The Progressive Ensign

insights and analytics to build an economy that works for all

Author: Patrick Hill Page 13 of 18

14 % of Workers Have Not Received Wage Increases In the Last Year

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On May 30, 2018

In Automation, Corporate Reform, Stock Buybacks, Worker Wages

 

Photo: theaustintimes.com

While CEOs at the top 100 corporations received a 5 %  raise in average compensation  of  $15.7 million last year,  14 % of all workers have received no raises at all, higher than before the Great Recession. The recovery has not come for many workers.

Sources: San Francisco Federal Reserve, National Bureau of Economic Research, Haver Analytics, Marketwatch – 5/29/18

Prior to the 2008 recession there were 11 % of all workers not receiving raises, still too high but much lower when considering the size in millions of the US workforce. After the recession companies were slow to give all workers raises as the rate rose to almost 17 % without raises.  Then, over time more workers are receiving raises as the economy recovered for the top 20 % in income. Still, 14 % is still too high.  The Federal Reserve economists note that the no raise rate would have to drop to 12.5 % or so for enough wage pressure to cause a move from the present stagnant 2.5 % to increase to 3 % and cause wage push inflation.  The fact the number of employees not receiving wages is actually going up is a concern that wage raises may actually fall or stay the same.

Next Steps:

We continue to see the extreme inequity of executives and professionals continuing to receive raises, for many twice the 2 % inflation rate versus workers. The reality is that employees just do not have the same wage power that they used to. We have previously discussed the combination of factors that contribute to extreme lack of wage power for workers including: lack of union representation, automation, fewer corporations due to mergers reducing the number of jobs,  low wage H1-B visas being approved,  using profits for stocky buybacks instead of investment in productivity increases, Internet recruiting nationwide and worldwide for some positions, and the shift to outsourcing jobs and the gig economy.

We recommend the following actions be taken by Congress and Corporate Leaders:

  1. Place Workers on Boards– as Germany has so effectively setup, engaging management with required representation of workers on Boards.
  2. End Outsourcing– corporations would pay 50 % tax on each job moved overseas making the move costly, encouraging corporations to move jobs to low cost or inland areas of the US, or innovation economic zones (special tax geographies) and to invest in worker training to receive training tax credits.
  3. End Low Cost H1-B Visas– the practice of importing inexpensive labor to drive down wages in US markets would be ended.
  4. Offer Lower Taxes on Repatriated Funds– only if the profits from overseas are invested in productivity actions, increasing wages of workers (not executives), reducing costs or innovation. Stock buybacks or dividends would be prohibited.
  5. End Stock buybacks– these funds are totally wasted, mislead investors on earnings reports and only serve to increase compensation for executives and shareholders. These funds are better allocated to increase worker wages or increase productivity so workers can receive higher wage increases.
  6. Breakup Oligopolies– breakup market concentrations in key sectors: information technology, banks and financial services, health insurers, airlines, hospitals and clinics, entertainment, media and distribution and others as deemed in the public interest.
  7. Balance Job Market Process– require companies over 100 employees to offer information on their website for contacts, phone numbers, job listings with identified contacts, and to let the candidate know the status of his consideration, and candidate introductions held monthly for F2F communication.
  8. Balance Worker and Executive Pay– tax corporations 25 % surcharge on any corporate income where any executive makes greater than 150 % than any the average worker wage – this would force executives to share their income with workers while not increasing costs. End federal tax deductions on corporate income taxes for executive stock compensation above $1 million. End golden parachute packages by taxing 50 % of every dollar received above $1 million. Severance packages for workers would have to be in proportion to the highest executive package ie, executive receives 10x of monthly salary a worker would receive 10x of his/her monthly salary.
  9. Fund Worker Training and Increase Wages – for each robot employed, the corporation would be required to offer training, skills development for the displaced worker to find a comparable job within the company or outside. Where automation software or technology is deployed 10 % of the realized cost benefit would be used to raise the wages of all workers in the company.

