Government shutdowns don’t harm the economy. Is there a lesson there?

The U.S. economy grew at an inflation-adjusted 3.2 percent annualized in the first quarter of 2019, putting it on track to get to 3 percent for the year for the first time since 2005, according to data compiled by the Bureau of Economic Analysis.

The startling data undoubtedly caught official Washington, D.C. by surprise, who had been gleefully predicting that the partial government shutdown earlier this year would cause a slowdown particularly to government contractors who, unlike federal employees, were not awarded backpay after the shutdown ended.

Unfortunately for the establishment punditry, whatever effect slower spending might have had was more than offset by the strength of the Trump economy.

The Congressional Budget Office had estimated that the partial shutdown cost the U.S. economy $3 billion of output in the fourth quarter of 2018, and $8 billion of output in the first quarter of 2019, respectively.

But it did not matter.

Most of that came out of $245 million of government contracts a day not paid out during the shutdown. Again, federal employees who were furloughed during that time have already been awarded back pay, including for the last week of 2018, the output of which has been moved into the first quarter of 2019.

Because government spending is factored into the GDP, and the reduction was actually $8.1 billion, amounts to approximately 0.16 percent according to the Bureau, or 0.17 percent annualized that came out of the first quarter GDP’s growth rate.

So, instead of 3.2 percent (really, 3.17 percent rounded up), the economy might have grown at 3.34 percent in the first quarter without the government shutdown.

But that does not matter, either. It will be made up for in the second quarter and beyond as government contractor spending “grows” by $8 billion back to its normal level. As the CBO report noted, “In subsequent quarters, GDP will be temporarily higher than it would have been in the absence of a shutdown.”

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Generic Insulin Now Available After Nearly One Hundred Years of Regulatory Protection From Competition

A lesson to be learned

Diabetes is arguably the biggest epidemic of the twenty-first century. According to the federal Centers for Disease Control, more than 100 million Americans are diabetic or prediabetic. If left unmanaged, diabetes is fatal and can result in serious health complications, including nerve damage, heart disease, stroke, blindness, kidney disease, and damage to extremities requiring amputation.

For an increasing number of people with diabetes, regular insulin injections are indispensable for managing their condition. Tragically, insulin in the United States is alarmingly expensive, taking a financial toll on many who need it to prolong their lives. A recent CBS News article reports finding “horror stories every day” of diabetics reducing and rationing their insulin doses, risking long-term complications or falling into a diabetic coma.

Fortunately, these stories may now be a thing of the past.

Drug producer Eli Lilly and Company recently released Lispro, the first ever generic insulin to enter the U.S. market. Lispro is available in pen or vial form and lists for $137.35 per vial (or $265.20 for a pack of five pens), half the price of Humalog, its brand-name alternative. Generic insulin provides much-needed financial relief. As Eli Lilly and Company CEO and Chairman Dave Ricks noted in a statement, “We don’t want anyone to ration or skip doses of insulin due to affordability. And no one should pay the full Humalog retail price.”

But many are still upset that a generic alternative is still expensive and is coming so late. Ben Wakana, executive director of the nonprofit advocacy group Patients For Affordable Drugs, echoes the frustrations of many when he expressed, “Charging nearly $140 for a vial of insulin—a drug that was invented almost a century ago—is still too high.”

He has a point. Insulin has been available to treat diabetes since 1922. The first generic insulin was approved just a few weeks ago. Why?

Unlike pharmaceuticals, which enjoy 20 years of patent protection from competition, insulin is classified as a biological compound. Under the FDA’s regulatory system, producers can extend patents for biological compounds by slightly modifying their product components. This possibility creates an incentive for insulin producers to alter their products rather than releasing generic drugs and competing by offering patients lower prices.

As my coauthors and I note in an article published in the Journal of Entrepreneurship and Public Policy, insulin has been adapted to enter the bloodstream quicker, to last longer by using different preservatives, and has also been extracted from different animals since first becoming available to patients. Many of these changes offered little medicinal benefits but protected producers from generic competitors. The result is that three insulin producers encompassed 99 percent of the market for nearly one hundred years.

Offering a generic alternative for insulin is a much-welcomed addition to the diabetic care market. I expect this change to prolong and save many lives, which is certainly worth celebrating. However, the development of insulin in the United States also provides a cautionary tale of how devastating the misaligned incentives created by poorly designed regulations can be for patients.

