Raise My Taxes, Please!

I'll be the first to admit that 2009 was not a great year, incomewise. But -- on the optimistic assumption that 2010 will be better -- I want to be on record, the day before Tax Day, saying, Raise my taxes, please.

In this, happily, I'm not alone.

NPR ran a nice piece on Morning Edition today (click here for print version; audio is here) on "some of the rich ask for higher taxes." Among the people quoted is Jeffrey Hollander, a co-founder of Seventh Generation eco-products, who says that so-called trickle-down economics is "really about keeping money in the pockets of people who already have too much money."

Hollander and others are members of the Responsible Wealth Project of United for a Fair Economy, which (to quote their website), holds that "concentrated wealth and power undermine the economy, corrupt democracy, deepen the racial divide, and tear communities apart."

Applause!

In fact, that position makes so much sense to me, I have to stop and ask -- why on earth isn't every American a member of United for a Fair Economy?

I blame the "bootstraps" myth -- the idea that any American can, purely by his or her own effort, rise from the deepest poverty to the greatest wealth.

It's a great story, but it's a myth.

In fact, it's the most dangerous myth I know.

No one does it alone. Not only are there innumerable people who propelled Joe Bootstraps on his way (whom he is now conveniently forgetting -- hello, Mom and Dad? Third-grade teacher Mrs. Benton? Boy Scout leader Mr. O'Hanlon? Rabbi Shlomo Ereritz? High-school science teacher Mr. Yee? You get the idea.), there are also innumerable institutions of law and government that made it possible for Joe to succeed.

Would Joe have succeeded without the trust that's embedded in a working economy grounded in the rule of law?

His first customers could be confident that if he were merely a flimflam artist, sooner or later regulators would find him out and he would be prosecuted and at least a portion of their lost funds would be returned.

His first employees could be confident that, were his interview promises to prove false, there was some legal recourse to which they could turn.

His first suppliers could be confident that, should Joe neglect to pay them promptly, they too had legal recourse.

You get the idea.

I try to keep good company, so I'm with Oliver Wendell Holmes Jr. on this: "Taxes are the price we pay for civilization."

I want more civilization, so go ahead, Tax me more.

You Wouldn't Buy a Car Without a Warranty; How About a Hip?

Let's say I'm a car manufacturer, and a prospective customer is asking about what sort of warranty I'll be offering on my new XY7200. Here's my reply:

"The longevity of a vehicle depends on a great many factors beyond my control, including the driver's skill, the types of driving done, and the owner's adherence to break-in time restrictions and the regular maintenance schedule. Because of the multifactorial nature of the survival of a vehicle, no, we really can't offer any kind of warranty."

So... would you buy that spiffy new XY7200?

I didn't think so.

I wouldn't either.

Such a scenario could never play out in the big-ticket world of automobiles, or in the small-ticket world of appliances like toaster, TVs, and kitchen mixers.

But in orthopedic implants? Oh, yeah.

Today's New York Times has an excellent article by Barry Meier on how the "health system bears [the] cost of implants with no warranties."

The million or so artificial hips and knees implanted each year in the United States ... are normally not guaranteed. Instead, the costs of replacing implants that fail early because of design or mechanical problems -- devices that sell for as much as $15,000 each -- are largely paid by Medicare, insurance companies and patients.

Implants can fail for many reasons, but if only a small percentage of them fail prematurely because they are substandard, the costs to taxpayers, policyholders and patients can run into tens of millions of dollars each year, health care experts estimate.

Orthopedic producers may sometimes even profit from the failures because they sell the replacements at full price.

Anyone else see a problem with this picture? [Read the full article for, among other things, the comment by Zimmer Holdings on why they don't guarantee their products, which I only barely parodied above.]

There are serious financial concerns here -- at a time when everyone is arguing about how best to rein in healthcare costs, this seems like a good place to start -- but there are also serious ethical concerns.

The system, as currently constructed, actually provides incentives for building something badly. Why should I care if my products are substandard if I don't have to bear the cost? If, indeed, there is a financial incentive to do so? (Yes, I know, we'd like manufacturers to build good products because it's the right thing to do....)

To add insult to injury, accord to Meier's piece, at least one manufacturer does offer warranties on certain of its knee, hip, and shoulder implants (including a "free of charge replacement" if one fails) ... just in Great Britain, and not in the United States.

Is Pay Garnishment More Immoral Than Debt?

"We are confident we are treating our customers fairly and with integrity," says an HSBC North America spokesman in today's New York Times article (by John Collins Rudolf) about garnishing the pay of consumers who owe the bank for credit-card or other personal loan debt.

The spokesman's definition of "fairly and with integrity" appears to be slightly different from mine.

In the specific case reported, a 45-year-old Virginia maintenance worker took out a $4097 personal loan in 2001 from a subprime lender now owned by HSBC. He fell behind on the payments, and was taken to court. Since he failed to appear ("I just thought they were going to take what I owed," he is quoted as saying), the lender was awarded a judgment of more than $5500 (including lawyers' fees), with debt to accrue at 27.55% until paid in full. By 2003, the bank was garnishing his wages, and continued to do so over the next six years, deducting more than $10,000 from his earnings ... and the end of which he still owed the company nearly $4,000, "a sum," Rudolf notes in the article, "nearly equal to the original loan amount."