Millennials Buried in Student Debt Can’t Buy Homes!

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On May 29, 2018

In Housing, Millennials, Student Debt, Wages

 

Student debt has soared to $1.4 trillion in the last month according to the Federal Reserve.  Now millennials are faced with a combination of soaring student debt and high home prices are giving up on owning a home.

Sources: Federal Reserve Bank of New York, US Census Bureau, New York Times – 5/29/18

In 2003, 42 % of people under age 35 owned a home now only 35 % own a home.  The dream of owning a home is slipping away as our society allows the rich continue to enjoy huge tax reductions in the most recent tax bill, with continuous lack of state funding for colleges and universities and then a paucity of forgiveness programs for graduates.  The lack of household formations, now at a low point since the Great Recession means that durable orders will fall and sure enough durables (ie. appliances, furniture, cars) orders have fallen recently.  As millennials and working class are squeezed between stagnant wages and rents, college debt, car loan payments, and credit card payments:

Source: Bloomberg, The Wall Street Journal, The Daily Shot – 5/29/18

Next Steps:

We saw this problem getting worse in our blog last April and suggested several solutions related to student debt forgiveness and interest reduction programs:

“As part of the spending bill that Congress passed last month, $350 million was allocated for a fix it forgiveness program for some types of student loans.  Senator Elizabeth Warren has been surveying the issue and individuals trying to take advantage of the provisions where she found that it was quite complex, answers were in complete from the Department of Education and work still needed to be done to setup the process. She found many firefighters and teachers having a difficult time getting into the program.  Prior to passage of the spending bill Senators Whitehouse and Kaine wrote a bill to setup a student debt forgiveness program and get it funded, their bill set the stage for Democrats to push for provisions of the bill to be included in the omnibus spending bill.

This solution is still not enough compared to the huge issue of $1.49 trillion outstanding placing an anchor of debt on our young people when they need to be investing in starting their families and careers and buying homes. In blog of February 16th in our archives, we review an idea to cancel all student debt.  We like the idea moving forward, yet recommend that forgiveness be done in stages, by reducing interest rates, offering Heartland Service, providing a universal national service option and corporate sponsorship of an internship by the student.”

Our ideas stand today, as they did six weeks ago as Congress, the Elite and Corporate Nation States continue to ignore the fact that we are not doing right by our young people entering the economy and starting their careers.

Visa Program For Immigrant Entrepreneurs Ended

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On May 28, 2018

In Entrepreneurship, Heartland Economics, Immigrant Contributions, Immigrant Entrepreneurs, Visa

 

Photo: wsj.com

Last year in July, the GOP administration announced their intent to end any special visa handling for immigrants who startup companies in the US.  If the entrepreneur met certain criteria for funds raised in the US and sponsor financing they were allowed into the US for a period of 30 months.  However, the entrepreneur visa could be revoked at any time.  President Obama just before he left office in January, 2017 setup the special visa program for immigrant entrepreneurs to jump start more companies and create more jobs. Last Friday, May 25, Homeland Security announced that it was planning on ending the program after winning a court battle with venture capitalists who were seeking to have the program launched.  Let’s step back and look at the jobs and startup issue in context.

Do we need more startups in the US?  Yes, there are actually more companies dying right now then startups and small companies.  While, we hear about the Googles and Facebooks, there are many thousands of startups (usually 10 times more) that fail and other small businesses.  Actually the rate of businesses dying has increased dramatically such that more small businesses are going out of business than ones being created.

Do we need more jobs?  Yes, while the unemployment rate is at an all-time low, there is another 11 million people who want to work but can’t and have quit looking for work so they are not counted in the unemployment statistics.  About, 70 % of all new jobs are created by small businesses not large corporations – who are generally still reducing their workforces.

