October 28, 2021

The Media Equation: War on Leaks Is Pitting Journalist vs. Journalist

That was Daniel Ellsberg in 1969, and for his efforts, which became the publication of the Pentagon Papers, he was investigated and indicted, but eventually he was hailed as a hero and enshrined in the journalistic canon.

Today that role has been taken up by Pfc. Bradley E. Manning (who now wants to be known as Chelsea) and Edward J. Snowden. Their chances of being widely declared heroes aren’t nearly as great: Private Manning was sentenced to 35 years in prison last week, and Mr. Snowden, who revealed documents showing the extent of surveillance by the National Security Agency, is still hiding in Russia beyond the reach of the United States government.

Perhaps they got what’s coming to them. They knew, or should have known, the risks of revealing information entrusted to them, and decided to proceed. Like almost all whistle-blowers, they are difficult people with complicated motives.

So, too, are the journalists who aid them. It’s not surprising that Julian Assange, the founder of WikiLeaks, who brokered the publishing of Private Manning’s documents, and Glenn Greenwald, the columnist for The Guardian who has led the Snowden revelations, have also come under intense criticism.

What is odd is that many pointing the finger are journalists. When Mr. Greenwald was on “Meet the Press” after the first round of N.S.A. articles, the host, David Gregory, seemingly switched the show to “Meet the Prosecutor.” He asked, “To the extent that you have aided and abetted Snowden, even in his current movements, why shouldn’t you, Mr. Greenwald, be charged with a crime?”

Jeffrey Toobin, who works for both CNN and The New Yorker, called Mr. Snowden “a grandiose narcissist who belongs in prison.” This week, he called David Miranda, Mr. Greenwald’s partner who was detained by British authorities for nine hours under antiterror laws, the equivalent of a “drug mule.”

Mr. Assange has also come under withering criticism, including in the pages of The New York Times, which accused him, among other things, of not smelling very nice as we cooperated with WikiLeaks in publishing reams of articles in July 2010 based on the revelations from Private Manning.

This week, Michael Grunwald, a senior national correspondent at Time, wrote on Twitter: “I can’t wait to write a defense of the drone strike that takes out Julian Assange.” (He later apologized, perhaps reasoning that salivating over the killing of anyone was in poor taste.)

What have Mr. Assange and Mr. Greenwald done to inspire such rancor from other journalists? Because of the leaks and the stories they generated, we have learned that in the name of tracking terrorists, the N.S.A. has been logging phone calls and e-mails for years, recorded the metadata of correspondence between Americans, and in some instances, dived right into the content of e-mails. The WikiLeaks documents revealed that the United States turned a blind eye on the use of torture by our Iraqi allies, and that an airstrike was ordered to cover up the execution of civilians. WikiLeaks also published a video showing a United States Army helicopter opening fire on a group of civilians, including two Reuters journalists.

In the instance of the stories based on the purloined confidential documents in the Manning and Snowden leaks, we learned what our country has been doing in our name, whether it is in war zones or in digital realms.

Mr. Toobin agrees that an important debate has been joined, but says no story, no matter how big, justifies journalists’ abetting illegal acts, saying, “Journalists are not above the law.”

“The Jane Mayers, Sy Hershes and Walter Pincuses have all done superb work for decades without the rampant lawlessness that was behind these stories,” he said, adding later, “I’ve never heard any of those journalists endorsing the wholesale theft of thousands of classified government records.”

E-mail:carr@nytimes.com;

Twitter: @carr2n

Article source: http://www.nytimes.com/2013/08/26/business/media/war-on-leaks-is-pitting-journalist-vs-journalist.html?partner=rss&emc=rss

Fair Game: Two Senators Try to Slam the Door on Bank Bailouts

The legislation, called the Terminating Bailouts for Taxpayer Fairness Act, emerged last Wednesday; its co-sponsors are Sherrod Brown, an Ohio Democrat, and David Vitter, a Louisiana Republican. It is a smart, simple and tough piece of work that would protect taxpayers from costly rescues in the future.

This means that the bill will come under fierce attack from the big banks that almost wrecked our economy and stand to lose the most if it becomes law.

For starters, the bill would create an entirely new, transparent and ungameable set of capital rules for the nation’s banks — in other words, a meaningful rainy-day fund. Enormous institutions, like JPMorgan Chase and Citibank, would have to hold common stockholder equity of at least 15 percent of their consolidated assets to protect against large losses. That’s almost double the 8 percent of risk-weighted assets required under the capital rules established by Basel III, the latest version of the byzantine international system created by regulators and central bankers.

