCare.

Mr. Tauzin -- the former Democratic Congressman turned Republican turned pharmaceutical frontman -- has been assuring his CEO employers that he can get them a good deal if they negotiate with Democrats instead of opposing them on health care. And to show its bona fides, the drug lobby announced in June an agreement with Senate Finance Chairman Max Baucus, promising $80 billion over the next decade to defray drug costs for seniors and to finance the Obama plan. Mr. Tauzin believed this giveaway would spare his industry from price controls and the reimportation of cheaper foreign drugs that would reduce company margins and profits.

Mr. Tauzin should have demanded a pre-nup. House Democrats declared last week that they aren't bound by Senator Baucus's deal. And this week they released a health-care bill that pocketed the industry concessions for senior drug coverage, and also imposed the very price controls Mr. Tauzin thought he'd shelved. These mandatory "rebates" on drugs for seniors would cost the industry $50 billion more over a decade than the $80 billion the industry promised Mr. Baucus. And that's optimistic. Democrat Henry Waxman cheerfully explained it was only "equitable" to devote the industry's "windfall" profits to seniors.

Meanwhile, Mr. Tauzin's fellow Cajun, Louisiana Republican David Vitter, sponsored an amendment that passed the Senate last week to allow Americans to buy cheap drugs from Canada over the Internet. Among the 55 Senators who voted for this form of drug reimportation was none other than Mr. Baucus. As for the White House, Mr. Waxman last week said he'd been told that the Administration also doesn't feel bound by the $80 billion agreement. This isn't surprising since Mr. Obama had co-sponsored the same legislation with Mr. Vitter when he was an Illinois Senator in 2006.

In case this isn't enough of a doublecross, Senate Democrats are also considering hefty new taxes on health insurance and . . . pharmaceutical companies. Price tag: $100 billion. Let's just say the companies' return on their investment in Mr. Tauzin's political strategy is looking negative.

Meanwhile, the insurance and hospital industries that struck similar deals with Democrats are also being taken for a ride. Liberal Senators may pare back billions of dollars of tax breaks now claimed by nonprofit hospitals. The House legislation contains the new "public option" that insurance lobbyist Karen Ignagni hoped to forestall with her industry's cost savings proposals. It also guts payments for Medicare Advantage, which allows seniors to buy into private plans offered by Mrs. Ignagni's members.

Democrats remember the failure of HillaryCare, and they blame industry ads that alerted the public to the rationing and loss of choice that will accompany government health care. Their negotiations this time around are intended to buy business silence, at least long enough for Democrats to spring legislation into law before the companies have enough time to educate the public and defeat it.

Big Pharma and others have been played for suckers. We'd say these companies deserve what they get, except that the real victims of government health care will be American patients.

John Yoo: Why We Endorsed Warrantless Wiretaps

Why We Endorsed Warrantless Wiretaps. By JOHN YOO
The inspectors general report ignores history and plays politics with the law.
WSJ, Jul 16, 2009

It was instantly clear after Sept. 11, 2001, that our security agencies knew little about al Qaeda's inner workings, could not detect its operatives' entry into the country, nor predict where it might strike next.

Suppose an al Qaeda cell in New York, Chicago or Los Angeles was planning a second attack using small arms, conventional explosives or even biological, chemical or nuclear weapons. Our intelligence and law enforcement agencies faced a near impossible task locating them. Now suppose the National Security Agency (NSA), which collects signals intelligence, threw up a virtual net to intercept all electronic communications leaving and entering Osama bin Laden's Afghanistan headquarters. What better way of detecting follow-up attacks? And what president -- of either political party -- wouldn't immediately order the NSA to start, so as to find and stop the attackers?

Evidently, none of the inspectors general of the five leading national security agencies would approve. In a report issued last week, they suggested that President George W. Bush might have violated the 1978 Foreign Intelligence Surveillance Act (FISA) by ordering the interception of international communications of terrorists without a judicial warrant. The report also suggests that "other" intelligence measures -- still classified only because they are yet to be reported on the front page of the New York Times -- similarly lacked approval from other branches of government.

