Tuesday, January 25, 2005

BW: More bitter pills for Big Pharma

More Bitter Pills For Big Pharma
-- Patents are expiring on blockbuster drugs, and there's not much in the pipelines
-- Executives fear that Washington will get tough in the wake of the Vioxx debacle

Last year, Merck & Co. made pharmaceutical history as the company that suffered the greatest agony due to a pain remedy. In September, Merck withdrew Vioxx, its $2.5 billion pain medication, after a study confirmed fears that the drug raised the risk of heart attacks.

Within weeks, Merck had plenty of company: A study linked Pfizer Inc.'s (PFE ) Celebrex to heart problems. Eli Lilly & Co. (LLY ) warned of potential liver problems with Strattera, a drug for attention-deficit hyperactivity disorder. AstraZeneca PLC (AZN ) disclosed that Iressa, a lung cancer treatment, did not extend patients' lives. And Crestor, a cholesterol-lowering drug from the same company, fell under scrutiny for potential side effects. By the end of the year, all this heat was battering pharmaceutical company valuations and misting future prospects for drug stocks.

The current year is unlikely to mark a return of robust health for the drug sector. A preliminary estimate from business information and consulting firm IMS Health (RX ) shows drug sales in the U.S. will be up 9.5% this year, to $259 billion. That's a tad better than 2004, with estimates showing sales rising 9%. But it's hardly a stellar performance: The industry hadn't posted single-digit growth since 1994.

The challenges in 2005 are similar to those the industry faced last year. Patents on major drugs continue to expire. At the same time, executives worry that the Food & Drug Administration could turn overly cautious in approving new drugs in the wake of Vioxx. That would be bad for an industry already struggling through a period of weak output from research labs. "The erosion from generics is large, and the contribution from the innovation engine is lower than it used to be," warns Schering-Plough Corp. (SGP ) Chairman and CEO Fred Hassan.

That is not to say innovation has ground to a halt. Pfizer is expected to launch two important drugs in the U.S. market in 2005: Macugen, a treatment for macular degeneration that Pfizer will market with Eyetech Pharmaceuticals, and Lyrica, an epilepsy and pain medication. Some forecasters are also excited about Eli Lilly's new urinary incontinence drug, Yentreve, which is expected to win FDA approval in the first half of the year. And while pharmaceutical executives continue to face challenges from counterfeit versions of their branded drugs, there are signs of progress. India, for example, will be implementing patent protections for new pharmaceutical products in 2005. "At least we will be getting the full [benefit] of our innovation instead of splitting it with a dozen copycat companies," says GlaxoSmithKline PLC (GSK ) CEO Jean-Pierre Garnier.

The industry needs to wring every buck it can to offset the loss of some big sellers as more patents expire. On the hit list in 2005: Pfizer's $2.1 billion antibiotic, Zithromax, and Johnson & Johnson's (JNJ ) $2.1 billion painkiller, Duragesic. And investors will be nervously watching a court case brought by Indian generic drugmaker Ranbaxy Laboratories Ltd., which seeks to knock down key patents on Pfizer's $10 billion cholesterol-lowering drug, Lipitor. While analysts say Pfizer has a good shot at prevailing, the outcome is far from certain.

Drug industry watchers are focusing on the regulatory environment in Washington as well. With the public outcry over drug prices continuing to mount, Congress is likely to return to the issue of reimporting drugs from Canada. But analysts say that even if a law were passed to facilitate such purchases, the impact on company bottom lines would be minimal.

In contrast, regulatory fallout from the Vioxx debacle poses a substantial threat to business as usual. Lehman Brothers Inc. (LEH ) analyst Rami Armon says the FDA may crack down harder on drug companies' aggressive direct-to-consumer advertising. And he figures the agency may also be more assertive about putting strong warnings on drug labels when safety questions arise, something drug companies resist because it can hurt marketing. Indeed, the FDA has already slapped stronger warnings on several drugs, including Pfizer's Bextra, a painkiller in the same class as Vioxx. "The wild card is the FDA," says Murray L. Aitken, senior vice-president for corporate strategy at IMS Health.

Industry executives also worry about how the FDA will treat new drug applications in '05. They fear regulators may become too stringent on safety when reviewing novel treatments. "In the past, people accepted there was no such thing as a totally safe drug," says AstraZeneca CEO Sir Tom McKillop. "Today, we have become more risk-averse."

All these pressures make it more critical than ever that drugmakers improve their dangerously weak development pipelines. That's why investment bankers say Big Pharma companies will pursue licensing or acquisition deals with smaller companies more aggressively than ever to get their hands on upcoming products. Lazard LLC investment banker Steven J. Golub says intense competition for those products means deals are now getting done more quickly.

In the past, drugmakers were inclined to license many products when they reached the final phase of human testing. Now, in the rush to license, drugmakers seem willing to sign deals at a point early in the testing process, when drugs run a higher risk of failure. As for important mergers, many bankers say weakened companies such as Schering-Plough (SHR ), Merck, and Bristol-Myers Squibb (BMY ) could be acquisition targets. But given these companies' patent or legal problems, some potential partners may be inclined to stay on the sidelines for now.