This change, by itself, would eliminate a raft of problems posed by the risk-weighted Basel approach. Under those rules, banks must hold lesser or greater amounts of capital against assets, depending on the supposed risks they pose. For example, holdings of United States government securities are considered low-risk and require no capital to be held against them. Securities or loans that are riskier require more of a buffer against loss.

There are many problems with this arrangement. First, the risk assessments on various types of assets rely heavily on ratings agency grades. In the housing boom, toxic mortgage securities carrying triple-A ratings were considered low-risk, too. As such, they didn’t require hefty capital set-asides.

We all know how disastrous that was. So chalk up this plus for Brown-Vitter: Eliminating risk-weights as part of a capital assessment means less reliance on unreliable ratings.

Risk-weighted asset calculations also give bankers a lot of freedom to understate the perils in their institutions’ holdings.

The bill prevents another type of fudging by requiring off-balance-sheet assets and liabilities and derivatives positions to be included in a bank’s consolidated assets. In addition, the capital cushion that a bank would hold under the bill is liquid and can absorb losses easily. This capital measure would be more transparent than the current system and could not be manipulated.

In a truly courageous move, Brown-Vitter would require United States financial regulators to abandon Basel III. An earlier version of Basel did nothing to prevent the financial crisis and encouraged banks to binge on leverage.

Taxpayers would not be the only beneficiaries in the Brown-Vitter bill. Community banks, which weren’t responsible for bringing the nation’s economy to the brink, would be operating on a more level playing field with the jumbo banks. These large institutions have lower financing costs than community banks because the market understands that regulators will never let them fail.

“This bill will inject more market discipline on the financial services industry,” Mr. Brown said in an interview on Thursday. “The megabanks have a choice to make: they can increase their capital or bring down their size.”

Brown-Vitter has other attributes as well. It would bar bank regulators from giving nondepository institutions access to Federal Reserve lending programs. And it would make it harder for bank holding companies to move assets or liabilities from nonbanking affiliates, like derivatives bets held at a brokerage unit, to the protective umbrella of the parent company that might be rescued by taxpayers in a financial disaster.

Thomas M. Hoenig, the vice chairman of the Federal Deposit Insurance Corporation, supports the bill. “It’s finally taking the discussion in the right direction toward improving the stability of banks and the financial system more broadly,” Mr. Hoenig said in an interview on Friday. Brown-Vitter would also put the United States in a leadership position on financial soundness, he added, which other countries could emulate.

Article source: http://www.nytimes.com/2013/04/28/business/two-senators-try-to-slam-the-door-on-bank-bailouts.html?partner=rss&emc=rss

Wealth Matters: Modern Safeguards for a Family-Owned Business

There are a host of tried and true methods to get money out of the company short of selling it. The founders could take cash out or have the company take on debt to pay them out. They could bring in a minority partner to make an investment. But all of these options pose risks to the company and the family.

Samuel P. Phelan and his two brothers considered these options, but they went for a more complex structure that allows them to have a say in the company and give their children control while leaving day-to-day operations in the hands of professional managers.

They had taken over Taconic Farms, a breeder of genetically modified rats and mice for laboratory testing, from their mother, who had run the company since their father died in 1955. The company, based in Hudson, N.Y., has 800 employees in three countries and $125 million in annual sales. The United States government and major pharmaceutical companies are clients. Still, no successor among their seven children had emerged.

Over the last decade, the brothers, who are all in their 60s and 70s, had been thinking about how to keep the company in their family.

“There were members of the family involved in the business, but it became pretty evident that they weren’t going to become the C.E.O. of the company,” said Mr. Phelan, who is the executive board chairman. “The other children were either too young and didn’t know their careers or had started other careers.”

The Phelan brothers faced a situation common to anyone who has built a business with family involvement. If they sell outright, they risk that the proceeds could have unforeseen effects on their children and grandchildren. If they try to keep the company in the family, they run the risk of the company failing, or worse, tearing the family apart.

The brothers reached a conclusion that may not be for every company or family. They decided to create a holding company, Phelan Family Enterprises, to own and manage the three brothers’ shares in the family business and to put their children and the children’s spouses in charge of the holding company. They then brought in professional managers to run Taconic Farms.

There are plenty of financial structures that can be used to protect a family business from estate taxes. But those strategies often fail to take into account the biggest issue: internal family dynamics and how those conflict with the decisions a company needs to make.