It is absurd to think that a law like FISA should restrict live military operations against potential attacks on the United States. Congress enacted FISA during the waning days of the Cold War. As the 9/11 Commission found, FISA's wall between domestic law enforcement and foreign intelligence proved dysfunctional and contributed to our government's failure to prevent the 9/11 attacks.

Under FISA, to obtain a judicial wiretapping warrant the government is supposed to show probable cause that a specified target is a foreign agent. Unlike, say, Soviet spies working under diplomatic cover, terrorists are hard to identify. Yet they are vastly more dangerous. Monitoring their likely communications channels is the best way to track and stop them. Building evidence to prove past crimes, as in the civilian criminal system, is entirely beside the point. The best way to find an al Qaeda operative is to look at all email, text and phone traffic between Afghanistan and Pakistan and the U.S. This might involve the filtering of innocent traffic, just as roadblocks and airport screenings do.

In FISA, President Bush and his advisers faced an obsolete law not written with live war with an international terrorist organization in mind. It was to meet such emergency circumstances that the Founders designed the presidency. As John Locke first observed, foreign threats "are much less capable to be directed by antecedent, standing, positive laws." Legislatures are too slow and their members too numerous to respond effectively to unforeseen situations. Only the executive can act to protect the "security and interest of the public."

The power to protect the nation, said Alexander Hamilton in the Federalist, "ought to exist without limitation," because "it is impossible to foresee or define the extent and variety of national exigencies, or the correspondent extent & variety of the means which may be necessary to satisfy them." To limit the president's constitutional power to protect the nation from foreign threats is simply foolhardy. Hamilton observed that "decision, activity, secrecy, and dispatch will generally characterize the proceedings of one man, in a much more eminent degree, than the proceedings of any greater number." "Energy in the executive," he reiterated, "is essential to the protection of the community against foreign attacks."

Clearly, the five inspectors general were responding to the media-stoked politics of recrimination, not consulting the long history of American presidents who have lived up to their duty in times of crisis. More than a year before the attack on Pearl Harbor, President Franklin Delano Roosevelt authorized the FBI to intercept any communications, domestic or international, of persons "suspected of subversive activities . . . including suspected spies." FDR did not hesitate long over a 1937 Supreme Court opinion (United States v. Nardone) interpreting federal law to prohibit electronic surveillance without a warrant. It is too late to do anything about it after sabotage, assassinations and 'fifth column' activities are completed," he wrote in a secret 1940 memo authorizing the wire tapping. Indeed, he continued to authorize the surveillance even after Congress rejected proposals from his attorney general, Robert Jackson, to authorize national security wiretapping without a warrant.

Every federal appeals court to address the question has agreed that the president may gather electronic intelligence to protect against foreign threats. This includes the special FISA appeals court, which in a 2002 sealed case upholding the constitutionality of the Patriot Act held that "the President did have inherent authority to conduct warrantless searches to obtain foreign intelligence information." The court said it took the president's power "for granted," observing that "FISA could not encroach on the President's constitutional power."

Now, according to the inspectors general, those of us in government following the 9/11 terrorist attacks should have assumed that the usual peacetime rules for domestic wiretaps applied and interpreted FISA in a most curious way -- to delete the president's traditional authority as commander in chief to collect signals intelligence in wartime.

The 1952 Supreme Court case of Youngstown Sheet & Tube v. Sawyer is the IG's lodestar. In Youngstown, the Court addressed President Harry Truman's effort to seize steel mills shut down by a labor strike during the Korean War. Truman claimed that maintaining production was necessary to supply munitions and material to American troops in combat. Youngstown correctly found that the Constitution gives Congress, not the president, the exclusive power to make law concerning labor disputes. It does not, however, address the scope of the president's power involving military strategy or tactics in war. If anything, it supports the proposition that one branch cannot intrude on the clear constitutional turf of another.

Moreover, earlier Justice Departments -- reaching across several administrations from both parties -- had likewise concluded that Youngstown did not limit the president's legitimate conduct of foreign affairs and national security policy. This is why all administrations have refused to accept the 1973 War Powers Resolution and have regularly engaged in military conflicts without congressional approval.