With new products flowing at a trickle, look for drugmakers to continue pushing for price increases in 2005. Sanford C. Bernstein & Co. analyst Richard T. Evans expects pharmaceutical prices to rise at double the rate of inflation this year. Why? Drugmakers may feel there is less political downside with a Republican-controlled Congress and White House. They also recognize that pricing will become much more difficult after the federal government phases in its Medicare prescription-drug benefit in 2006, because Washington is likely to push hard to keep a lid on costs. Another reason the head winds for Big Pharma, in the long term, aren't going to abate.

U.S. Military May Face Reservist Shortage ...duh

From Yahoo:

By ROBERT BURNS, AP Military Writer

WASHINGTON - The strain of fighting a longer, bloodier war in Iraq (news - web sites) than U.S. commanders originally foresaw brings forth a question that most would have dismissed only a year ago: Is the military in danger of running out of reserve troops?

At first glance the answer would appear to be a clear no. There are nearly 1.2 million men and women on the reserve rolls, and only about 70,000 are now in Iraq to supplement the regulars.

But a deeper look inside the Army National Guard, Army Reserve and Marine Corps Reserve suggests a grimmer picture: At the current pace and size of American troop deployments to Iraq, the availability of suitable reserve combat troops could become a problem as early as next year.

The National Guard says it has about 86,000 citizen soldiers available for future deployments to Iraq, fewer than it has sent there over the past two years. And it has used up virtually all of its most readily deployable combat brigades.

In an indication of the concern about a thinning of its ranks, last month the National Guard tripled the re-enlistment bonuses offered to soldiers in Iraq who can fill critical skill shortages.

Similarly, the Army Reserve has about 37,500 deployable soldiers left — about 18 percent of its total troop strength.

The Marine Corps Reserve appears to be in a comparable position, because most of its 40,000 troops have been mobilized at least once already. Officials said they have no figures available on how many are available for future deployments to Iraq.

Both the Army and the Marines are soliciting reservists to volunteer for duty in Iraq.

"The reserves are pretty well shot" after the Pentagon (news - web sites) makes the next troop rotation, starting this summer, said Robert Goldich, a defense analyst at the Congressional Research Service.

Among the evidence:

_Of the National Guard's 15 best-trained, best-equipped and most ready-to-deploy combat brigades, all but one are either in Iraq now, have demobilized after returning from a one-year tour there or have been alerted for duty in 2005-2006.

The exception is the South Carolina National Guard's 218th Infantry Brigade, which has had not been deployed to Iraq as a full brigade because smaller groups of its soldiers have been mobilized periodically for homeland defense and numerous missions abroad, including Iraq.

_The Army Reserve, with about 205,000 citizen soldiers on its rolls for support rather than combat duty, has been so heavily used since the Sept. 11, 2001 attacks that, for practical purposes, it has only about 37,500 troops available to perform the kinds of missions required in Iraq, according to an internal briefing chart entitled, "What's Left in the Army Reserve?"

_The chief of the Army Reserve, Lt. Gen. James R. Helmly, recently advised other Army leaders that his citizen militia is in "grave danger" of being unable to meet all its operational responsibilities. He said the Reserve is "rapidly degenerating into a `broken' force."

The mix of troops in the U.S. force rotation now under way in Iraq is about 50 percent active duty and 50 percent reserves. But that is set to change to 70 percent active and 30 percent reserve for the rotation after that, beginning this summer, because combat-ready Guard units have been tapped out.

Thus, two active-duty Army divisions that have already served one-year tours in Iraq — the 101st Airborne and the 4th Infantry — have been selected to return in the coming rotation. The 1st Marine Expeditionary Force already is on its second tour in Iraq.

The potential squeeze could be avoided if security conditions in Iraq improve so dramatically this year that the Pentagon decides it can achieve stability with a smaller force.

The original expectation, after the fall of Baghdad in April 2003, was that a troop withdrawal could begin within weeks. But an unanticipated insurgency — which turned out to be lethal and resilient — changed the picture and led to the stressful situation the Army faces today.

In some respects, the use of Army and Marine reservists in Iraq has been a success story. Goldich, the defense analyst, said their performance has generally been excellent. Commanders sing their praise. Yet there is a limit to the reserves' resources, and the limit may be nearing.

It's not the absolute number of reservists that poses a problem. It's the number who have the right skills for what is required in Iraq and who have not already served lengthy tours on active duty since President Bush (news - web sites) authorized the Pentagon three days after the Sept. 11 attacks to mobilize as many as 1 million reservists for up to 24 months.

A portion of the best-trained reservists are approaching the 24-month limit, and some senior officials inside the Army are considering whether the limit should be redefined so that mobilizations over the past three years would, in effect, not count against the 24-month limit.

The Guard and Reserve are hurting in other ways, too. Their casualties in Iraq have been mounting (16 deaths in October, 28 in November, 20 in December and

Sunday, January 23, 2005

Abu Ghraib Abuse Trial Shields Pentagon, White House War Criminals

From wsws.org:

"Specialist Charles Graner Jr. was found guilty on January 15 of five counts of assault, maltreatment of detainees and conspiracy. The first of the US troops involved in torture at Iraq's Abu Ghraib prison to face a full court martial, Graner was sentenced by a jury of soldiers to 10 years in prison and a dishonorable discharge.

