CEI Weekly is a compilation of articles and blog posts from CEI’s fellows and associates sent out via e-mail every Friday. Also included in the weekly newsletter is a brief description of CEI’s weekly podcast and a feature on a major CEI breakthrough made during the week. To sign up for CEI Weekly, go to http://cei.org/newsletters.
CEI Weekly
June 17, 2011
>>Featured Story
As part of the ongoing Congressional Labor Scorecard project, CEI labor policy analysts this week scored a significant House vote on mandatory Project Labor Agreements (PLAs). In 2009, President Obama signed an Executive Order encouraging federal agencies to only hire construction firms that sign PLAs; but now, many congressmen recognize that PLAs increase contract costs and heavily favor unionized firms. This week, the House voted on a bill that would disallow mandatory PLAs. Read more about PLAs and the Congressional Labor Scorecard Project on WorkplaceChoice.org.
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The SEC is bringing fraud charges against leading credit-rating companies for not being thorough enough in their research to determine ratings on mortgage-backed securities involved in the financial crisis. Criticized as “key enablers” in the financial meltdown by government officials, the rating agencies represent simply the next phase in the state’s plan to deflect attention away from its own misguided policies that were the true “key enablers” of the 2008 crisis. These include but are certainly not limited to artificially low interest rates instituted by the Federal Reserve that provided an unsustainable amount of liquidity in credit markets, “affordable loan” quotas put on banks and Government Sponsored Entities (GSEs) that mandated certain amounts of essentially subprime mortgages regardless of the amount of risk that would be imposed on the lender, and the preferred credit line that GSEs retained with the FED that encouraged their reckless behavior.
If the government won’t look inward on itself to understand and solve the problems it created, it ought to at least realize that these policies distort the same market information on which credit rating companies rely to make assessments. As such, the blame for inaccurate credit ratings ought to fall squarely on the shoulders of the one blowing smoke through the eyes of the raters. However, given government’s track record of using the private sector as a scapegoat for the problems that its interventionism produces, this does not seem likely.
Josh Smith reports in National Journal that Representative Doris Matsui (D-Calif.), has proposed legislation to provide subsidized Internet services to low-income Americans. The “Broadband Affordability Act of 2011” directs the Federal Communications Commission to establish the program that will reimburse broadband providers for providing reduced-cost services to qualifying low-income residents.
This comes while many progressives have been arguing that Internet access is in fact a “human right.” No doubt Internet access offers a great many benefits, but there are many problems with this claim. Aside from the theoretical question of whether any consumer product can be a “right,” there is no evidence that government subsidization is the best means to ensure wider access. Matsui’s website reports that as of 2010, “28 million Americans do not subscribe to broadband services because of affordability barriers.” This does not take into account accessibility barriers. If Internet access is a right, then why isn’t the government subsidizing computers and smart phones for these Americans as well?
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Tech:
Identify Vancouver rioters: Facebook and Tumblr groups set up:
“After the Vancouver Canucks lost to the Boston Bruins in Game 7, some people that were downtown started rioting, starting fires, flipping cars, and breaking store windows and causing general chaos.”
U.S. Government In Cyber Fight But Can’t Keep Up:
“The Pentagon is about to roll out an expanded effort to safeguard its contractors from hackers and is building a virtual firing range in cyberspace to test new technologies, according to officials familiar with the plans, as a recent wave of cyber attacks boosts concerns about U.S. vulnerability to digital warfare.”
NSA allies with Internet carries to thwart cyber attacks against defense firms:
“The National Security Agency is working with Internet service providers to deploy a new generation of tools to scan e-mail and other digital traffic with the goal of thwarting cyberattacks against defense firms by foreign adversaries, senior defense and industry officials say.”
Global Warming / Environment / Energy:
Senate vote marks start of end for ethanol subsidies:
“The U.S. Senate voted overwhelmingly Thursday to eliminate billions of dollars in support for the U.S. ethanol industry, sending a strong message that the era of big taxpayer support for biofuels is ending.”
Another Obama Propaganda Fail… Green-Car Mandate Will Eliminate 260,000 Jobs:
“The Detroit News’ David Shepardson has unearthed a study that reveals that President Obama’s radical CAFE mandate “could force vehicle prices up by nearly $10,000, reduce sales by 5.5 million vehicles annually, and eliminate more than 260,000 jobs.””
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“While pursuing a PhD in “homicide studies” at the British taxpayers’ expense, a man with a long history of criminal violence became a serial killer, writes Theodore Dalrymple in City Journal. After Stephen Griffiths’ release from prison — and a mental hospital, in which he was diagnosed as an incurable psychopath — he was accepted by the University of Bradford; the government paid his fees and living expenses. Griffiths “killed and ate three women, two cooked and one raw, according to his own account.” He’s now serving a life sentence, giving him time to complete his doctorate on 19th-century murder practices, notes education expert Joanne Jacobs.
These true facts are so bizarre that you would expect them to be found only in absurd fiction. As Jacobs notes, “in the British series Wire in the Blood, a paroled killer enrolls in a PhD program while committing new murders. It was written in 2005, before Griffiths’ murder spree.”
While educators and the government subsidized a murderer, the U.S. Department of Education recently sent a SWAT team to the wrong house over misused student loans, handcuffing the innocent father of three young kids.
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Have a listen here.
In a recent NBC interview, President Obama blamed ATMs for taking away bank tellers’ jobs, and computerized airline check-in kiosks for eliminating aviation jobs. Communications Coordinator Lee Doren points out that innovation doesn’t affect the number of jobs so much as the types of jobs. Accomplishing more while using less labor is actually the key to prosperity. People looking for an explanation for today’s high unemployment need to look elsewhere.