Do we need more entrepreneurs?  Yes, but in the Heartland region of the US. The West Coast, Austin, and Boston, New York areas receive most the venture capital funding for startups. Jumpstarting entrepreneurs and new businesses in the Heartland where we need new job development is crucial to getting the region moving again economically.  US local entrepreneurs should receive federal help, venture, university and non-profit assistance in getting businesses started as we have recommended in our Heartland Development Center initiative blog.

Are immigrant entrepreneurs key to growing our economy?  Yes, immigrants are increasingly the ones starting new businesses versus native born founders.

Sources: U.S. Census Bureau, Kerr & Kerr, Harvard Business Review – 9/26/16

Immigrants make up a disproportionate amount of the entrepreneur base, experts believe their passion and dedication to building new businesses is strong and drive to make the American Dream come true.

Next steps:

The GOP Administration believes if immigrant entrepreneurs are to be given special visa status that Congress needs to pass a law that specifies how the program works, the number of founders to be admitted and how they are to be selected.  We understand the present program for immigrant entrepreneurs is vague and established by executive order.  However, President Obama was intent on giving special status to those who could start new businesses quickly and create more job opportunities for workers.  Our recommendation is that Congress should be passing a law in regard to immigrant entrepreneurs as part of funding Heartland Development Centers and use the special visa to bring immigrant entrepreneurs to the Heartland where they are most needed after investing and providing entrepreneur support for native born founders. One way to gain acceptance, is to have the immigrant entrepreneur sponsored by a startup co-founder native born person in the region, then have them work together as a team.

Our Founding Leaders Believed Public Education Builds the Common Good

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On May 25, 2018

In Common Good, Education, Public Interest

Image: Your Little Planet

Public education’s rightful role is as the Fifth Estate next to the Fourth Estate, the Press, as pillars of our government.  The judiciary, legislative and executive being the other three Estates. Thomas Jefferson and James Madison in their writings on education knew it was crucial for the success of the country that all citizens (then it was white males) be well educated to use their knowledge to check the power of tyrants.

James Madison had tremendous vision, and steadfast hope that knowledge would triumph over ignorance when he said in a letter to W. T. Barry about a bill for Kentucky public education in 1822, “Knowledge will forever govern ignorance”.  Today, we are finding out if his vision can be held up as true or will demagogues and tyranny rule the day through ignorance.  Madison focused on the means of acquiring knowledge as proving the power to overcome tyranny. “A popular Government, without popular information, or the means of acquiring it, is but a Prologue to a Farce or a Tragedy; or, perhaps both.  He saw that the people must be armed with knowledge to have leverage over their rulers. “And a people who mean to be their own Governors, must arm themselves with the power which knowledge gives.” Education provides the way for the intellectual development of all people to discern the truth from untruth, coming from any individual or the press. They gain the ability to lead themselves and to discern policies and leaders that are basing their ideas and plans on truth rather than fiction.

Thomas Jefferson sponsored a bill for public education in the Virginia legislature when he was Governor and wrote the following preamble to the law:

“Whereas it appeareth that however certain forms of government are better calculated than others to protect individuals in the free exercise of their natural rights, and are at the same time themselves better guarded against degeneracy, yet experience hath shewn, that even under the best forms, those entrusted with power have, in time, and by slow operations, perverted it into tyranny; and it is believed that the most effectual means of preventing this would be, to illuminate, as far as practicable, the minds of the people at large, and more especially to give them knowledge of those facts, which history exhibiteth, that, possessed thereby of the experience of other ages and countries, they may be enabled to know ambition under all its shapes, and prompt to exert their natural powers to defeat its purposes.” (Underlining is ours).

 The law, The Act to Establish Public Schools, was presented to the House of Delegates in 1778 and 1780 but was not passed until 1796, when Jefferson was serving as US ambassador to France, with continuous lobbying by his friend James Madison.