Our Constitution created a presidency whose function is to protect the nation from attack. Gathering intelligence -- including intercepting enemy communications -- has long been a key aspect of war. Our military and intelligence agencies cannot attack or defend the nation unless they know where to aim. As we confront terrorists who remain intent on attacking the U.S., using weapons we cannot anticipate, we should be skeptical of those who insist that we radically change the way this country has always made war.

Mr. Yoo is a law professor at the University of California, Berkeley. He was an official in the Justice Department from 2001-03 and is a visiting scholar at the American Enterprise Institute.

Cross-Strait Relations Improve, but China Still Deploys Missiles

Cross-Strait Relations Improve; China Still Deploys Missiles. By Richard C. Bush III, Director, Center for Northeast Asian Policy Studies
Brookings, June 27, 2009

In the relations between Taiwan and China, something intriguing happened between last spring and this spring. I refer not to the impressive progress that the two sides have made since Taiwan President Ma Ying-jeou took office in May 2008. They have restored dialogue mechanisms; concluded agreements to enhance cooperation in the areas of trade, transportation, finance, and crime control; and made possible Taiwan’s participation as an observer at the annual meeting of the World Health Assembly. This significant progress occurred against the backdrop of fifteen previous years of deepening mutual mistrust, which led Beijing and Taipei each to craft policy based on fears of the other’s intentions rather than hopes for cooperation.

The intriguing development was what happened in the military field. In spite of progress in the political and economic arenas, the People’s Liberation Army’s procurement and deployment of equipment that puts Taiwan at risk continued unabated. According to the last two Pentagon report on China’s military power, released in March of 2008 and 2009, China’s short- and medium-range missiles, which target Taiwan, increased from a range of 995-1070 to 1050-1150. This rate of growth is a bit less than previous years, but still raises the question, what is going on?

Let us stipulate, for purposes of discussion, the following:
  • The PLA’s buildup occurred over the past decade because China perceived that Ma Ying-jeou’s predecessors planned somehow to permanently separate Taiwan from China. It was necessary, therefore, to secure the ability to deter this challenge to China’s fundamental interests, and to punish Taiwan if deterrence failed.
  • Some of the systems the PLA is acquiring have multiple uses, including surface ships, submarines, fourth-generation aircraft, and cyber-warfare. These can be used, for example, to protect China’s interests in the East China Sea as well as attack Taiwan. (But that is cold comfort for Taiwan’s security planners. They worry—correctly that those systems will be used against them, and to block the United States from coming to the island’s defense.)
Still, it is startling that Beijing did not adjust the procurements and deployments that are most relevant to Taiwan in response to Ma’s taking office. After all, what drove China to its military buildup was its perception of threatening intentions of Ma’s predecessors. He on the other hand has pursued a policy of reassurance and reconciliation. We can imagine several possible reasons.

The first is bureaucratic: that the PLA procures equipment on a five-year cycle, and the adjustment to Ma will begin in the cycle that begins in 2011. The second concerns threat perception: PLA and other leaders do not believe that the threat of separatism has disappeared. Pro-independence forces could return to power and China must be prepared. The third possible reason is institutional. The PLA is increasingly a corporate entity that has its own view of how, within broad policy parameters, to protect China’s national security. It could be some combination of the three. We simply do not know.

China’s failure to adjust has important implications for the future of cross-Strait stability, because it affects the sustainability of Ma Ying-jeou’s policies. In his electoral campaign, he argued that that the best way to ensure Taiwan’s prosperity, security, and dignity in the face of a more powerful China to reassure and engage Beijing. His appeal, therefore, defines what he must achieve to secure re-election in 2012 for himself and his party. Moreover, Ma has made very clear that China’s existing military capabilities are an obstacle to creating a truly stable cross-Strait environment. As he told The New York Times last year, “We don't want to negotiate a peace agreement while our security is threatened by a possible missile attack.”

China derives significant strategic benefit from Ma Ying-jeou’s policies, because they diminish what it saw as a serious threat. Ironically, if the China is too grudging on what it offers in return, particularly in the area of security, it will undercut Ma’s core argument and the political support that sustains it. It was Taiwan fear of China’s buildup that helped create the previous vicious circle. It cannot be in China’s interest to restart a negative spiral.