The main defense offered by Graner's lawyer, Guy Womack, was that his client was following orders. Under US military law, this is a valid defense only if the order is lawful, or if the soldier can reasonably believe it to be lawful.

So far, seven soldiers have been charged in connection with the scandal that erupted after the publication last spring of photographs depicting the abuse. Three have entered guilty pleas, while three others have yet to face a court martial.

According to the statements of Iraqi detainees and some of his fellow US soldiers, Graner, a member of the 372nd Military Police Company and a prison guard on the night shift at Abu Ghraib, was a ringleader in the systematic abuse of prisoners. He figures prominently in the infamous photos, standing behind a stack of naked and hooded Iraqi prisoners and broadly grinning.

It was Graner who forced the prisoners into that position on November 7, 2003. On another occasion, he punched a hooded prisoner in the face so hard as to knock him unconscious.

Ameen Said Al-Sheikh testified that Grainer was "the primary torturer" who beat him, handcuffed him to a door for eight hours, watched as another soldier urinated on him, forced other prisoners to eat from a toilet, and threatened them with rape.

Graner flaunted his sadistic exploits, sending e-mails containing photographs of beaten and bloodied prisoners back to his family, including his young children, and bragging about the "really cool stuff" he got to do on the job.

While he is guilty of brutal crimes, and deserves to be punished, the claim of the Bush administration and the US military that he is simply one of a few "bad apples" whose misdeeds in no way reflect on the nature of the US occupation of Iraq is an absurd and contemptible lie.

The photos in which Graner figured so prominently aptly sum up the American occupation. But the Bush administration continues to insist that Graner and the other soldiers who have been charged were "rogue" elements who acted on their own. The prosecutions of Graner and the others have been designed to buttress this lie and enable the media to promote the fiction that those responsible for torture at Abu Ghraib are being brought to justice. The small-fry offenders are being sacrificed in order to whitewash those at the highest levels of the Bush administration and the military who authored the policies sanctioning the use of torture.

Graner and his cohorts were encouraged by military intelligence officers to abuse and torture detainees. These actions were the direct outcome of policies and guidelines set by Secretary of Defense Donald Rumsfeld and ratified by the White House.

The judge in the Graner case, Army Colonel James Pohl, sought to exclude any evidence pointing to the culpability of higher-level military officers or government officials. Pohl denied the requests of Graner's attorney to call to the stand the former commander of US forces in Iraq, Lieutenant General Ricardo Sanchez, as well as Rumsfeld and his undersecretary for intelligence, Steven Cambone. He further denied attorney Womack's request to grant immunity to Colonel Thomas Pappas, the head of the military intelligence brigade at Abu Ghraib, so that he could testify.

Having excluded these top military and civilian officials, the judge disallowed any questioning of witnesses about orders given by officers regarding the treatment of prisoners. In a classic "Catch-22" maneuver, he refused to permit witnesses to explain what higher-level officers knew about the abuse on the grounds that such statements were "hearsay."

The most senior level officer that Pohl has allowed to testify in any of the cases is Brigadier General Janis Karpinski, who did not testify in the Graner case, but will testify in another case, that of Javal Davis. Karpinski, the one-time head of US prisons in Iraq, has herself accused Sanchez, Major General Geoffrey Miller, who was sent to Iraq to evaluate interrogation methods, and Major General Barbara Fast, the former chief of military intelligence in Iraq, of responsibility in the torture.

The testimony of witnesses who did appear in Graner's case, mainly fellow soldiers at Abu Ghraib and some detainees, indicated that culpability extends well beyond the seven individuals who have been charged. Some of the other soldiers who have already pleaded guilty noted that Graner and others were encouraged in their actions by military intelligence and CIA officials in order to "soften up" prisoners for interrogation purposes.

Former Specialist Megan Ambuhl, who has pleaded guilty to charges relating to the Abu Ghraib torture, said, "They encouraged us all the time." She said military intelligence officers "would come down and let us know what they wanted us to do with the detainees." They told her "to point at detainees and laugh at them while they were in the shower" in order to humiliate them.

Ambuhl also said that Lieutenant Colonel Steven Jordan, head of the Joint Interrogation and Detention Center at Abu Ghraib, saw photos of the abuse that had been placed on the screen of a desktop computer at the prison.

Master Sergeant Brian Lipinski testified that Jordan commended Graner for "doing a good job" shortly after the incident involving naked prisoners stacked in a pyramid, though the performance report chastised Graner for smashing a prisoner's head into a wall. Graner was not punished for this action, but was offered time off to deal with stress.

According to a Washington Post article of January 11, Private Ivan Frederick, who has also pleaded guilty to charges relating to the Abu Ghraib torture, "said he had consulted with six senior officers, ranging from captains to lieutenant colonels, about the guards' actions, but was never told to stop. Frederick also said that a CIA official, whom he identified as 'Agent Romero,' told him to 'soften up' one suspected insurgent for questioning. The agent told him he did not care what the soldiers did, 'just don't kill him.'"