Jefferson was adamant that education was the antidote to tyranny when he wrote George Wythe on August 13, 1786 (the bill still had not passed, and would not for 10 more years), “I think by far the most important bill in our whole code is that for the diffusion of knowledge among the people. no other sure foundation can be devised for the preservation of freedom, and happiness.”

The relationship of freedom and learning was a closely held view by Madison as well when in 1822 in his letter to W.T. Barry he said, “What spectacle can be more edifying or more seasonable, than that of Liberty & Learning, each leaning on the other for their mutual & surest support?”

Madison continued in his letter to Barry that the poor should be in public school as well paid by the rich, “Whilst those who are without property, or with but little, must be peculiarly interested in a System which unites with the more Learned Institutions, a provision for diffusing through the entire Society the education needed for the common purposes of life…that it is better for the poorer classes to have the aid of the richer by a general tax on property, than that every parent should provide at his own expense for the education of his children, it is certain that every Class is interested in establishments which give to the human mind its highest improvements.”  He advocates that the property of the rich be taxed to support public education for all. Yet, in Europe education today is primarily funded by national governments. It is likely that Madison after experiencing the tyranny of the King of England did not want the national government as the source of funding for educating people on how to discern the truth from untruth expressed by national leaders.

To create a sense of the common good is to understand the views of immigrants he astutely observes, “An acquaintance with foreign Countries in this mode (learning institutions), has a kindred effect with that of seeing them as travellers, which never fails, in uncorrupted minds, to weaken local prejudices, and enlarge the sphere of benevolent feelings.”

Two hundred and twenty years ago since passing the Virginia public education act our country has changed the focus to educating, women, minority groups, and all members of society to be better informed, discern the truth and select democratic leaders.

Yet, how well has public education performed in its role to create the common good?  Next week, we will look at measuring public education achievements and failures in building a more democratic society.

Activists Push Environmental Corporate Reform at McDonalds

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On May 24, 2018

In Corporate Nation State, Corporate Reform, Environment, Solution

 

Image: thepeoplesconvention.org

We believe corporate behavior will most likely only change when shareholders demand change through corporate reform.  While some farsighted companies are moving to all sustainable materials for their packaged goods McDonalds has been slow to make it happen.

McDonalds says it is willing to move to eliminate plastic straws by 2025 – seven years from now.  That timeframe is just too late.  There are plastic straw substitutes like biodegradables are available now made from starch, corn or bamboo. The giant restaurateur has been dragging on making shift.  Plastic in our oceans is a huge problem, destroying habitat for ocean creatures and fouling their food sources multiplying each year by 8 million metric tons.

Source: The Ocean Conservancy – 5/24/18

We applaud the plastic straw proposal by SumOfUs, corporate reform activists, obtaining 450,000 signatures to qualify for a shareholder vote.

Corporate decision making must continue to be monitored, and when a decision is making our planet more uninhabitable it must be changed to make our life here sustainable.  The reality is that those profits are not going to matter in a planet where our environment is destroying the world we live in placing people world-wide in jeopardy of shortened life spans.

Unfortunately, today the plastic straw proposal only received 8 % of shareholder votes.  The vote of major shareholders and institutions against the proposal shows there is still work to be done to in corporate reform.   We are pleased to see major institutions, like Blackrock, where CEO Larry Fink has demanded that companies they invest in get more engaged in environmental issues and ‘how’ they make money not just make money. When CEOs at major companies see that it is in their interest to move the paradigm of environmental protection ahead then we will know that they are listening to us, the people, rather than Wall Street. Corporations and the wealthy control Congress so we need to go directly to Corporate Nation States to bring about real change.

Corporate Executives, Congress Misled Citizens On Tax Bill Benefits

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On May 23, 2018

In Heartland Economics, Tax Bill, Worker Wages

Photo: newsweek.com

The latest reports show that Corporate Executives, and Congressional GOP Leaders misrepresented to us the benefits of the Tax Cut Bill – capital spending has gone down, wages have stagnated and stock buybacks have hit $1 trillion.  So much for stimulating the economy, raising wages and making capital improvements.