What are the implications of this situation for the United States? Washington’s fundamental goal is the preservation of peace and stability in the Taiwan area. It does not believe that goal is served when Chinese military power creates a strong sense of insecurity on Taiwan. Taiwan is thus subject to coercion and intimidation because its own deterrent is weak and it cannot negotiate confidently with Beijing.

If by its actions Beijing demonstrates a continuing desire to increase Taiwan’s sense of insecurity, then it is proper for the United States to reduce it through arms sales and other forms of security cooperation. We should, of course, provide systems that strengthen Taiwan’s real deterrent, not those that are useful primarily as political symbols (China can easily tell the difference). True, continued arms sales will damage U.S.-China relations, but we are responding to a problem that China has itself created.

President Ma’s initiatives present a strategic opportunity to transform and stabilize cross-Strait relations. But opportunities must be seized. China has done so in some areas but certainly not in the military area. To further increase its own sense of security, China must be prepared to strengthen Taiwan’s as well.

Defining Activism Down: A liberal vote cast in conservative judicial rhetoric

Defining Activism Down. WSJ Editorial
A liberal vote cast in conservative judicial rhetoric.
WSJ, Jul 15, 2009

After two days of Senate hearings on the nomination of Sonia Sotomayor, an onlooker could be forgiven for wondering where all the judicial liberals went. To hear the adjectives heaped on the judge by members of the President's party, you'd think Mr. Obama had nominated Chief Justice John Roberts's conservative cousin.

Judge Sotomayor is smart and accomplished, New York Democrat Chuck Schumer said Monday, "but most important . . . [her record] bespeaks judicial modesty" and shows she is a better "umpire" than Justice Roberts himself. Dick Durbin called her "restrained, moderate and neutral," while Pat Leahy said her record shows a "careful and restrained judge with a deep respect for judicial precedent."

The activists in Mr. Leahy's rhetorical show are, presto, the conservatives of the Roberts Court, which has very, very cautiously chipped away at some precedent in cases on issues like the Second Amendment and campaign finance reform.

Under this brave new meaning of judicial activism advanced several years ago by now-White House aide Cass Sunstein, a judicial activist is any judge invalidating a federal law, however shoddily made. Ergo, conservative judges are obliged to uphold liberal precedents no matter how narrow the vote and how recent the case, while liberals can overturn long-time principles in the name of the evolving Constitution.

The effect is a liberal ratchet, where precedents like Miranda v. Arizona and Roe v. Wade are cast in stone, but any rethinking by the Roberts Court of the six-year-old 5-4 campaign-finance ruling in McConnell v. FEC is a scandal. "So many of the rulings of the current conservative majority on the Supreme Court can be described as activist," Wisconsin Democrat Russ Feingold insisted. "The best definition of a judicial activist is when a judge decides a case in a way you don't like."

Actually, we have a better one. An activist judge is one who is willing to decide cases based on something other than what's in the Constitution. But that's a troublesome standard for Sonia Sotomayor, who in speeches and writings has shown she is open to a wide variety of sources, from human empathy to personal experience to foreign and international law to help her in judging cases, or to "set our creative juices flowing," as she said of the latter.

Under questioning yesterday on her controversial remark that a "wise Latina" would make better decisions than a white male, Judge Sotomayor backed away from the statement, calling it a "bad" play on the words of Sandra Day O'Connor that a wise old man and a wise old woman would reach the same conclusion. Still, she insisted, she was trying to inspire Hispanic law students "to believe that their life experiences would enrich the legal system, because different life experiences and backgrounds always do."

Democrats emphasize that Judge Sotomayor's record on the bench shows she is a moderate whose decisions were frequently in step with her colleagues on the Second Circuit Court of Appeals. According to a study by the left-leaning Brennan Center for Justice, Judge Sotomayor voted with the majority in 98.2% of her 217 constitutional cases, dissenting only four times.