"Dale Pittman, a consumer law lawyer in Petersburg, Va., took ... [this] case without charge, and found that all but $134 of his [client's] payments had gone toward interest, fees and court costs. 'It's a perfectly legal result under Virginia law,' Mr. Pittman said."

Does this really sound like treating a customer "fairly and with integrity"? To me, it sounds more like "usury" or even "loan-sharking".

I'm not suggesting that Mr. Pittman's client's debt should have been forgiven as soon as he fell behind. Fiscal responsibility is important; most of us struggle, but manage, to owe no more than we can afford to pay. But it's also important to recognize, and allow for, the power differential in the lender / borrower relationship, and especially to recognize that circumstances can change fast.

In the current Great Recession, there are millions of people falling behind on credit-card bills, mortgage payments, home-equity loans, and other bills, not because of some terrible moral failing on their part, but because it had never occurred to them that they could be out of work for so long, or that their homes' values could have fallen so far. The bank's first step should have been to find out why Mr. Pittman's client had fallen behind on his payments -- did he have an accident that kept him from working for a week or a month? did a child become severely ill? did he underestimate the size of his income-tax refund? did he play the ponies with money that was supposed to have gone to bank payments?

Any of those events could have affected his ability to pay; not all of them are morally questionable.

To add insult to injury for the working poor, a former last resort -- declaring personal bankruptcy -- has become increasingly difficult, and expensive. Rudolf notes that "sweeping changes to federal law in 2005 -- pushed by the banking lobby -- complicated the process and more than doubled the average cost of filing, to more than $2000. Many low-income debtors must save for months before they can afford to go broke."

Despite the tightening, the recession has had its expected effect: "More Americans filed for bankruptcy protection in March than during any month since the federal personal bankruptcy law was tightened in October 2005, ...a result of high unemployment and the housing crash," with federal courts reporting nearly 7000 filings a day, up 35% from February, according to Duff Wilson's article in today's New York Times.

So which is the more immoral: the consumer falling behind through no fault of his own, or the banker garnishing his wages to the tune of 27.55%?

I'm "Brand Me", But My Genes Belong to Someone Else?

It's too early to celebrate -- who knows what will happen on appeal, and I have not doubt that this decision will be appealed -- but US District Court Judge (Southern District of New York) Robert W. Sweet is my hero for the day.

In a 152-page ruling Judge Sweet struck down seven patents currently held by Myriad Genetics for genes associated with a greater risk for breast and ovarian cancer, as reported by John Schwartz and Andrew Pollack in today's New York Times, and by many other news channels. The suit had been filed last May by a group of women with breast cancer, several medical research organizations, the American Civil Liberties Union, and others.

I think that many of us, who are not genetic scientists, find it hard to understand (and more than a little ambiguous morally) that a corporate entity could own genes that come from our own bodies. And that was the crux of the suit.

The patents had been used in the development of a test that looks for mutations in the BRCA 1 and 2 genes. The only way to know whether you have the mutations is to pay up to $3000 for the Myriad Genetics test; Myriad has refused to license the test to other companies. The suit charged that by doing so, Myriad kept prices artificially high and prevented woman from getting a second opinion from another testing company.

Moreover, the suit asserted that the "patenting of human genes, the concept of looking at or comparing human genes, and correlations found in nature between certain genes and an increased risk of breast and/or ovarian cancer violates long established legal principles that prohibit the patenting of laws of nature, products of nature, and abstract ideas." (More background on the case can be found here, in a March 2010 E-Commerce Times article by C. Douglas Brown, and here, in Turna Ray's piece for Pharmacogenomics Reporter) The patenting of genes, the plaintiffs argued, "stifle[s] research that could lead to cures and limit women's options regarding their medical care."

Companies like Myriad have argued that without the potential for significant financial gain that the patents represent, there would be no incentive to invest in potentially life-saving research.

Some legal experts had expected that the case would be dismissed -- after all, as Schwartz and Pollack reported in the Times, "the Supreme Court upheld patents on living organisms in 1980."

But Judge Sweet agreed with the plaintiffs, ruling that the patents had been "improperly granted".

This is hardly the end of the story. As I said above, appeals can be expected. Moreover, Myriad holds 23 patents for its BRCA analysis, so there are still 15 not addressed by this suit.

Note that at present, about one-fifth of all human genes have been patented. Hello?!? Note also that this is a US problem; most other countries do not permit gene patenting.

Honoring the Triangle Shirtwaist Fire victims

Did you know that yesterday was the 99th anniversary of the Triangle Shirtwaist Factory fire? I didn't either, until reminded yesterday by Jezebel.com and the New Yorker, and today by the New York Times. Some of the nearly 150 workers who died in that fire were suffocated by the smoke; others died as they leapt from the ninth floor to the street below; still others were killed when the single, flimsy exterior fire escape broke (there was no audible alarm on the affected floors; doors locked to prevent unauthorized cigarette breaks then prevented many workers from escaping the flames; fire department ladders could reach no higher than the sixth floor).