“Everyone talks the talk, but few people set up multigenerational structures rather than handing off a company from one generation to the next,” said Frederic Marx, partner at Hemenway Barnes, a Boston law firm and an adviser to the Phelan family. The American model of a family owning a single business “comes at this,” he said, “by looking at the family business and saying, ‘Let’s see what happens when you die.’ ”

Mr. Marx said he considered what the Phelans did more of a European model of creating a group that manages the original company but also invests in other ideas that family members have. With this model, he said, the founder of the company could retain control of the holding company while giving children and grandchildren the capital to start other businesses — or do something completely different.

Getting the structure right took nearly a decade of thinking, Mr. Phelan said. When he and his brothers realized that their children would be overseeing the company instead of running it, they wanted to make sure the children knew what this would entail.

“We wanted to teach governance as much as it could be taught but also to get that sense of the company instilled into the next generation,” Mr. Phelan said. “It wasn’t hard to instill that pride of ownership. We had to come to grips with, ‘Is it worth it?’ ”

Article source: http://www.nytimes.com/2013/02/16/your-money/modern-safeguards-for-a-family-owned-business.html?partner=rss&emc=rss

Japan Airlines Says 787 Jet Leaked Fuel During Safety Test

An open valve on the aircraft caused fuel to leak on Sunday from a nozzle on the left wing used to remove fuel, a company spokeswoman said. The jet is out of service after spilling about 40 gallons of fuel onto the airport taxiway in Boston because of a separate valve-related problem.

In Boston, a different valve on the plane opened, causing fuel to flow from the center tank to the left main tank. When that tank filled up, it overflowed into a surge tank and came out through a vent. The spill happened on Tuesday as the plane was taxiing for takeoff on a flight to Tokyo. It made the flight about four hours later.

The causes of both incidents are unknown, the JAL spokeswoman added. There is no timetable for the plane to return to service.

“We are aware of the event and are working with our customer,” a Boeing spokesman, Marc Birtel, said of the leak in Tokyo.

On Friday, the United States government ordered a broad review of the Boeing 787, citing concern over a battery that caught fire last week, also on a JAL plane in Boston, and other problems. The government and Boeing insisted the passenger jet remained safe to fly.

The 787 represents the boldest bet Boeing has made on a plane in more than a decade. Because much of its financial performance is riding on the 787, Boeing is trying to double production to 10 jets a month this year to fulfill nearly 800 orders.

Article source: http://www.nytimes.com/2013/01/14/business/global/japan-airlines-says-787-jet-leaked-fuel-during-safety-test.html?partner=rss&emc=rss

DealBook: A.I.A. to Pay $1.7 Billion for ING’s Malaysia Business

HONG KONG–A.I.A. Group, the Asian insurance giant partly owned by American International Group, said on Thursday it would pay 1.34 billion euros to acquire the Malaysian insurance business of the Dutch insurer ING.

A.I.A., listed in Hong Kong, said the $1.73 billion deal will catapult it to the No. 1 position in Malaysia’s lucrative life insurance market, up from No. 4 previously, with the addition of 1.6 million new customers and 9,200 new agents to its network in the Southeast Asian nation.

For ING, the transaction marks the first successful deal towards a plan it announced last year to sell off assets in Asia as part of a broader corporate restructuring. Analysts have estimated those assets could command between $6 billion and $8 billion in total, and ING’s operations in Malaysia have been seen as one of its more attractive businesses in the region.

‘‘Today’s announcement is the first major step in the divestment of our Asian insurance and investment management businesses and shows that ING continues to make steady progress in the restructuring of our company,’’ ING’s chief executive, Jan Hommen, said Thursday in a statement.

The Dutch insurer said its expects to book a net gain of 780 million euros, or $1 billion, from the sale.

A.I.A. has been seeking to build its footprint in Asia and grow profitability even as A.I.G. has been selling down its stake in the Asian unit, which was spun out of the New York-based company via a Hong Kong listing two years ago as part of A.I.G.’s efforts to repay its 2008 bailout by the United States government.

A.I.G. has since further sold down its stake in the Asian unit in order to raise funds to repay the government. It retains a 13.7 percent stake, following a sale last month of A.I.A. shares worth $2 billion. At the same time, the U.S. Treasury has been selling down its shares in A.I.G., and last month raised $20.7 billion by reducing its stake in the insurer to 15.9 percent from 53.4 percent.

A.I.A. said the deal for ING’s Malaysian business would be funded through existing cash and external debt financing, and completion is targeted for the first quarter of 2013, subject to regulatory approvals in Malaysia and the Netherlands.