Falling within the mainstream of liberal judges, however, is not the same as falling into the mainstream of the rest of the country. The judge's decision to deny a racial bias claim by white firefighters was overturned by the Supreme Court in Ricci v. DeStefano last month. Afterward, a Rasmussen poll found that 46% of voters considered her a political liberal compared to only 32% who thought she was a moderate. Justices shouldn't be confirmed based on polls, but the numbers do explain the concerted Democratic attempts to define her as a conservative.

In fact, what was once the Felix Frankfurter-Whizzer White school of liberal judicial restraint no longer exists in the polite echelons of the judicial left. The new school is now remarkably uniform in wanting to dictate racial outcomes, limit political speech, invoke foreign rulings as a legal guide, and do whatever else the activist cause of the moment demands.

Judge Sotomayor gives every sign of being of that school, and there's little reason to believe she wouldn't be a reliable liberal vote on every important issue. Elections have consequences, and Justice Sotomayor is almost certain to be confirmed. But for a President who was elected on the promise of moving beyond old racial divisions, Mr. Obama's first Supreme Court nominee looks jarringly passé.

China's War for Ore - Business is being reshaped around the world

China's War for Ore. By HOLMAN W. JENKINS, JR.
Business is being reshaped around the world.
WSJ, Jul 15, 2009

China was miffed by the outcome of what we last year called the corporate "deal of the century." But shareholder interests prevailed. How often will that be said in the future?

Politics, that ugly dynamic when mixed with business, was already back in play last week as Rio Tinto, an Australian mining giant at the heart of the controversy, saw four of its Chinese executives arrested in Shanghai on spying charges.

China says the busts are not retribution for the cancelled deal between Rio and a state-owned company, which received angry press in China. Instead, the arrests supposedly arise from skullduggery by Rio officials during fraught annual ore-price negotiations with mainland steelmakers. But the distinction may be irrelevant. Ore has become a major neuralgic concern for China. It sees its dependence on imported supply as strategically risky. It fears that its massive attempts to "stimulate" domestic job growth are being drained off as fatter profits for Australian mining companies.

When the intrigue is unraveled, moreover, don't be surprised if the arrests are partly aimed at corralling the mainland's own restive steelmakers, many of whom have not cooperated in Beijing's ore strategy but have been striking their own spot market deals at higher prices.

But let's step back. Rio has been wrongfooted over and over lately amid the zigzagging of the world's monetary conditions, whose chaos is now disastrously reshaping business-government relations globally (think the Obama administration's ownership of most of the Detroit auto industry).

When China was booming, Rio played coy in the face of a merger bid from fellow miner BHP Billiton 18 months ago, acknowledging the "industrial logic" of the deal but insisting the offering price was "several ballparks" short of fair value.

Oops. With the collapse of Lehman and the global meltdown, ore prices plummeted and BHP withdrew its bid. Suddenly, Rio needed its own debt bailout and turned to a company on the cash-rich mainland, state-owned Chinalco. Beijing was doubly pleased by the $19.5 billion Chinalco deal. Not only was China getting ownership of Australian ore assets at a bargain price, but the deal also killed off any chance of a BHP merger, seen on the mainland as an Aussie plot to gouge China.

Oops. The Chinalco proposal ran into a buzzsaw of nationalist opposition in Australia. And while a government review board dragged its feet, the delay allowed Ben Bernanke to rev up the monetary engine and China to launch its own massive stimulus. Ore prices recovered. A BHP joint venture was back on the table. In a jilting worthy of a Judy Blume novel, Rio last month dumped its Chinese savior and leapt into bed with its erstwhile Australian suitor.

Now the Chinese naturally see dirty politics at work, but the deal was actually scuttled by Rio's shareholders, who rightly saw more upside in BHP's offer. Yet it's also true the Chinalco bid would likely eventually have been torpedoed by the Australian government. Polls were running strongly against selling the country's mineral patrimony to a company ultimately controlled by the Chinese Communist Party. Australia Prime Minister Kevin Rudd, who prides himself on being an old China hand, must have been overjoyed when this icky chalice was taken from his lips by Rio's shareholders

Yet the politics have only turned ickier since the Rio arrests. And Beijing has other cards up its sleeve. It can take its opposition to the BHP-Rio deal to Europe's trustbusters, who voiced qualms about their earlier proposed tie-up. China also can make use of its own new anti-monopoly law, which has already been used to punish the U.S. for blocking an oil deal. Earlier this year, Chinese regulators nixed Coca-Cola's purchase of a local juicemaker on "competition" grounds that antitrust lawyers considered ludicrous.