The latest report from the Richmond Federal Reserve shows capital expenditures falling:

Sources: Federal Reserve – Richmond, The Wall Street Journal, The Daily Shot – 5/23/18

Other regions in the US show similar falloffs. While some jobs and regions are showing increases in wages in our Heartland they were lagging and still lag at 2 % wage growth vs 8% nationally:

Sources: US Bureau of Economic Analysis, The Wall Street Journal, The Daily Shot – 5/22/18

Today, corporate executives are doing a good job of juicing the price of their company stock with stock buyback funds that could be invested in increasing productivity, raising worker wages, reducing the price of their products and services or increasing job and career training.  Corporate stock buybacks have hit a new all-time high with repatriated funds from overseas at steep tax discounts and tax bill operating income reductions to $1 trillion!

Sources: Standard and Poors, The Wall Street Journal, The Daily Shot – 5/22/18

Donors told our elected representatives ‘not to call’ unless they got a tax bill done – which of course 80 % of the benefits went to them not the people. The top 1 % wealthy class has control of the key levers of government – our elected representatives by providing hundreds of millions of dollars in campaign contributions which corrupt their representation of us.

Next Steps:

We need to win back control of Congress to set the right priorities for taxes that are fair for all not just a gift to the rich.

In congressional primaries across the country many women and progressives are winning in districts where Democrats did not run or corporate controlled Democrats held seats for years.  In Pennsylvania, seven women won primaries from the suburbs of Philadelphia to the rural conservative regions of the southwest.  Democrats are focusing on small donor funding to bring representative power back to the people.

Sources: The Wall Street Journal, The Daily Shot – 5/23/18

Plus, Democrats are beating the GOP in the funding race by appealing to the people again, some are renouncing PACs as Sen. Kamala Harris of California has done, others will follow. The mid-term election is crucial to win back the House and maybe the Senate and put an end to the oligarchy running our government.

Supreme Court Hands Corporations Another Win Over Employees

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On May 22, 2018

In Arbitration, Corporate Nation State, Employees, Wages

Photo: Central Penn Business Journal

Yesterday, the Supreme Court announced a major decision that further limits employee rights. Newly appointed Supreme Court, Justice Neil M. Gorsch wrote the majority opinion holding that a 1925 Arbitration held over a 1935 National Labor relations law allowing employees to sue their employers.  The court held that employees can not bind together in class action law suits where they have common interests in a complaint against a company, they must use arbitration specified in the agreement.  Employees are coerced into employee agreements in that they must sign them to take the job, corporations have the power in a job negotiation as they can just go to the Internet and find another 25 or 100 candidates for many jobs.  The candidate cannot negotiate clauses in employment contracts with their own attorney because they want the job more than worrying about a contract clause.

Supreme Court Justice Ruth Bader Ginsberg wrote the minority opinion outlining how unjust this decision is, a part of the opinion she read aloud in court:

“The court today holds enforceable these arm-twisted, take-it-or-leave-it contracts — including the provisions requiring employees to litigate wage and hours claims only one-by-one,” she said. “Federal labor law does not countenance such isolation of employees.”

Research supports Justice Ginsberg’s finding, in most cases the employee is more likely to lose a case in arbitration versus court suits and when judgements are won the final awards are much smaller.

Source: The Economic Policy Institute – 10/14/2016

The decision clearly is another win for corporations increasing their power over employees by severely limiting the ability of an employee to equalize the leverage with their employer in bringing a complaint.  Corporations can now take on employees one by one where they will not have the attorney fire power that corporations wield.