Article source: http://dealbook.nytimes.com/2012/10/11/a-i-a-to-pay-1-7-billion-for-ings-malaysia-business/?partner=rss&emc=rss

DealBook: A.I.G. Plans to Raise $2 Billion for Share Buyback

The headquarters of A.I.A. Group, American International Group's Asian insurance unit, in Hong Kong.Jerome Favre/Bloomberg NewsThe headquarters of A.I.A. Group, American International Group’s Asian insurance unit, in Hong Kong.

The insurance giant American International Group said on Thursday that it planned to sell a $2 billion stake in its Asian insurance unit as part of a plan to repurchase $5 billion worth of its own stock from the United States government.

The move is the latest effort by A.I.G. to shed assets and repay the government after the firm received a $182 billion bailout in 2008.

A.I.G. has been progressively selling its stake in its Asian insurance business, the A.I.A. Group, since listing the company on the Hong Kong stock exchange in an initial public offering that raised $17.8 billion.

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Under the terms of the deal announced, A.I.G. will offer investors 600 million shares in A.I.A. at 25.75 Hong Kong dollars to 26.75 Hong Kong dollars, according to the term sheet obtained by DealBook.

On the low end, the price represents a 2.1 percent discount to A.I.A.’s closing price in Hong Kong on Thursday; on the high end, it represents a 1.7 percent premium. The deal will leave A.I.G. with a stake of about 13 percent stake in A.I.A.

Robert H. Benmosche, chief of the American International Group, at a House panel in 2010 on the government's $182 billion bailout.Yuri Gripas/ReutersRobert H. Benmosche, chief of the American International Group, at a House panel in 2010 on the government’s $182 billion bailout.

Earlier this year, A.I.G. sold a $6 billion stake in A.I.A., which is the region’s third-largest insurer.

A.I.G. said on Thursday that it planned to buy as much as $5 billion of its own stock, the third repurchase of its shares this year. A.I.G. added that it would use the proceeds of the A.I.A. share sale, in part, to repurchase its shares.

The Treasury Department has been selling off its stake in A.I.G. Last month, officials said they would sell about $5 billion worth of A.I.G. stock to reduce the government’s holding to around 53 percent, from 92 percent when the firm was first bailed out.

The government’s links with A.I.G. now lie primarily with the Treasury Department’s shares in the insurer. The holdings could prove profitable. The stock is currently trading at almost $35, ahead of the government’s break-even price of $29.

Since receiving a government bailout, A.I.G. has recovered by reinventing itself as a smaller company that largely shies away from the types of complex investments that nearly led to its downfall.

Goldman Sachs and Deutsche Bank are managing the $2 billion share sale for A.I.G.

Article source: http://dealbook.nytimes.com/2012/09/06/a-i-g-to-raise-2-billion-for-share-buyback/?partner=rss&emc=rss

Economix: Debt Crises, Real and Fake

There are real debt crises — Greece is going through one — and there are fake ones, created by politicians playing chicken with the nation’s credit.

I expressed that sentiment in a column last week that ran in the Asian editions of The International Herald Tribune on Friday. The new Greek rescue caused me to write a different column for The Times, and the I.H.T. column never made it onto the Web. It follows.

FLOYD NORRIS

FLOYD NORRIS

Notions on high and low finance.

In the world of government bond markets, never have the haves been treated so much better than the have-nots. The haves can borrow for virtually nothing. The have-nots, if they can borrow at all, must pay exorbitant rates.

Yet politicians, even in the countries that investors seem to trust completely, talk of impending budget disaster if spending is not cut immediately.

This summer, as the markets offered a ‘‘no confidence’’ vote on Europe’s effort to rescue Greece — and grew notably more worried about Italy and Spain — they appeared to be highly confident about the debt of the United States government.

The yield on benchmark 10-year Treasury securities fell back below 3 percent this month, even as the Washington rhetoric about the debt ceiling heated up.

That was a sign that investors were not alarmed about a potential United States default, whether in the next few weeks or the next 10 years. If they were, rates would be soaring.

For much of the spring and summer, the proportion of people who believed that Congress would raise the debt ceiling seemed to vary based on the distance from Washington. The closer to Capitol Hill, the more doubt there was that rationality would prevail.

In politics, it appears, familiarity breeds contempt.

If rationality does prevail, the debt ceiling will be raised. For that matter, there is no good reason to have a debt ceiling other than to give politicians a chance to grandstand. The important decisions for Congress and the White House concern spending and taxing. Borrowing, or paying back debt as happened for a couple of years before the Bush tax cuts, is a result of the interplay of those decisions and the state of the economy.