More disturbing, China has upped its ore purchases in recent weeks even as mainland growth seems to be slowing, suggesting an effort to lay in a stockpile for a longer showdown against Rio-BHP.

If the Rio arrests mark the beginning of a Chinese war to remake the global ore market more to China's liking, Beijing might want to think again. Its clumsy attempt to make computer makers instruments of Internet censorship was not exactly confidence-inspiring. Ensuring nobody wants to do a business deal with China for fear of being charged with a death penalty crime hardly improves the case. Then there's the epic civil disorder in Xinjiang.

The final casualty may be China's overblown reputation for macroeconomic competence, on which so many hopes for global recovery depend. There are already signs its stimulus efforts are running off the rails. The world might appreciate a signal right now that China's government actually knows what it's doing.

Libertarian: Universal Health Care Isn't Worth Our Freedom

Universal Health Care Isn't Worth Our Freedom. By THOMAS SZASZ
What would Thoreau have made of the current debate?
WSJ, Jul 15, 2009

People who seek the services of auto mechanics want car repair, not "auto care." Similarly, most people who seek the services of medical doctors want body repair, not "health care."

We own our cars, are responsible for the cost of maintaining them, and decide what needs fixing based partly on balancing the seriousness of the problem against the expense of repairing it. Our health-care system rests on the principle that, although we own our bodies, the community or state ought to be responsible for paying the cost of repairing them. This is for the ostensibly noble purpose of redistributing the potentially ruinous expense of the medical care of unfortunate individuals.

But what is health care? The concept of reimbursable health-care service rests on the premise that the medical problem in need of servicing is the result of involuntary, unwanted happenings, not the result of voluntary, goal-directed behavior. Leukemia, lupus, prostate cancer, and many infectious diseases are unwanted happenings. Are we going to count obesity, smoking, depression and schizophrenia as the same kinds of diseases?

Many Americans would willingly pay for insurance to protect them against the exorbitant cost of treating their own leukemia. But how many Americans would willingly pay for insurance to protect them from the expenses of treating their own depression?

Everyone recognizes that the more fully we wish insurance companies to defray our out of pocket expenses for our car repairs, the higher the premium they will charge for the policy. Yet foregoing reimbursement for trivial or unnecessary health-care costs in return for a more suitable health-care policy is an option unavailable under the present system. Everyone with health insurance is compelled to protect himself from risks, such as alcoholism and erectile dysfunction, that he would willingly shoulder in exchange for a lower premium.

The idea that every life is infinitely precious and therefore everyone deserves the same kind of optimal medical care is a fine religious sentiment and moral ideal. As political and economic policy, it is vainglorious delusion. Rich and educated people not only receive better goods and services in all areas of life than do poor and uneducated people, they also tend to take better care of themselves and their possessions, which in turn leads to better health. The first requirement for better health care for all is not equal health care for everyone but educational and economic advancement for everyone.

Our national conversation about curbing the cost of health care is crippled by the vocabulary in which we conduct it. We must stop talking about "health care" as if it were some kind of collective public service, like fire protection, provided equally to everyone who needs it. No government can provide the same high quality body repair services to everyone. Not all doctors are equally good physicians, and not all sick persons are equally good patients.

If we persevere in our quixotic quest for a fetishized medical equality we will sacrifice personal freedom as its price. We will become the voluntary slaves of a "compassionate" government that will provide the same low quality health care to everyone.

Henry David Thoreau famously remarked, "If I knew for a certainty that a man was coming to my house with the conscious design of doing me good, I should run for my life." Thoreau feared a single, unarmed man approaching him with such a passion in his heart. Too many people now embrace the coercive apparatus of the modern state professing the same design.

Dr. Szasz is emeritus professor of psychiatry at Upstate Medical University in Syracuse, New York. He is author of "The Myth of Mental Illness," among other books (HarperCollins, 1961).