Wednesday, February 13, 2013

Crisis Management

Bruce Yandle is one of my favorite people.

And he comes up big with this nice essay in Freeman.  Excerpt:

The more serious the crisis, the greater the media outcry; and the tighter the calendar for resolving it, the better the chances that members of Congress could attach special interest promises to a final bill that would be passed at the very last minute. In fact, forcing any resolution to the last minute made it possible to hang even more meat on the hooks, since few critics would have the time or interest to look for it, much less take it out. Remember: At the zero hour, all eyes are focused elsewhere.

So when the fiscal fix train left the station, how much pork stood packed in the last car? According to a Wall Street Journal analysis, there was $12 billion in benefits for producers of windmill energy, $222 million in tax rebates for liquor makers, some $78 million in writeoffs for NASCAR track owners, a special $62 million tax credit that will keep StarKist operating the only meaningful industrial plant in American Samoa, and—best of all—a $410 million special tax treatment gift to Hollywood movie studios. But even as these porcine free riders sat front and center in the fiscal train’s caboose, there was an even bigger political goodie hidden among the bill’s baggage.

According to the New York Times, drug maker Amgen may have won the blue ribbon for rent-seeking. The fiscal cliff legislation contained language that delayed limits on drug prices that had been a part of previous legislation intended to bring down Medicare costs. When politicians regulate prices, all kinds of things can happen. That goodie is worth $500 million over the next 10 years, we are told. Without mentioning the word "Amgen," the last-minute legislation exempted one of the firm’s major products from previously mandated price controls. It is reported that Amgen had 74 lobbyists working on the deal. You read that right. That’s 74 people working the halls of Congress while the fiscal cliff battle was being fought. So, do the math: 74 people produced $500 million in future net revenues. That’s $6.75 million per worker. With gains that big, the Amgen government affairs office must surely be counted as a major profit center along with other Amgen divisions.

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