Trying to control the result by putting limits on borrowing is a bit like trying to balance a household budget by waiting until the money has been spent and then deciding not to pay the bills.

To analyze the fiscal problems confronting the United States now, it is necessary not to confuse short-term and long-term problems. And it is crucial to pay attention to the state of the economy.

A weak economy will inevitably worsen the fiscal balance. Tax receipts fall because profits and incomes decline. Government spending increases on automatic stabilizers, like unemployment insurance payments.

To the extent high deficits are a result of a weak economy, a decision to react by cutting spending or raising taxes can lead to a vicious cycle. The solution, if possible, is to revive the economy even if that makes deficits temporarily worse.

One of the most important failures to analyze what was happening in the economy came in the late 1990s, when the United States government, to the surprise of almost everyone, began to run budget surpluses. Some of that was a result of tax increases and spending restraint, but a lot of it was caused by a completely unexpected and misunderstood surge in tax receipts.

That surge was the result of the bull market in stocks, and of the peculiar nature of it. Individual income tax payments soared both because of high capital gains and because profits from stock options are taxed at ordinary income rates, not the reduced rate charged on capital gains.

Most analyses ignored that. The conventional assumption was that the taxes on option profits were balanced by reduced taxes paid by companies. That would have been accurate if the companies were paying taxes and could use the additional deductions. But many of those companies — the heroes of the dot-com bubble — paid no taxes because they had no profits. So the extra deductions did them no good.

A proper analysis would have seen that the inevitable end of the bull market would reduce tax receipts, and a slowdown would increase government spending. In that sense, it is wrong to blame the Bush tax cuts for ending the surpluses of the Clinton years. They would have ended anyway. The deep tax cuts and the wars in Afghanistan and Iraq made the deficits that much larger.

There is a risk that many analysts now are making the opposite mistake. Deficits have skyrocketed in recent years for reasons that are clearly temporary, or that will be temporary if the economy recovers.
In some of the debate, the short-term problems are mixed up with longer-term demographic concerns caused by the aging and retirement of the baby boomers and the rising costs of Medicare, the health insurance program for Americans over the age of 65.

It is worth looking at what has happened to financial markets around the world since the financial crisis exploded. A mild slowdown turned into something much worse after the collapse of Bear Stearns in March 2008 showed the vulnerability of the financial system. Stock markets plunged around the world, credit dried up for many borrowers and there was a flight to safety. Central banks intervened with unprecedented measures and banks were bailed out. Deficits soared.

Now, more than two years later, the American stock market is about where it was in February 2008, just before the crisis hit. That may not sound impressive, but markets in nearly every other country are down sharply. The dollar has lost ground against the Swiss franc and the yen, but is up versus the euro and the pound.

The yields on government bonds — the price investors demand to lend money to the government — are down in countries with solid foundations, including the United States. They have soared in markets where default seems a real possibility, and are up in some European countries where investors are getting more nervous, including Italy and Spain.

That is a vote of confidence in Uncle Sam, at least relative to the alternatives.

Markets can be wrong, of course. But Europe is in far worse shape. Greece is insolvent. It must have its debt reduced, but a default could cause bank failures and substantial losses for the European Central Bank. Europe’s battles reflect the fact that there are no good alternatives. There is a crisis in Europe, where lenders now fear to tread. Would there be one in the United States if the politicians produced an unnecessary default? Let’s hope we will not find out.

Article source: http://feeds.nytimes.com/click.phdo?i=3c2d03e44c894fdd0b088fea8ed232e1

Bits: Google Confirms F.T.C. Antitrust Inquiry

Correction Appended

Google confirmed Friday that the Federal Trade Commission has opened an antitrust investigation into its core search and advertising business. The inquiry has the potential to turn into the biggest showdown between the United States government and a major technology company since the Microsoft antitrust trial that began in the late 1990s.

In a regulatory filing, Google said that a day earlier it had “received a subpoena and a notice of civil investigative demand” from the commission. Google said that the agency’s investigation concerned its “business practices, including search and advertising.” In the brief filing, the company added: “Google is cooperating with the F.T.C. on this investigation.”

The investigation will not necessarily lead to accusations of misconduct against the company. If it does, it could become the most serious antitrust challenge for Google to date.

In a blog post, Google said it was unsure about the precise focus of the commission’s concerns. But it began outlining its defense against accusations, made by some of its rivals, that it has manipulated its search results to favor its own services at the expense of others.