Sergeant Kenny Davis said that after visiting Abu Ghraib in the fall of 2003, he told his platoon leader that military intelligence "was doing some pretty weird things with naked detainees over there." Pohl refused to allow further questioning on the subject.

If military intelligence and the CIA were encouraging military police soldiers, including Graner, to torture detainees--as they certainly were--they were not doing so on their own initiative. The pressure to step up interrogation practices at Abu Ghraib and other facilities in Iraq came directly from Rumsfeld and Sanchez, and was part of Bush administration policy.

Harvey Volzer, the lawyer who represented Ambuhl, suggested a reason why Pohl was so eager to cut off questioning about the role of Jordan, Pappas and other top officials at Abu Ghraib. "The higher up they go," Volzer said, "the more problems they have with people leading to the Pentagon. Pappas gives them to Sanchez, and they don't want that. Sanchez can give them Rumsfeld, and they don't want that. Rumsfeld can lead to Bush and [White House Counsel Alberto] Gonzales, and they definitely don't want that."

Michael Ratner, head of the Center for Constitutional Rights (CCR), noted, "Whatever Charles Graner did, however heinous his acts may have been, we believe he is taking the fall for the architects of a policy that empowered him to torture and abuse those being held at Abu Ghraib." The CCR has called for a special prosecutor to examine Rumsfeld's role. The organization has already filed war crimes charges against Rumsfeld and others in a German court.

It is worth recalling the background to the Abu Ghraib torture revelations. Immediately following September 11, 2001, the Bush administration sought to exploit the attacks of that day to carry out a far-reaching assault on democratic rights, including the rights traditionally granted, under international law, to prisoners of war.

The Bush administration decided not to treat prisoners in Afghanistan and Guantanamo Bay, Cuba as prisoners of war under the Geneva Conventions. A CIA request led to a memo, submitted to Gonzales, who is currently Bush's nominee for attorney general, which so narrowly defined torture as to allow methods banned by international and US laws against torture. The memo, written in August 2002, declared that the president, as commander-in-chief, had the right to order the torture of prisoners.

Bush had a direct hand in these developments. Scott Horton of the American Bar Association told the Age, an Australian newspaper, "It is now reasonably clear that there was action by the president. I have now seen several further documents which persuade me that there is in fact a determination by the president that dates from roughly April 2002. It is addressing extreme interrogation procedures, though not in detail."

Journalist Seymour Hersh reported in his book, Chain of Command, that sometime in late 2001 or early 2002, Bush signed a top-secret finding authorizing the Defense Department to set up a Special Access Program (SAP) operating outside of any regulation or oversight. The SAP was responsible for secret interrogation practices in Afghanistan.

According to one of the army's own investigations, led by Major General George Fay, by December 2002 "interrogators in Afghanistan were removing clothing, isolating people for long periods of time, using stress positions, exploiting fear of dogs and implementing sleep and light deprivation."

In April 2003, Rumsfeld approved a more extensive list of interrogation methods for Guantanamo Bay that included many of these techniques. Though the list was formally withdrawn later, there is much evidence, including a series of documents recently released by the American Civil Liberties Union (ACLU), showing that torture in Guantanamo Bay became institutionalized.

Major General Miller, who at the time was head of the Guantanamo Bay facility, was sent, in the fall of 2003, to Abu Ghraib. Even the whitewash report by a panel headed by former defense secretary James Schlesinger, released in August 2004, felt obliged to acknowledge that practices carried out in Cuba "migrated" to Iraq. An ACLU-released document from an FBI agent states that Miller was sent to implement what the FBI considered to be illegal techniques, and that he received his authority directly from Rumsfeld.

The torture and abuse methods employed at Guantanamo were transferred to Iraq in an attempt to counter a growing insurgency that the American military found increasingly difficult to handle.

Far from being punished, those who are most responsible for the policy of torture have strengthened their position in Bush's second term administration. Gonzales has been selected as the new attorney general and Rumsfeld is staying on as secretary of defense. Condoleezza Rice, who, according to Hersh, approved the Special Access Program, has been elevated from national security adviser to secretary of state.'

Wednesday, January 19, 2005

George W. Bush, Philosopher-King

Why he won't debate the math of Social Security reform.
By Chris Suellentrop
Posted Monday, Jan. 17, 2005, at 4:54 PM PT
George W. Bush has waited until the eve of his second inaugural to let us know that he doesn't hate pointy-headed intellectuals after all. Instead, he now confesses, he's one of them. On the subject of Social Security reform, "It's exciting to be part of stimulating a debate of such significance," President Bush told the Wall Street Journal this past week. "It really is the philosophical argument of the age."

You may be surprised to learn that the president views Social Security reform as a philosophical question, the kind of groovy give-and-take subject that's appropriate for drug-induced dorm-room bull sessions. But understanding why he framed the subject that way is critical to understanding the impetus behind Social Security privatization. Opponents of personal Social Security accounts have been trying to knock down the president's plan—to the extent that he has one—by tackling it as a mathematical puzzle and carefully explaining that the numbers don't add up. "There's no Social Security crisis," is one version of this argument, explaining how relatively minor changes in benefits and taxation can preserve the system in its current form. The other is to poke holes in the arithmetic of privatization. Slate's founding editor, Michael Kinsley, went so far as to offer a logical proof of how privatization would fail to fix Social Security. But submitting the answers to a math test during a philosophy exam is a sure way to flunk.