Next Steps:

Congress needs to pass a law to make clear that the National Labor Relations Act takes precedence over the Arbitration Law which was passed to use arbitration processes for company to company complaints.  Then over the years since 1925 corporations have use their lobbying influence and ability to buy control of presidents appointed justices to extend the law to covering consumers in credit agreements and employee contracts. Corporate control of campaign funding with the Citizens United decision, succeeding Super PACs and extreme lobbying spending strengthens the hegemony of corporations over employees.  It is obvious that employee power is at an all-time low as we have the lowest unemployment rate in 10 year while wages for the 80 % in income stagnant.

Employers Should Pay Hourly Employees Fairly, Not Chip Away at Stagnant Wages

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On May 21, 2018

In Automation, Corporate Nation State, Wages, Worker Wages

Photo: smallbusiness.chron.com

As more corporations use software to track hourly employee hours some have tipped the data collection rules in their favor.   American Airlines is facing a suit from 400 employees for shorting their hours, Kroger and Montage are facing similar suits.  We realize that corporations are under great pressure to cut costs on labor to increase profits and meet shareholder and Wall Street expectations.  However, since the wages of production employees and non-supervisors have been essentially stagnant for the past 5 years we ask:  who is really getting hurt?  Corporations have all time low taxes, all time high stock buy backs to juice executive salaries, and all time cash nearly $1 trillion stashed in most offshore accounts.

Meantime employees are at the lowest point of wage power in the workplace in decades with reduced health benefits at greater cost, competition for their jobs from other workers on the Internet, automation, corporate mergers reducing the number of jobs available, and union busting laws.  So who are the wage scales tipped toward?  Corporations.  Average hour worker income has continued to fall when inflation is included.

Sources: Bureau of Labor Statistics, Real Investment Advice – 5/15/18

So, when companies use software to track employee hours, then ‘round hours up’ for breaks or deduct breaks that didn’t happen – like for nurses in healthcare at the University of Missouri Health Care using time tracking software where they cared for patients during their breaks but the software recorded a break anyway.  The nurses are losing money, and even more than just wages respect for the work they do.

Next Steps:

Employers wake up! Work is a social contract that is two-way and should be equitable, time cards should be signed by employees in some manner before wages are dispersed.  The signing which used to be performed is a confirmation that the employee and employer understand the work being performed and the fair hours completed. Software should not just automatically capture data and cut checks.  When time cards were used, filled out by employees – now done online, yet most systems allowed for electronic signatures.  In haste, these companies are just using the software to capture the hours, record the hours and post checks. Company IT departments set the rules of the software sometimes in favor the company not the employee.  These rules changes can be for just minutes or more but at infrequent times so it is hard for employees to discern what is happening to their paycheck.  Time tracking software should be required to show an audit trail for the employee to see to ensure that it is a just capture of their hours. Let’s be clear when these systems don’t treat employees fairly, and allow for confirmation of hours worked the employer is committing a real in justice to the employee.  Corporations need to review the process of their time recording software for hour employees, ensure adequate safeguards are in place for employee input and install these systems with employee support.

Maybe We Do Make Choices for the Common Good – More Than We Think

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On May 18, 2018

In Common Good, Conflicts of Interest, Public Interest, Self Interest

 

Image: Your Little Planet

James Madison was concerned that the basic character of man was self-interest and he would not act if in a power position for the common good.  While, this self-interest aspect of people is turbo charged in capitalist nations, it may not be the choice many of us make when we see the light of the common good and make choices that benefit all of us. Certainly, Madison put great faith in a diverse, well informed citizenry making good choices for their representatives who would act with ‘enlightened interest in the public good’.  Our government of checks and balances provides a way for the this enlightened good idea to be discovered from free speech and forcing self-interested people to recognize they had gone too far and needed to see the needs of all the people.