“At Google, we’ve always focused on putting the user first,” wrote Amit Singhal, a Google fellow. “No matter what you’re looking for — buying a movie ticket, finding the best burger nearby, or watching a royal wedding — we want to get you the information you want as quickly as possible. Sometimes the best result is a link to another Web site. Other times it’s a news article, sports score, stock quote, a video or a map.”

Mr. Singhal also sought to play down the dominant role that Google has in determining where users go on the Internet. “Search helps you go anywhere and discover anything, on an open Internet,” he wrote. “Using Google is a choice — and there are lots of other choices available to you for getting information: other general-interest search engines, specialized search engines, direct navigation to Web sites, mobile applications, social networks, and more.”

Google’s business practices and its dominance over the Internet have come under scrutiny from the Justice Department and the Federal Trade Commission a number of times in recent years. But the prior cases focused either on acquisitions or on portions of Google’s business that were not critical to its survival, like its plan to create a giant digital library.

The current investigation focuses on the heart of Google’s business, the search and advertising systems that account for nearly all of the company’s $29 billion in annual revenue.

“This is major league,” said Ted Henneberry, former trial lawyer at the Justice Department and a partner at Orrick Herrington Sutcliffe. Google is facing a similar challenge in Europe, where the European Commission opened an investigation into Google’s business late last year. “Given what’s happened in Europe, they must have known this was inevitable,” Mr. Henneberry said.

In a statement, FairSearch.org, an organization that represents several of Google’s critics, including Microsoft and the Web sites Expedia, Travelocity and Kayak, said that Google’s “anticompetitive practices include scraping and using other companies’ content without their permission, deceptive display of search results, manipulation of search results to favor Google’s products, and the acquisition of competitive threats to Google’s dominance. Google’s practices are deserving of full-scale investigations by U.S. antitrust authorities.”


Correction: June 24, 2011

An earlier version of this post misspelled the name of Ted Henneberry.

Article source: http://feeds.nytimes.com/click.phdo?i=8be8f02e9b1695a58c39ed0d5f97a6c9

Economix: The Debt and Redistribution

Today's Economist

Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

In the nation’s latest fiscal mood swing, the mainstream consensus has swung from “we must extend the Bush tax cuts” (in November and December 2010) toward “we must immediately cut the budget deficit.” The prevailing assumption, increasingly heard from both left and right, is that we already have far too much government debt — and any further significant increase is likely to ruin us all.

This way of framing the debate is misleading — and at odds with the fiscal history of the United States. It masks the deeper and important issues here, which are more about distribution, in particular how much relatively wealthy Americans are willing to transfer to relatively poor Americans.

To think about the current size of our debt, start at the beginning of the American republic. (For a very short history of United States government debt, listen to my conversation last weekend with Guy Raz of National Public Radio; we cover more than 200 years in about three minutes. For more detail, look up the annual debt numbers at Treasury Direct).

On the first day of 1791, the recently founded United States Treasury had nearly $75.5 million in outstanding debt. This was roughly around 40 percent of gross domestic product, a large amount of debt relative to the size of the economy — but not out of proportion to what we have become accustomed to in recent decades.

However, relative to federal revenues, the debt was enormous — about 20 times the amount that the government was then capable of taking in. In contrast, the total Treasury debt outstanding since 1950 has fluctuated between 30 and 90 percent of G.D.P., with the debt-revenue ratio never worse than 5 to 1 — and in recent decades between 2 to 1 and 3 to 1.

The debt-revenue ratio matters, as it is relevant to whether the country can readily service the debt. Very few countries default because they can’t afford to pay their debts, either to their own citizens or to foreigners. Defaults occur when the political process in a country determines that, for whatever reason, the government cannot raise sufficient revenue.

At the beginning of the American republic, this was the central fiscal fight – primarily whether Alexander Hamilton would succeed in imposing a tariff on imports as a way for the federal government to raise revenue and thus, among other things, create a way to “fund” the debt (meaning cover the interest and, over time, pay down the principal). The tariff revenue fight was nasty and drawn out, pitting North against South in a way that would generate resentment and friction throughout the 19th century.

After losing repeated votes in the House of Representatives, Hamilton eventually prevailed – part of a larger deal with Thomas Jefferson and James Madison that was very much about who would pay what amount to create and sustain the new federal government. That debate was also focused on the kind of federal role the political elite wanted to achieve.

Once this political deal was done, United States government obligations moved quickly from widely reviled status to being perceived as relatively safe. Fiscal mood swings go both ways.

The main difference between the debate then and now is with regard to spending. In the early 1790s — and again after the Civil War, World War I and World War II — the spending surge had already taken place and the issue was how to move the government into surplus and bring down the debt.