Explaining how both the "Social Security crisis" and the "privatization solution" rely on faulty math misses the point of the president's plan entirely. Like supply-side tax cuts, Social Security reform is a subject on which conservatives prize philosophy—or, if you prefer, ideology—over arithmetic.

The confusion over the nature of the debate is intentional. The Bush administration has linked two reforms—private accounts and benefit cuts—that have nothing to do with each other. Benefit cuts are the administration's preferred solution to Social Security's long-term financing imbalance. (Democrats prefer a mixture of benefit cuts and tax hikes.) Private accounts have nothing to do with Social Security's actuarial problems, except to the extent that they make them worse. White House aide Peter Wehner conceded as much in his leaked memo on Social Security. Pushing investment accounts without benefit cuts would mean "making no effort to address [the system's] fundamental structural problem," Wehner wrote.

Private accounts have different virtues, Wehner explained. "Our goal is to provide a path to greater opportunity, more freedom, and more control for individuals over their own lives. That is what the personal account debate is fundamentally about." In other words, it's a philosophical debate about the role of government, not a mathematical debate about how to make Social Security's outflows match its inflows.

National Review, in its response to Kinsley's (in their words) "ingenious argument against reform," suggested that personal accounts would "increase incentives to work" and "induce people to save more." Those arguments sound a lot like the conservative arguments against welfare, which had to do with the effect of economic incentives on thrift and industriousness, rather than the mathematical effect of welfare spending on the budget. NR also argued that private Social Security accounts would "probably restrain federal spending" by preventing the government from "masking its deficits by borrowing from Social Security." Perhaps most important, the magazine argued that private accounts would create more Republicans, by increasing "both the public's financial sophistication and its receptivity to proposals to increase the returns to capital." In short, NR replied, look, our math doesn't add up, but that's not the point. We like the idea because Social Security privatization is consistent with conservative philosophy: "Providing the security of ownership, and reducing dependence on Washington, is a worthy goal in its own right." (Kinsley, in his Los Angeles Times column, wrote: "Republicans control the entire federal government. If they want to cut government spending, they should do it. They don't need to trash Social Security along the way.")

Liberals, for their part, aren't bereft of philosophy. They support Social Security because it's redistributive. In other words, it's welfare for old people. The politically correct term for this is "social insurance." Liberals are willing to keep paying rich people Social Security in the hopes that the payments will keep those rich people from figuring out that Social Security is a redistributive transfer program. Responding to Kinsley, former Federal Reserve economist Arnold Kling made the novel point that redistributive liberals should support the transition to personal accounts, because it means that Social Security payments for current retirees will be funded by the progressive income tax instead of the regressive payroll tax.

Like the Iraq war, the administration's push for private Social Security accounts is a war of opportunity and a war of choice. As with the war, the administration's arguments have some merit, but rather than arguing the honest case, Bush is trying to convince the country of a looming crisis in which the dangers of inaction are as risky as the dangers of action. Democrats have done a good job of shooting holes in Bush's "crisis is now" assertion, but winning that debate may not be sufficient if Republicans win the philosophical side of the argument. A recent Washington Post-ABC News poll (disclosure: Slate is now owned by the Washington Post Co.) showed why: Only 19 percent of Americans between the ages of 18 to 29 believe the Social Security system is in crisis, but 67 percent of those same Americans support private accounts. In every demographic group in the poll, the number of people who supported private accounts was greater than the number of people who believed the system was in crisis.

Here's what a straightforward discussion of the philosophy behind the Social Security system would look like: Democrats support welfare for old people, on the grounds that it creates a safety net for capitalism's losers, who might otherwise live in poverty. Republicans oppose welfare for old people, on the grounds that it reduces incentives to work and save, it gives the government too much money to spend, and it makes people overly dependent on the government for their retirement. That's an honest debate. Let's have it.

Friday, January 14, 2005

The war on drugs: US addicted to failure

A valuable report from IPS detailing how the US is losing its "War on drugs", and suggestions on how to address the problem from a health care perspective.

