Free to Innovate

The FCC is going to release a report saying that the current broadband oligopoly is not bringing connections to the American market fast enough. If you’re interested in why, this study of Time-Warner’s spending and profits profits provides some of the answer:

TWC’s revenues from Internet access have soared in the last few years, surging from $2.7 billion in 2006 to $4.5 billion in 2009. Customer numbers have grown, too, from 7.6 million in 2007 to 8.9 million in 2009.

But this growth doesn’t translate into higher bandwidth costs for the company; in fact, bandwidth costs have dropped. TWC spent $164 million on data contracts in 2007, but only $132 million in 2009.

What about investing in its infrastructure? That’s down too as a percentage of revenue. TWC does spend billions each year building and improving its network ($3.2 billion in 2009), but the raw number alone is meaningless; what matters is relative investment, and it has declined even as subscribers increased and revenues surged. “Total CapEx [capital expenses] as a percentage of revenues for the year [2009] was 18.1 percent versus 20.5 percent in 2008,” said the company a few months ago.

In fact, CapEx has declined for the industry as a whole. As the National Broadband Plan noted, the big ISPs invested $48 billion in their networks in 2008 and $40 billion in 2009. (About half of this money can be chalked up to broadband; the rest of the improvements were done to aid cable or phone service.)

To recap: subscribers up, revenues up, bandwidth costs down, infrastructure costs down.

Skeert of The Mean Lady, Elizabeth Warren

Shamelessly stolen from Jim Newell’s Gawker article, “Will Tough, Awesome Elizabeth Warren Head the New Consumer Protection Agency?”:

… Warren’s voice became more prominent over the last decade for her work studying credit card company abuses and other, suddenly very common financial sector exploitations of the debt-saddled middle class. Her fame and popularity “exploded” (Washington-wise!) after she was appointed to chair the TARP oversight board in 2008, where she’s tried her damnedest and spoken quite candidly in public about Treasury’s shitty disclosure record.
Treasury secretary Tim Geithner naturally thinks she is very annoying. He probably doesn’t want her running the new rule-writing financial regulatory authority, because she would very much try to write rules, and “rules” destroy the global financial system.
Geithner’s official position is that “believes that Elizabeth Warren is exceptionally well qualified to lead the new bureau,” which seems to fit in with the possible game plan Sen. Chris Dodd hinted at this morning: that she’s great but, you know… Republicans! It would all be the Republicans fault, see?
“I think Elizabeth would be a terrific nominee,” Dodd told NPR’s Diane Rehm on Monday. “The question is, ‘Is she confirmable?’ And there’s a serious question about it… “

While we’re all still feeling warm and virtuous about our resistance to the dog-whistle racism of the Tea Partiers, let’s shine a light on the dog-whistle sexism that still percolates through the mucky base of our Acceptable Political Spectrum. Elizabeth Warren, the NYTimes notes, was the “chief conceiver of — and booster for — a new consumer financial protection agency, and has become the most prominent consumer advocate in Washington in many years… As one administration official acknowledged, the prospect of her running the new agency may be an impediment to its creation because of her crusading style, her seemingly visceral loathing of financial services companies and her expansive way of interpreting assignments.”

She may be the best choice to run an effective consumer financial protection agency, but as the Very Serious People (anonymously) ask their Media Village Courtiers: Can “we” afford an effective CFPA? What if she’s mean to the important suit-wearing almost-exclusively-male Masters of the Universe? What if she abuses her vast powers of oversight? What if she turns out to be… The Bad Mommy?

Elizabeth Warren is the mirror image of Sarah Palin: A tough-yet-still-feminine granny from Heartland America(tm) who rose to her current prominence by working hard and using her considerable intellectual abilities, not by winking at the right Right political consultants and transferring beauty-pageant skills to broader media platforms. The barely-coded arguments against her appointment are a measure of how little the nominal Progressive-Left-Center has moved beyond the rightwingers regarding some of the oldest cruelest prejudices of our tribal past.