Previous fiscal debates in the United States have therefore very much been about the distribution of the tax burden within a pro-growth system, and this again needs to be atop our political agenda – that was one reason I opposed extending the Bush-era tax cuts. In addition to this traditional issue, we are now confronting more directly than ever the question of redistribution that takes place through government spending.

In “Growing Public: Social Spending and Economic Growth Since the 18th Century” (Cambridge University Press, 2004), Peter Lindert traced changes in attitudes and actions toward redistribution in the United States and other countries. The pendulum of opinion has swung many times, and the United States has followed a somewhat different path than other relatively rich countries.

Now we find ourselves again about to debate the fundamental Hamiltonian questions: At the federal level, who will pay how much, to whom and for what, exactly?

Most of our government spending, now as always, goes to wars and transfers to relatively poor people and to older people. The military spending will come down — if we can end the wars (as we did in the past). The social transfers were constructed in a more open-ended fashion — and our long-term budget forecasts account for this form of future spending in a more transparent and more honest way than we do for the probability of future wars or financial crises.

The real budget debate is not about a few billion here or there – for example, in the context of when the government’s debt ceiling will be raised. And it is not particularly about the last decade’s jump in government debt level. Although this has grabbed the headlines, it is something that we can grow out of (unless the political elite decides to keep cutting taxes).

The real issue is how much relatively rich people are willing to pay, and on what basis, in the form of transfers to relatively poor people — and how rising health-care costs should affect those transfers.

The consensus for Hamilton, Jefferson, Madison and their contemporaries was simple: No significant social spending was administered by the federal government. Professor Lindert estimates that social spending (including on “poor relief” and public education) in the United States even by 1850 was less than five-tenths of 1 percent of G.D.P.

We’ve come a long way since 1792, but the question is how far, exactly. What we should do is figure out the transfers we want to make and then agree on how to pay for them. But are we now willing to debate the real issues: taxes, health care costs and what kind of redistribution we think is fair and sustainable?

Article source: http://feeds.nytimes.com/click.phdo?i=992f5897ea1f31456a489f3c2e6eb1b9

After Japan Crisis, New Urgency for Radiation Drugs

But the two men — who were injured in a nuclear fuel accident in Japan in 1999, not during the current crisis — did not die right away. Drugs and procedures unavailable when the atomic age began kept Mr. Ouchi alive for 82 days, and Mr. Shinohara for about seven months.

As radiation spreads in Japan from crippled nuclear reactors, with workers at the Fukushima Daiichi nuclear plant potentially exposed to extremely hazardous levels, experts say that progress has been made in developing treatments for radiation poisoning. But there is still much work to do.

The crisis has put a spotlight on some small biotechnology companies developing drugs to treat people exposed to radiation. Some say they are accelerating their efforts in light of the problems in Japan.

Most of the companies are working under contracts from the United States government, aimed at treating people after a military or terrorist attack involving a nuclear or radioactive weapon. Such drugs would also be of use in a nuclear power plant accident, particularly for the nuclear plant workers, who might be exposed to the highest doses.

“There would definitely be a zone around ground zero where you could save a lot of people with these drugs,” said Mark H. Whitnall, program advisor for radiation countermeasures at the Armed Forces Radiobiology Research Institute in Bethesda, Md.

He said the drugs under development would allow people to survive doses 20 to 40 percent higher than what is now considered lethal. “We’d like to do a lot better,” he said.

The Japanese crisis has caused upticks in the shares of some of the companies focusing on this research, like Cleveland Biolabs. Some 5.6 million shares of Aeolus Pharmaceuticals changed hands on a single day after the crisis began, over 1,000 times the usual trading volume.

“It was crazy, just crazy,” said John McManus, chief executive of the company, based in Mission Viejo, Calif. In February, it received a federal contract worth up to $118 million to help it develop a drug to protect the lungs from radiation damage.

Several of the companies say they want to make their drugs available for use in Japan, but the government there has not ordered any. The drugs in question have not been approved by the Food and Drug Administration, and it is unclear whether anyone in Japan, even workers at the Fukushima plant, have been exposed to enough radiation to warrant such treatments.

Most of the drugs in development are two to five years away from possible regulatory approval, federal officials say, and even once approved there would still be some slight uncertainty about how well they would work in people. Because it would be unethical to expose people to high levels of radiation in a clinical trial, the F.D.A. allows approval of this type of drug if it proves effective in two species of animals and is shown to be safe in people at doses corresponding to those used in the animals.