Wednesday, January 12, 2005

US isn't stingy, it's strategic

US isn't stingy, it's strategic
By Tom Barry
Uncle Sam is not Ebenezer Scrooge. The US government is the world's largest foreign-aid donor, contributing economic assistance to more than 150 countries. The US is also the largest national source of humanitarian and emergency relief aid. Before President George W Bush took office in 2001, the US government was providing foreign nations with nearly as much development aid and humanitarian assistance as did France, Germany and the United Kingdom combined.
When Jan Egeland, United Nations under secretary general for humanitarian affairs, called the US "stingy" last week in the wake of the tsunami disaster, he affirmed the belief of many that the Bush administration was not only arrogant and aggressive but also lacking in compassion and generosity. The failure of the president to make a personal statement of support and condolence until three days after the tragedy - and the paucity of the US initial commitment of emergency humanitarian aid - gave widespread credence to the charge that the US is not a good global neighbor but rather a self-centered Scrooge.
Egeland was quick to note that his measure for generosity was not total aid but economic aid as a percentage of national income or gross domestic product (GDP). A decade ago at the Earth Summit in Brazil, the US and the rest of the developed world promised to increase aid levels to at least 0.7% of national income. "If the foreign assistance of many countries is now 0.1 or 0.2% of national income, I think that is stingy," said Egeland.
Can the US$45 billion US economic and military aid budget of 2004 - roughly three times what the administration of president Bill Clinton allocated in 1997 - be described as "stingy"?
How does the US economic-aid commitment as a percentage of national wealth compare to the other 22 large aid donors? The latest comparative figures from 2002 place the US - with its 0.13% commitment - dead last behind Italy and Greece with their 0.2% contributions of national income. If military aid is included, the percentage jumps to nearly 0.2%.
Only five countries have met or exceeded this promised 0.7% benchmark set a decade ago: Denmark, Norway, Sweden, the Netherlands and Luxembourg.
As a percentage of national income, US foreign aid has steadily and dramatically dropped since 1949. Not since the Alliance for Progress years of the John Kennedy administration has the economic-aid budget exceeded 1% of annual GDP. According to an April 2004 report by the Congressional Research Service (CRS), even with the increases in US aid commitments since 2001 (excluding the nearly $25 billion committed to Iraq), current aid levels are among the lowest in a half-century of US foreign-assistance programming.
Post-Cold War blues
During the Cold War, US foreign aid enjoyed what aid reformers now call "policy coherence". As the CRS analysts rightly point out in their recent report, until the 1990s "the underlying rationale for providing foreign aid was the same for all US foreign policy - the defeat of communism".
During the 1990s the US government was hard-put to find a new rationale to support Cold War aid levels. No longer could foreign aid - either economic or military - be justified as part of the Cold War against the advance of communism. The Clinton presidency settled on the concept of promoting "sustainable development" as the core principle of US foreign assistance, which proved to be a hard sell to the US public and Congress. This new difficulty in explaining how US aid served US national security and national interests, combined with the administration's determination to balance the budget, resulted in a gradual decline in foreign assistance.
In the last years of Clinton's tenure, foreign aid started to climb again - not out of any new congressional or executive-branch determination to foster sustainable development, but to complement US military operations in Colombia, Haiti, Bosnia-Herzegovina and Kosovo.
If one looks solely at the changing allocations of US foreign assistance, the Clinton years seem the age of austerity and the Bush administration in contrast appears generous. Starting in fiscal 2002, economic aid began a steady and dramatic rise - rising $4.3 billion over 2001. By 2004 the US government's economic aid commitments had risen to historic levels - rising to levels not seen since the post-World War II years with the Marshall Plan for European reconstruction.
Depending on how you view foreign assistance - total aid or as a percentage of income - Uncle Sam is either generous or a miser. But a narrow focus on dollar amounts and percentages misses the bigger picture of the changes in US economic aid in the past several years. What cannot be debated is that US economic aid is increasingly strategic.
The administration's "global war on terrorism" is the main determinant in the distribution of economic aid - not development needs, not humanitarian disasters, not hunger or the increasing numbers of the world population living on a dollar a day or less. In providing a new rationale for US foreign aid, the "war on terrorism" has provided a new policy coherence that integrates foreign assistance with foreign and military policy. When the officials of the State Department and the US Agency for International Development (USAID) justify their aid requests before congressional committees, they stress that aid is part of the country's national-security strategy. The "war on terrorism" has replaced the war on communism as the underlying rationale for foreign assistance. That makes selling increasing foreign-aid budgets much easier on Capitol Hill and has restored a bipartisan consensus in support of USAID programs.
Guns and butter
The 2004-09 strategic plan produced by the State Department and USAID defines "security" as the main goal of US foreign assistance. The strategic plan aims to "align diplomacy and development assistance" with the president's National Security Strategy of September 2002 - the document that lays out the case for preventive war and for building the capacity for global military intervention.
Increasing equitable development, reducing poverty and hunger, and protecting the global environment don't figure into the strategic goals and objectives of this strategic plan. Instead, the main priorities are Arab-Israeli tensions, stabilizing Iraq, restructuring the "Muslim world" to increase democracy and economic freedom, stabilizing Afghanistan, North Korea, India-Pakistan tensions, drug eradication in the Andean region, strengthening alliances such as the North Atlantic Treaty Organization, and reforming the United Nations. Further down on the list of priorities for USAID and the State Department are the AIDS crisis; food security, particularly in crisis countries such as Sudan, Iraq, Ethiopia and Afghanistan; and providing "accountable" development assistance through the new Millennium Challenge Account.