Our media has taken the negative perspective (it sells advertising and gains attention) that there is a tragedy of the commons, which Prof Garrett Hardin popularized in 1968, that people have a tendency to always go for the self–interest choice, i.e. overgrazing a plot of land to make more money from the ever increasing number of livestock that a herder wants to graze causing overgrazing and killing the life support ability of the land.  There are countless examples of over farming from large regions like the Midwest in the 1930s causing huge dust storms and forcing migration of farmers to California and the West.  Today, we see self-interest to the max in stock buy backs where corporations purchase their own stock to reduce the number of shares and drive the price up, so executives and shareholders would make more money – at the expense of employees not receiving raises, investments in research to increase productivity and reduce product prices or increasing investments in employee training and development.

Yet, maybe we do make the choice for the common good when offered.  Lecturer, Dylan Selterman, at the University of Maryland, asked his students an extra credit question if they would like to have 2 or 6 extra credit points to your final grade, but if 10 % of the students asked for 6 extra points none would receive them.  Class after class would go over the 10 % limit, until he provided a third choice – altruistic – you can select zero points.  After offering the third choice enough selected the zero point or two-point option so that would be under the 10 percent limit. The classes learned if they were not too greedy with their extra credit point choice they all could win.

So, how does choice and information play a role in developing and implementing common good policy?  A 2008 classic study by consumer researchers found that if hotel guests were provided a message that said ‘the majority of guest reuse their towels’ then towel recycling would increase dramatically. While, today we are used to recycling towels there were two elements:  one – providing information that towel recycling would reduce water usage and two – you have a choice to reuse or not reuse your towel.

Source: Journal of Consumer Research – 2008

The common good dilemma in regulating industry is more challenging because of the profit motive and personal benefit in making more money by increasing profits and reducing costs.  For chemical factories, installing scrubbers and extra equipment to return cleaner air to the sky is a cost, while just using the air for their factory and workers is free. Yet, all people beyond the factory are hurt from air pollution.  Generally, penalties for violating air pollution standards, or court cases have been the only way to stop polluting behavior.  But is there another way; getting an industry sector to work together, see that in their own interests if they all reduce air pollution they will benefit because they all breathe cleaner air – and they all have the similar costs if they all install equipment or even share technology and air pollution equipment in a group purchase.  Maybe when everyone is taking action, it is seen as the right choice and reduce costs for all with the benefit that everyone will enjoy clean air. Plus, if everyone is making the same investment, the costs will be similar across the industry and no single company is hurt financially or by Wall Street analysts.

Bi-Partisan Support to Cut Drug Costs – Stalled by Brand Drug Companies

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On May 17, 2018

In Drug Pricing, Solution, Stock Buybacks

Image: freopp.org

In an unusual development in the Senate, senators from the Republican side like Sen. Ted Cruz – (R- TX) to Democrat Sen. Diane Feinstein (D – CA) agree that the process of converting brand name drugs to generics needs to be sped up and reduce drug costs.  With 23 co- sponsors the CREATES Act would require brand name drug companies to provide large enough quantities of samples of their drugs to generic manufacturers in a timely manner and that are safe.  At the present time brand name drug manufacturers often do not supply the quantities necessary or block access due to safety concerns – unnecessarily delaying the conversion of a brand name drug to a generic.  The bill provides a remedy for generic manufacturers by allowing them to sue the brand name manufacturers for not providing the necessary samples.

Sen. Patrick Leahy (D-VT) a bill sponsor, says the Congressional Budget Office estimates the bill would save the federal government about $3.8 billion over a decade in drug costs.  The Congressional Budget Office and the Generic Pharmaceutical Association estimate a total savings of $250 billion in 2013 by using generic drugs versus brand name drugs.

Source: CBO, GPha – 2014

As we have noted before drug companies are running their companies focused on making unreasonable levels of profit through $50 billion stock buy backs to increase executive and shareholder compensation and paying $1 billion a year in direct advertising to consumers for prescription medications. If the drug companies allocated these wasted funds toward price reduction we would see a dramatic reduction in drug prices.  The CREATES Act is a good bi-partisan way to at least begin to tack down agreement on drug price reductions in a fair way.

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