Open Thread: Struldbrugs Among Us

I consider myself fairly cynical about the Forty Years’ War Against the Middle Class, but I hadn’t previously heard of this particular strategem to help (some) Americans build an aristocracy:

… Congress is feeling pressure to deal with taxes on inherited wealth, which have fallen to zero this year thanks to lawmakers’ inaction. In the process, it should address the more pernicious problem of dynasty trusts.
This type of trust is new because until very recently most states had a “rule against perpetuities,” which limited the term of any family trust to about 90 years, after which time the family members would own the property outright. This rule derived from the idea that property is best controlled by the living. In the mid-1990s, however, many states repealed the perpetuities rule, and now any wealthy American can set property aside for his heirs forever, simply by hiring a trustee from one of these states.
Dynasty trusts can grow much larger than the $3.5 million exemption amount would suggest. A couple can, for example, put $7 million (their two $3.5 million exemptions) into a life insurance policy owned by the trust. They apply their exemption at the start, and the trust is forever free from taxes — even when, after the death of the second spouse, the life insurance policy pays off at $100 million. Alternatively, a trust can use the $7 million as seed money for a profitable business that the trust then owns.
An ordinary trust dissipates as money is distributed to the beneficiaries. But a dynasty trust can avoid this by discouraging outright distributions and instead encouraging trustees to buy, for the use of the beneficiaries, things like houses, artwork, airplanes and even businesses. Because the trust retains ownership, the assets can pass tax-free and creditor-proof to the next generation. Beneficiaries don’t pay taxes on the use of this property. In contrast, a worker whose employer provides housing or other benefits is taxed on those benefits.
But tax breaks are not the only special advantages that dynasty trusts provide. Even more troubling, they commonly include a “spendthrift clause,” which provides that trust assets cannot be reached by a beneficiary’s creditors. If a beneficiary causes a car accident, for example, the victim cannot be compensated with assets from the trust, even if they are the driver’s only resources. So beneficiaries are free to behave as recklessly as they like, knowing that their money is forever protected for themselves and their heirs…

Jonathan Swift sensibly asserted that his Struldbrugs, those born immortal but not ageless, were forbidden to own property:

As soon as they have completed the term of eighty years, they are looked on as dead in law; their heirs immediately succeed to their estates; only a small pittance is reserved for their support; and the poor ones are maintained at the public charge. After that period, they are held incapable of any employment of trust or profit; they cannot purchase lands, or take leases; neither are they allowed to be witnesses in any cause, either civil or criminal, not even for the decision of meets and bounds… Otherwise, as avarice is the necessary consequence of old age, those immortals would in time become proprietors of the whole nation, and engross the civil power, which, for want of abilities to manage, must end in the ruin of the public.

But to look on the lighter side, if our new “aristocracy” is successful in their long campaign to reduce America into a banana republic, at least we’ll have some properly feudal entertainment — the Grey Lady is pleased to report that jousting is making a comeback!

Leverage Meets Real Life

The latest Leverage episode, the Double-Blind Job, featured a plotline in which a drug company executive was planning to release a new drug and make billions. There was only one problem- they knew that it caused liver damage and would kill people. Not so fictional, it seems:

In the fall of 1999, the drug giant SmithKline Beecham secretly began a study to find out if its diabetes medicine, Avandia, was safer for the heart than a competing pill, Actos, made by Takeda.

Avandia’s success was crucial to SmithKline, whose labs were otherwise all but barren of new products. But the study’s results, completed that same year, were disastrous. Not only was Avandia no better than Actos, but the study also provided clear signs that it was riskier to the heart.

But instead of publishing the results, the company spent the next 11 years trying to cover them up, according to documents recently obtained by The New York Times. The company did not post the results on its Web site or submit them to federal drug regulators, as is required in most cases by law.

“This was done for the U.S. business, way under the radar,” Dr. Martin I. Freed, a SmithKline executive, wrote in an e-mail message dated March 29, 2001, about the study results that was obtained by The Times. “Per Sr. Mgmt request, these data should not see the light of day to anyone outside of GSK,” the corporate successor to SmithKline.

If only we had de-regulated the pharmaceutical market and got rid of the heavy hand of the FDA, the free market would have discovered this well in advance and SmithKline would be punished by consumers.

This Needs to be Said Over and Over Again

And even then it won’t stick because someone will get bitten by a shark or a little blonde girl will get kidnapped:

Deficit Hawks Don’t Care About The Deficit

Some just want to cut spending that might benefit poor brown people, most just want to cut taxes paid by rich people. They don’t actually care about the deficit. Nobody does except maybe CBO actuaries.

If they cared about the deficit, Dick Darman and the elder George Bush and Bill Clinton would be heroes. They care about tax cuts for the rich. Period.


Also, too.

Deficit Hawks

Tim Eagan is shrill.


If we can’t get people to start using ‘deficit vultures’ — which would be accurate, if insulting to the avian scavengers who fulfill a useful ecological role — can we at least start using ‘deficit chickenhawks‘ for those who want to attack any expenditures that don’t affect them?

Extend and Pretend

Your daily dose of frightening economic news, this time focused on commercial real estate.