Responding to a spate of criticism in the 1990s that US economic aid lacked a strategic coherence, USAID over the past few years has addressed that criticism head-on by its determination to make foreign assistance coherent with US national-security strategy. This challenge to establish "policy coherence" was also addressed in the January 2004 USAID Commission report, "US Foreign Aid: Meeting the Challenges of the 21st Century", written in part by neo-conservatives from the right-wing Hudson and Hoover think-tanks. The paper calls for greater "selectivity" in US foreign assistance based on two criteria: "relevance to US national security" and "greater aid effectiveness".
Selective and strategic
One has only to look at the major recipients of US economic aid to grasp the policy coherence with national-security strategy. But this new selectivity based on security imperatives can also be seen in the significant rise in economic (and military aid) to what USAID calls "front line" states in the "war on terror" - those like Poland that joined the "coalition of the willing" in the Iraq occupation, countries in Central Asia that have opened their countries to US military bases, and others like Indonesia that are regarded as key allies in containing Muslim militancy.
Starting in 2002, the executive branch began to underscore the "war on terrorism" as a top foreign-aid priority. According to the Congressional Research Service, the State Department now highlights the amount of US assistance going to some 30 "front line" states in the terrorism war. Aid to Pakistan, for example, jumped from $1.7 million in 2001 to $275 million in 2004.
Leading the list of top economic-aid recipients in 2004 was Iraq, which received $18.5 billion - more than the total USAID budget prior to 2002. Next comes Israel ($2.6 billion), followed by Egypt and Afghanistan, both of which received approximately $1.8 billion. Other top recipients were Colombia, Jordan, Pakistan, Peru, Bolivia, Turkey, Sudan and Indonesia.
Additional top recipients of US aid in 2004 were Sudan and Liberia as part of US conflict-resolution and humanitarian-aid initiatives, along with Uganda, Ethiopia and Kenya, reflecting Bush's $15 billion Global AIDS Initiative in Africa.
Clearly, the Bush administration was slow on the uptake to see the strategic implications of tsunami disaster relief. But the strategic and public relations benefits of US humanitarian aid in largely Muslim countries such as Indonesia are now recognized. Although Washington and US society desperately need some favorable public relations, the US government's apparent use of its aid efforts in Indonesia to solidify working relations with the Indonesian military (TNI), including the use of US helicopters by the TNI, may only contribute to strengthening the position of the highly abusive military forces in that conflicted nation.
Selective and effective
Foreign assistance is one of the most flexible instruments of US foreign policy, since it can be used alternately as a carrot and a stick. Countries that cooperate with the US national-security initiatives - no matter their record on such foreign-aid objectives as democracy, human rights, or good governance - receive aid as carrots.
In addition to aid selectivity measured by national-security goals, USAID has established its own criteria of "effectiveness" when evaluating how development funds should be spent. In the past, USAID has used its project funding to foster such goals as privatization, economic liberalization, and austerity.
The World Bank's 1998 report "Assessing Aid" concluded that a "good policy environment" is an essential precondition for effective development assistance. The Bush administration has taken up this theme with a vengeance with its much-vaunted Millennium Challenge Corporation. Established after the 2002 Monterey Conference on Financing and Development, the $5 million in promised development funds are available only to countries that meet strict preconditions - including a commitment to free trade, cooperation with US foreign-policy initiatives, and no-holds-barred economic liberalization, as well as national treatment for US investors. In other words, instead of conditioning new aid to agreed-up reforms, countries need to meet US-imposed political, economic, and governance conditions in advance of new aid commitments. Largely as a result of this onerous pre-conditionality, the government corporation has been hard-put to find countries who have met the challenge of satisfying all the US requirements.
A long-running measure of the effectiveness of US aid has been its ties to US exports and technical assistance. According to USAID, 81% of its procurement comes from US sources. This falls short of the 87% US procurement rate for US military aid. That figure would be 100% if it were not for a special provision that allows Israel to use US military aid to buy from its own military contractors.
Promises, promises
A few days after the criticism of penny-pinching in its tsunami disaster aid, the administration increased its promised aid from $15 million to $350 million. However, unlike the supplemental aid packages it has secured for Iraq and Afghanistan reconstruction aid, this $350 million doesn't represent an increase in the economic-aid budget, but rather is a commitment that is not backed by available resources. If the US is to deliver on its promise, it will either have to draw disaster aid from other accounts, ask Congress for supplemental aid, or go into the next fiscal year with a budget deficit. Because of US strategic priorities, US humanitarian aid and emergency disaster assistance - which represents 12% of total foreign and military aid - is largely used in conjunction with US humanitarian interventions and in conflict zones where US national-security interests are at stake. As the US global reach expands, the need for associated humanitarian aid also increases, thus compounding US budgetary pressures.
There is good reason to doubt whether the promised $350 will be anything more than just another broken promise by the Bush administration. The Bush White House has established a record of promising large sums of aid to reduce poverty, to fight the human immunodeficiency virus (HIV) and AIDS, and to help governments that are helping themselves with good governance and economic reform. The Millennium Challenge Corporation has failed to deliver any of the promised $5 billion, although the account continues to whittle down its resources in studies and evaluations that are establishing exactly what a "good policy environment" means with respect to US foreign, economic and military policy.
At first glance, a country's generosity in foreign aid seems a good measure of whether the US or any other nation is a good global neighbor. Certainly the high percentage contributions of the Nordic and other Western European countries make them immune to charges that they are stingy. Moreover, these same leading aid donors don't tie their aid to their own products and technical assistance.
But foreign aid is not always an unqualified good, especially when it comes from a country whose aid strategy is so closely tied to its global war strategy and to its neo-liberal economic policies.
Tom Barry is policy director of the International Relations Center, online at www.irc-online.org. He is the author of books on US economic aid including The Soft War: Uses and Abuses of US Economic Aid in Central America (Grove Press).