Getting federal support for the research is one thing. It might be harder to get the government to buy large quantities to be stockpiled for use in an emergency.

Hollis-Eden Pharmaceuticals provides a cautionary tale. It was developing a steroidlike compound that was championed by Defense Department scientists, but in 2007, after the company spent $85 million on development, the Department of Health and Human Services decided not to buy the drug, saying it did not meet technical requirements.

Hollis-Eden’s stock price collapsed and has never recovered. The company dropped the drug and changed its name to Harbor BioSciences.

Some federal officials and experts say that Health and Human Services decided it needed drugs that could be effective even if given 24 hours after exposure, reasoning that after a terrorist attack it would be hard to get the drug to people immediately. The Hollis-Eden drug did not meet that requirement.

The department plans a big purchase, but not of an experimental drug developed by a tiny company. Rather, it is looking to buy hundreds of millions of dollars worth of Amgen’s Neupogen or a similar drug, including generic versions of Neupogen that have been approved in Europe, according to Robin Robinson, director of the department’s Biomedical Advanced Research and Development Authority.

Neupogen helps the body build infection-fighting white blood cells, which can be depleted by radiation. The drug is approved to help prevent infections in cancer patients undergoing chemotherapy, but the F.D.A. has issued an “emergency use authorization” that would allow the drug to be used to treat radiation exposure.

Biodefense work has largely fallen to small biotechnology companies because they need the money, especially at a time when investors are averse to risk. Federal grants can help defray the costs of developing a drug for commercial uses. In the case of radiation treatments, the commercial use would mainly be to protect cancer patients from the side effects of radiation therapy.

“It’s significant funding for a biotech company like ours,” said Ram Mandalam, chief executive of Cellerant Therapeutics, a private company that won a federal contract worth up to $153 million over five years to develop a drug using stem cells to help bolster the immune system after radiation exposure.

Radiation can have various health effects, depending on the dose and form. For nuclear power plant accidents, the major exposure for the public would come from radioactive isotopes, and there already are some approved drugs for these that are in the federal stockpile.

Potassium iodide can help prevent thyroid cancer that can be caused by iodine-131, which has been detected in some milk, produce and tap water in Japan. Elevated levels of radioactive iodine have also been detected in milk in Washington State and California but the levels are still far too low to pose a health threat, the Environmental Protection Agency said on Wednesday. It has stepped up monitoring of radiation levels.

Exposure to cesium-137 can be treated with Prussian blue, a pharmaceutical version of an industrial dye, while plutonium exposure can be treated with DTPA. Both drugs bind to the isotopes and help the body to excrete them.

The drugs being developed by the biotech companies would probably not reduce the long-term risk of cancer after radiation exposure. They are aimed more at treating what is called acute radiation syndrome.

Death from this is often caused by bone marrow failure, which depletes the body of white blood cells and platelets, which control excess bleeding. The gastrointestinal tract and other organs can also be heavily damaged.

Progress has been fastest in reconstituting the immune system, using Neupogen, bone marrow transplants or other treatments. The two workers in Japan overcame bone marrow failure, only to die later from failure of several other organs.

But bone marrow transplants cannot be done on a mass scale, and even Neupogen is not ideal if there are thousands of people exposed after an attack because it requires refrigeration and medical care. So the government is searching for alternatives.

Cleveland Biolabs, which despite its name is based in Buffalo, is developing a drug derived from a bacterial protein. It fools the body into believing there has been a “massive salmonella infection,” said Andrei Gudkov, chief scientist. The body’s response is to produce substances, including the protein in Neupogen, that help restore the immune system and gastrointestinal tract.

Dr. Gudkov said the drug was at least a year away from approval.

Onconova Therapeutics, a private company in Newtown, Pa., has a drug called Ex-Rad that facilitates repair of DNA damaged by radiation and helps prevent cell death.

Osiris Therapeutics has a $224 million contract from the Defense Department to develop a therapy using stem cells to help repair gastrointestinal injuries. Of that, $200 million would be possible purchases of the drug, if it is approved by the F.D.A.

Safety is an obstacle, especially if a drug is to be given to healthy people in advance of possible exposure. Side effects could also slow down rescue or cleanup workers entering a contaminated area.

“You do not want to vomit in a hazmat suit,” said John E. Moulder, a professor of radiation oncology at the Medical College of Wisconsin. “You don’t really want to have diarrhea. You want to get in there, get the job done and get out.”

Assessing overall progress, he said, “I think we have moved to show that a radiological counterterrorism program is medically possible.” But he added: “Are we ready to go if it’s a large number of people? No.”

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