It’s been a costly and long-lasting mistake. Let’s hope we learn from it.

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FedGov: A Check-Writing, Wealth Redistribution Machine

When you think of all the ways that the U.S. government spends money, which of its functions do you think tops the list?

USA Today‘s John Merline reviewed several decades of the U.S. government’s annual budgets, including the latest budget proposal from President Trump, and has arrived at an inescapable conclusion:

What is the government’s primary function? If you look at the debates that rage each year when the president’s budget comes out, you’d think it was defense spending. Or food stamps. Or cancer research. Or student loans....

But if you look beyond the headlines at the actual budget document, you learn that those are all squabbles over crumbs. Today, the one thing the federal government does above all else is write checks. Lots of checks. Nearly $3.2 trillion worth of checks. Each and every year.

Buried in a separate volume of the annual budget are “Historical Tables,” which provide rich detail on how the government has spent taxpayers’ money going back as far as 1789. Three of these tables track “payment for individuals,” defined as “federal government spending programs designed to transfer income (in cash or in kind) to individuals or families.” It doesn’t include things like salaries paid to federal workers or services rendered.

According to the Trump budget, the government will hand out $2.6 trillion—that’s trillion with a “t”—directly to individuals or paid for services on their behalf this year. An additional $568 billion will go out as “grants to states,” which then pay the money in the same way.

In other words, 70 percent of everything the federal government will spend this year will amount to writing checks to benefit individuals. That’s up from 28 percent in 1968 and 50 percent in 1991. At $3.2 trillion, these federal money transfers will equal the entire economies of Canada and Mexico combined.

Even more perversely, much of that money is simply recycled through the U.S. government’s coffers as an intergenerational transfer from today’s middle and upper class income earners to the former middle and upper class income earners of the retired population.

For all practical purposes, the U.S. government is little more than “a check-writing, redistribution machine that costs trillions”—one that Merline observes is horribly inefficient because in practice, “much of what the federal government does today is rob Peter to pay...Peter.”

Only a politician or a bureaucrat would ever want more of such a nonsensical system!

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Trump Wants to Speed Up Asylum Adjudications and Impose Fees

President Donald Trump on Monday announced that his latest plan to secure the border and "restore integrity" to the immigration system focuses on asylum-seekers.

In a presidential memorandum, President Trump directed Attorney General William Barr and Acting Homeland Security Secretary Kevin McAleenan to do the following:

-- Propose regulations to ensure that all asylum applications adjudicated in immigration court are finalized within 180 days. (Many of the hundreds of thousands of people claiming asylum at the Southwest border are coming to the United States for economic opportunity, which is not grounds for asylum. The huge influx has produced an immigration backlog of some 800,000 cases.)

-- Propose regulations setting a fee for an asylum application, not to exceed the costs of adjudicating the application; and impose a fee for work permits for the period that the asylum claim is pending.

-- Propose regulations to bar asylum seekers who entered the country illegally from receiving work permits until they receive the court's permission to stay here; and to ensure immediate revocation of work permits for aliens who are denied asylum or become subject to a final order of removal.

The memo also directs the Homeland Security Secretary to "reprioritize the assignment of immigration officers," as the Secretary deems necessary, to improve adjudications of credible and reasonable fear claims; to strengthen the enforcement of the immigration laws; and to ensure compliance with the law by those aliens who have final orders of removal.

Trump tweeted about his latest attempt to stem the mass influx of foreigners, mostly Central Americans, who are flowing over the border in numbers not seen for years -- more than 100,000 inadmissible aliens encountered in March alone.

“If the Democrats don’t give us the votes to change our weak, ineffective and dangerous Immigration Laws, we must fight hard for these votes in the 2020 Election!” Trump tweeted on Monday.

In a second tweet, he wrote: “The Coyotes and Drug Cartels are in total control of the Mexico side of the Southern Border. They have labs nearby where they make drugs to sell into the U.S. Mexico, one of the most dangerous country’s in the world, must eradicate this problem now. Also, stop the MARCH to U.S.”

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Biden Plays the Race Card

As he debated with himself whether to enter the race for the 2020 Democratic nomination, Joe Biden knew he had a problem.

As a senator from Delaware in the '70s, he had bashed busing to achieve racial balance in public schools as stupid and racist.