Thursday, January 06, 2005

US Senator asks an obvious question...



Urges Effort to Address Shortcomings to Help Avert Future Disasters

Contact: Antonia Ferrier (202) 224-5344
Wednesday, December 29, 2004

WASHINGTON, D.C. – U.S. Senator Olympia J. Snowe (R-Maine) today sent a letter to Admiral Lautenbacher, Administrator of the National Oceanographic and Atmospheric Administration (NOAA), requesting he explain what specific efforts were made by NOAA to contact potentially affected nations before they were hit by the recent tsunamis. Snowe expressed her deep concern that once NOAA learned of the earthquake off Sumatra, and the possibility of a resulting tsunami, only two countries – participants in the Pacific Ocean Tsunami Warning System – were notified.

“The entire world mourns the terrible and stunning loss caused by these tsunamis,” said Snowe. “We must work to make whatever fundamental changes are necessary to ensure that every last measure of effort and resources are exerted to provide critical information to all those in a position to potentially use that knowledge to avert catastrophe.”

Reportedly, the only two nations in the affected region that were notified were Indonesia and Australia. Nations such as India, Sri Lanka, and the Maldives – which are not participants in the Pacific Warning System – apparently were not contacted.
“The fact that the potential danger rose to the level of prompting a swift warning to two nations, while others could be faced with a potentially devastating impact, raises serious questions that require a response and ultimately a solution,” said Snowe. “We must ensure information NOAA receives is quickly disseminated to all countries that could benefit from such critical information.”

“Given this fact, what efforts, if any, were made to contact those other nations in the region that were also in harm’s way? If NOAA did not have the appropriate contacts, as has been reported, why was this the case? Was an attempt made to obtain that contact information – and if not, why not? These are questions that must be answered.”

Tuesday, January 04, 2005

Social Security benefits may change

Social Security benefits may change
White House may tie increases to inflation, not wages, which could lower payouts; ad blitz to begin.
January 4, 2005: 12:51 PM EST
WASHINGTON (CNN) - As part of its effort to reform Social Security, the White House is seriously considering changing the way benefits are calculated, a shift that could mean lower benefits for future retirees.
Administration officials insist, however, President Bush has not made a decision to embrace the approach and the first White House priority is a massive public relations campaign this month to raise awareness of their version of the system's problems.
As reported in the Washington Post Tuesday, the reform idea would be to use inflation rates instead of workers' wages to calculate Social Security benefits.
The approach, known as "price indexing," was advocated by the president's Social Security Commission in 2001, a panel Bush has cited for having recommendations he generally supports.
Though the president has started to speak out about his belief Social Security must be reformed, and has advocated private accounts for younger workers, he has, so far, been vague about how he would pay for that as well as other specifics.
He has promised, however, that those at or nearing retirement would not see their benefits cut.
White House spokesman Scott McClellan confirmed changing the formula for benefits is one option administration officials have been discussion with GOP members of Congress. He refused, however, to define what Bush means when he talks about not touching benefits for those "near" retirement.
Instead, he repeated the president's oft-used phrase that he doesn't want to "negotiate with himself" by discussing specifics in public.
Changing the way benefits are calculated could cut benefits significantly for future Social Security recipients.
Republican support
It is an idea that has support among senior Republicans on Capitol Hill.
Senate Majority Leader Bill Frist, R-Tenn., told CNN it is an idea he "would strongly support, that we adjust benefits according to price increases and not wages."
The Republican leader cited this as a way to help pay for private accounts for younger workers, which he believes would yield more money in the end.
"We need to remember that you can have access to the personal accounts, which will grow much faster than either prices or wages," Frist said.
One Republican lawmaker with close ties to the White House acknowledged to CNN that although there is much concern in Congress about the political consequences of advocating any benefit cuts, it is the leading approach among options to pay for Bush's reform ideas.
"The only other way to pay for reform, for private accounts, is borrowing, and for those in our party concerned about the deficit, that's not the way to go," the GOP lawmaker told CNN.
Although the president has not yet offered a private account proposal, some rough estimates say the transition cost could be between $1 trillion and $2 trillion.
Administration officials said that while price indexing is something the White House is seriously considering, the president has not decided yet to push it.
White House officials are planning a large scale public relations campaign, starting this month, to sell the American people on the idea that Social Security is a program that is in crisis and needs to be fixed.
Administration sources said they intend to follow models used during the presidential campaign using the Internet, local and regional media and other non-traditional sources in addition to speeches from the president and his aides to lay out problems in the system.
"We want to spark a national debate about the problem before we really embrace solutions," said an administration official.
Democrats' worries
Many Democrats have said they think the White House is overstating the crisis in order to sell a long-standing GOP proposal, diverting some of the system into the private sector.
They note that the Social Security Trustees estimate the system may go into the red in little more than a decade, but it won't deplete its reserves until 2042, and even then recipients would still get 73 percent of the current benefit level.
A separate Congressional Budget Office analysis puts the date for the depletion of reserves at 2052, and says payouts after that would be 81 percent of the promised level.