In a 4-to-3 vote, the Wisconsin Supreme Court has upheld the state’s new law limiting collective bargaining with government-employee unions. As the Heritage Foundation’s Hans Von Spakovsky notes, the trial judge who erroneously struck down the law earlier — Maryann Sumi — “should have recused herself from the case to avoid the appearance of bias. Her son is a former lead field manager with the AFL-CIO and data manager for the SEIU State Council, two unions that not only represent public employees in Wisconsin but were instrumental in organizing protests against the passage of the collective bargaining law.”
As Spakovsky notes, in addition to violating constitutional separation-of-powers principles in her ruling, Judge Sumi also erred in uncritically accepting two “false claims that had been made by unions and Democrats protesting the new collective bargaining law,” which the Wisconsin Supreme Court properly rejected. The justices held that the legislature had not violated a section of the Wisconsin Constitution that requires the “doors of each house” to be kept open “except when the public welfare shall require secrecy,” since “the doors of the senate and assembly were kept open to the press and members of the public during the enactment of the Act,” as was the senate parlor where the joint committee on conference met. WisconsinEye, the state’s local version of C-SPAN, had even broadcast all of the proceedings live. “These were inconvenient facts that Judge Sumi had ignored. The Court concluded that there is no constitutional requirement that access be provided ‘to as many members of the public as wish to attend meetings.’ Finally, the Court held that the legislature had not violated the state’s open meeting law when the joint committee on conference met. Sumi had claimed that the law required 24-hours notice of the meeting. But it was undisputed that the legislature had posted notices of the meeting one hour and 50 minutes before its start in compliance with its own, internal procedural rules,” which can carve out exceptions in certain circumstances to the general 24-hour notice requirement — and in any event, the courts lacked jurisdiction to “review the validity” of the legislature’s interpretation of its own internal rules.
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AEI resident fellow Scott Gottlieb has a new paper out explaining why the FDA should not force pharmaceutical companies to prove their new drugs are superior to existing treatments before they may be approved. The idea has been kicked around by pharmaceutical industry critics for years, particularly as a solution to their claim that the industry produces too many “me too” drugs that are all essentially identical. CEI has debunked that argument before, but it nevertheless gets a lot of traction any time the issue of rising drug prices comes up.
Still, the FDA itself has held fast to the idea that randomized placebo-controlled trials (i.e. comparing a new drug against nothing at all, rather than another active compound) is the best way to generate clean, statistically reliable data on safety and efficacy. Gottlieb’s new paper does a fantastic job of explaining why that’s so. “Superiority trials require an enormous number of study subjects to discern clinically meaningful differences between two drugs. These trials can require tens of thousands of patients when two closely matched drugs are being compared.”
Moving from 2,000 or 3,000 patients in a typical Phase III trial to tens of thousands of patients is guaranteed to cause and explosion in R&D expenses. Note that each additional patient enrolled in a clinical trial can add an average of $30,000 to trial costs. Many products could justify the expense — though critics would complain even more about rising drug costs. But the bigger question is just where are all these patients going to come from? It’s already difficult to enroll the smaller placebo-controlled trials. Enrolling an order of magnitude more patients into a trial in a world of increasingly narrowly-targeted personalized medicines would be difficult, if not impossible. The new drug development process would grind to a halt due to the sheer impracticality of it — which just may be why drug industry critics love the idea so much.
An alternative, called a non-inferiority trial, permits a smaller patient enrollment, but it’s designed to show that two drugs are at least equally effective, not that one is necessarily better. It also provides less reliable data. Gottliebe notes that drug firms are already doing lots of these trials for the very purpose of trying to convince insurance companies and other health care payers of the value of their newest offerings. A study out earlier this year found that 70 percent of the new drugs approved by the FDA from 2000 to 2010 for which an alternative was already available, manufacturers had conducted at least one trial comparing the new drugs to active comparators. But this must almost always accompany placebo-controlled trials too — except in cases where running placebo-controlled trials would be unethical. If FDA officials weren’t such sticklers for perfectly pristine data packages, some compromise middle position might be arranged. But they are. So, for now at least, it can’t.
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The FDA is rolling out new labeling rules for sunscreen. First, sunscreens that don’t offer “enough” UVA protection (which has been shown to prevent wrinkles and skin cancer) will be required to carry a warning label stating that “the product hasn’t been shown to help prevent skin cancer or early skin aging.” Although many sunscreens offer strong UVB protection (which prevents sunburn), the FDA is concerned that a sunscreen can have plenty of UVB protection while offering little UVA protection and still call itself “broad spectrum,” thereby fooling consumers into buying a product that doesn’t offer complete protection.
Second, The FDA-mandated SPF cutoff for labeling whether the product has or hasn’t been shown to help prevent skin cancer and wrinkles is SPF 15. Further, the FDA will prohibit sunscreens from listing SPF values above 50 because “there aren’t enough data to show products with a value higher than 50 offers more protection.” A “star-rating” proposal had even been floated. In addition to increasing business’ production costs during a recession by forcing producers to change all of their labels, this new “big brother” scheme threatens to hurt sales as some products will be required to show a warning label mentioning their so-called “poor” protection (as it will obviously be interpreted) from UVA or UVB rays.
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Today’s Wall Street Journal reports that “Fewer than a quarter of American 12th-graders knew China was North Korea’s ally during the Korean War, and only 35% of fourth-graders knew the purpose of the Declaration of Independence, according to national history-test scores released Tuesday.”
Results like these show precisely why education is too important to trust to free markets. Children would be far better served if government were to take a leading role in K-12 education… oh, wait.
Nevermind.
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