As labor activist Rose Schneiderman said at the time, "The life of men and women is so cheap and property is so sacred! There are so many of us for one job, it matters little if 140-odd are burned to death."

There are memorial observances every year at the site and around New York. Why? It was a tragedy, of course, but Americans are generally speaking not very good at history, so why does this historical event still resonate?

The fire played a critical role in tougher safety regulations, of course. Since its victims were largely young immigrant women, it also played a key role in the founding of the International Ladies' Garment Workers Union (ILGWU, now a part of UNITE HERE!). And the fire launched the political career of Frances Perkins, the first female cabinet member (Labor, under FDR), a staunch progressive voice for the minimum wage and unemployment insurance.

Maybe we remember the Triangle Shirtwaist Fire so well because those issues are, alas, still with us.

Just a month ago, as reported by LaborNotes and others, 21 Bangladeshi garment workers were killed in a fire because they had been locked in for their own "security". Astonishingly enough, such things still happen, even here in the United States: Only a few years ago that it was revealed that Wal-Mart / Sam's Club in the U. S. were routinely locking overnight workers into the stores, ostensibly to keep robbers out (and to prevent employee theft -- click here for a 2004 New York Times article on the practice). So there's still a lot of work to be done to guarantee people's safety in their workplaces. Since companies obviously cannot be trusted to police themselves on this matter, we need tougher laws and tougher enforcement.

Labor unions have lost ground for years, but stagnating middle-class salaries and rapidly growing economic inequality should tell us how smart that has been for America. I still believe, with Schneiderman, that the single best one-word solution to poverty is: organize. To steal a tagline from LaborNotes, it's time to put "the movement back in the labor movement."

And while Frances Perkins should be praised for her pioneering work on unemployment insurance and the minimum wage, can anyone really say that this work is done? The federal minimum wage, since July 2009, is $7.25 / hour. Multiply that by 40 hours, and figure out how you would get by on $290 a week, or $15,080 for a 52-week year (on that salary, are you going to take a two-week vacation? I didn't think so.).

So a moment of silence for the Triangle Shirtwaist victims. But honor them by changing workers' lives for the better.

Fixing Specific Problems; Fixing General Procedures

Another day, another update. This one from Johnson & Johnson's McNeil Consumer Healthcare unit.

Back in mid-January, I wrote about complaints -- including an FDA warning letter -- about some moldy-smelling bottles of McNeil's over-the-counter medications. McNeil apparently waited nearly two years from receiving its first complaints to recall batches of the products. The problem was eventually traced to "the breakdown of a chemical that is sometimes applied to wood that is used to build wood pallets that transport and store product packaging materials. The health effects of this chemical have not been well studied but no serious events have been documented in the medical literature." (This from a company press release at the time; my full blog post can be found here.)

My concern at the time was about trust, and how easily it can be lost and how hard to regain. Would I ever feel the same way about McNeil's branded products, like Motrin? (I have some back trouble, and trust me, I love my Motrin.) If I can't trust J&J completely, why not just buy a generic? (The answer to that question can be found in this Times story re manufacturing violations at a major generic manufacturer's Indian and New Jersey plants.)

Today's New York Times carries a piece by Natasha Singer (who also reported on the initial problem) in which McNeil seeks to reassure consumers that they have taken the steps necessary to prevent such incidents in the future. In a letter dated 5 February 2010 and posted on the FDA's website, McNeil's president Peter Luther wrote that the company "recognizes the seriousness of this situation" and outlined a "corrective action plan" involving "enhancements to the quality system," "organizational changes", and "senior management oversight".

It's not just the specific problems with chemicals leaching from pallets to products that are being addressed, the McNeil letter asserted, but company-wide complaint review processes and complaint handling processes are being changed. That's good news, as the next problem -- and there will inevitably be a next one -- will be something quite different.

But I still don't feel quite the same way about McNeil and J&J as I did before.

Winner Declared!

Yesterday I was still pondering who best "deserved" the prize in the Lehman fiasco. Today, there's no question.

The winner is ... (envelope please) ... former CEO Richard S. Fuld Jr.

According to a published reports in today's New York Post, Fuld is apparently "feeling vindicated" by the bank examiner's report on Lehman's fall. This despite being called "at least grossly negligent" (emphasis added) in the 2200-page report.

The Post's Mark DeCambre writes, "Fuld privately believes that the report by examiner Anton Valukas provides proof that he did nothing illegal as he steered Lehman through a financial mess that ultimately led the firm to file the largest bankruptcy in US history..."

There may indeed not be enough evidence for criminal charges, although I suspect a civil suit would be harder to beat. Still, Mr. Fuld appears to be, um, ethically challenged. He denied having any knowledge of the highly-questionable Repo 105 accounting tricks (and yet was able to certify with his signature the financial statements), and he did admit to telling his underlings to reduce the firm's debt levels. Apparently, he didn't care how they went about doing so.

Sorry, Mr. Fuld: the buck stops at your desk. Congratulations on your "prize".