As chairman of Senate Judiciary in the hearings on the nomination of Clarence Thomas in 1991, Biden had been dismissive of the charges by Anita Hill that the future justice had sexually harassed her.

In 1994, Biden had steered to passage a tough anti-crime bill that led to a dramatic increase in the prison population.

Crime went down as U.S. prisons filled up, but Biden's bill came to be seen by many African Americans as discriminatory.

What to do? Acting on the adage that your best defense is a good offense, Biden decided to tear into President Donald Trump — for giving aid and comfort to white racists.

His announcement video began with footage of the 2017 white supremacist rally in Charlottesville, highlighting Trump's remark, after the brawl that left a female protestor dead, that there were "very fine people on both sides."

"With those words," said Biden, "the president of the United States assigned a moral equivalence between those spreading hate and those with the courage to stand against it. And in that moment, I realized that the threat to this nation was unlike any I had seen in my lifetime."

Cut it out, Joe. This is just not credible. Even he cannot believe Trump had in mind the neo-Nazis and Klansman chanting, "Jews will not replace us!" when Trump said there were "fine people" on both sides.

If this were truly a road-to-Damascus moment for Biden, calling forth a new resolve to remove so morally obtuse a resident of the Oval Office, why did he have to agonize so long before getting in the race?

And was Charlottesville, a riot involving Klansmen, neo-Nazis and radicals, really a "threat to this nation" unlike any Biden had seen in a lifetime that covers the Cuban missile crisis, Vietnam, the riots in 100 cities after Martin Luther King's assassination and Sept. 11?

Even the anti-Trump media seemed skeptical. Their first interviews after Biden's announcement were not about Charlottesville but why it took so long to call Anita Hill to apologize.

Yet there is an unstated message in the Biden video. It is this:

With the economy firing on all eight cylinders, and the drive for impeachment losing steam, a new strategy is emerging — to take Trump down by stuffing him in a box with white supremacists.

The strategy is not original. It was tried, but backfired on Hillary Clinton when she called Trump supporters "deplorables ... racist, sexist, homophobic, xenophobic, Islamophobic ... bigots."

This didn't sit well with some white folks in Wisconsin, Michigan and Middle Pennsylvania.

Yet the never-Trumpers seem to think it could work this time.

After Saturday's attack on the Passover service in Poway, California, which took a woman's life, Trump denounced the atrocity, expressed his condolences, called Rabbi Yisroel Goldstein, who had been wounded, and consoled him for 15 minutes.

"Nevertheless," wrote The Washington Post Monday in a front-page headline, "President's words push race to fore of campaign."

"The rise of white nationalist violence during Trump's tenure is emerging as an issue," said the Post, because Trump "previously played down the threat posed by white nationalism (and) ... also has a long history of anti-Muslim remarks."

The article should be taken seriously. For the Post is not only an enemy of Trump but a powerful institutional ally of the left. And during presidential campaigns, it doubles as an oppo research and attack arm of the Democratic Party.

"Violence, Hate Crimes Emerge as 2020 Issues" declared the inside headline on the Post story. The Post is not talking about customary crimes of violence in America or D.C. — robbery, rape, assault, battery, murder — a disproportionate share of which are committed by minorities of color.

The crimes that interest the Post are those committed by white males against minorities, which can be used to flesh out the picture of America that preexists in the mind of the left, if not in the real world.

Yet it does appear that issues of race, tribe and identity are becoming an obsession in our politics. This weekend, The New York Times faced charges of anti-Semitism for a cartoon of a blind Trump in a skullcap being led by a seeing-eye dog with the face of "Bibi" Netanyahu, who had a Star of David on his collar.

Recoiling under fire, the Times pulled the cartoon and apologized.

On Monday, Rev. Al Sharpton met with "Mayor Pete" Buttigieg. Subject of discussion: Reparations for slavery, which ended more than a century before the mayor was born.

"All is race," wrote Disraeli in his novel "Tancred." "There is no other truth."

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For more blog postings from me, see  TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH,  POLITICAL CORRECTNESS WATCH, AUSTRALIAN POLITICS, and Paralipomena (Occasionally updated),  a Coral reef compendium and an IQ compendium. (Both updated as news items come in).  GUN WATCH is now mainly put together by Dean Weingarten. I also put up occasional updates on my Personal blog and each day I gather together my most substantial current writings on THE PSYCHOLOGIST.

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