rBGH: some facts and some udder amusement

For those unfamiliar with the acronym, rBGH stands for recombinant Bovine Growth Hormone. It's a hormone injection given to dairy cows to induce greater milk production. As the following chart (from USDA Agricultural Projections to 2016) shows, it's been pretty successful:


There are a number of potential side effects for both cows and humans from rBGH, but the FDA approved it as safe over 15 years ago. This site has a subtly negative view, but also has links to some solid sources, such as the Government Accountability Office's study suggesting more study before approval of the hormone. You can also learn a bit about rBGH from Stephen Colbert:

David Walker talks $50 trillion with Colbert

I mentioned seeing David Walker, US Comptroller General, last week and that he'd be appearing on the Colbert Report to discuss America's $50 trillion problem.

Here's the video:

A 50 trillion debt? In dollars?

David Walker may have the un-sexy title of Comptroller General of the United States and head of the Government Accountability Office (GAO), but he knows budgets. I heard him speak on the fiscal fortunes of America this week and his 10-minute speech showed the power of high-content, compelling arguments. Walker argued that there are 4 deficits that government must address: budget, balance of trade, savings, and leadership (I'll discuss two).

Budget
The United States may have deficits of $400 billion and a debt of eight trillion, but right now it has unfunded liabilities of $50,000,000,000,000 - 50 trillion dollars. That's $440,000 for every household in the United States (and unlike your mortgage, there's no house to back it up).

What are unfunded liabilities? Money promised to Americans through Medicare, Medicaid and Social Security (entitlement programs) that the government has insufficient resources to pay for. That's $32 trillion in Medicare (parts A-C), $6.4 trillion in Social Security, and $8 trillion to the new Medicare prescription drug benefit.

Savings
For two years running, Americans have spent more money than they earned. The last time this happened was in 1933-34. As Walker noted, these were not good years for the U.S. economy.

Why is this a problem?

• It's a lack of stewardship. The baby boom generation is at risk of being the first generation to leave their children in worse shape than their predecessors.
• It's unsustainable. You simply cannot spend more than you earn every year. Eventually you run out of money.
  
• Increasing amounts of U.S. debt are held by foreign countries. If you don't understand how that could be a problem, see this excerpt from Wikipedia on the Suez Canal Crisis:

Part of the pressure that the United States used against Britain was financial, as President Eisenhower threatened to sell the United States reserves of the British pound and thereby precipitate a collapse of the British currency.

What can be done?

1. Reform the base Social Security program, preserving its use as basic social insurance (and probably raising the retirement age)
2. Add supplemental savings accounts on top, with an additional 2% payroll tax.
   
3. Adjust Medicare premiums so that recipients, particularly wealthier ones, have to put in more than the current 25% of expenses covered by premiums.
   

If you want to hear more on this topic, Walker will be appearing on the Colbert Report on Wednesday, April 25th.

Update 4/26: Here is the Colbert Report video

The GAO asks: are you ready for peak oil?

Robert at R-Squared Energy Blog analyzed the Government Accountability Office's new Peak Oil analysis and he has three major points:

1. Peak oil is coming soon, but it's not in the past and it's not imminent.
2. As far as energy prices go, it doesn't matter because supply isn't going to be able to get ahead of surging demand in developing countries like India and China.
3. The United States better take the GAO report seriously, because our economy is heavily dependent on oil.

Some excerpts of the report from the Energy Bulletin highlight the challenges ahead for the U.S.:

Key alternative technologies currently supply the equivalent of only about 1 percent of U.S. consumption of petroleum products, and DOE projects that even under optimistic scenarios, by 2015 these technologies could displace only the equivalent of 4 percent of projected U.S. annual consumption...

...Under these circumstances, an imminent peak and sharp decline in oil production could have severe consequences, including a worldwide recession...

...While the consequences of a peak would be felt globally, the United States, as the largest consumer of oil and one of the nations most heavily dependent on oil for transportation, may be particularly vulnerable...

The GAO has the full report online and the Energy Bulletin also has a lot of great charts from the report.

Non-surprise of the week: patent law lines drug company pockets

Most Americans have a sneaking suspicion that pharmaceutical companies are making pretty good money (pdf), but many probably don't understand exactly why. Well, the Government Accountability Office (formerly General Accounting Office - GAO in either case) just released a report (pdf) that explains why.

Because minor changes in existing drugs allow for new patents, giving extended monopolies, drug companies have used very little of their increased R&D budgets (147% from 1993-2004) to develop new drugs. Applications for new molecular entities - the FDA term for significantly new therapeutic drugs - increased only 7% in the same period.

In other words, instead of sparking innovation, drug patent law is doing the reverse - allowing companies to make big money off marginal modifications instead of expanding the realm of medicine. This might be good for Eli Lilly's shareholders, but it doesn't do much for the treatment of antibiotic resistant diseases or some of the world's more prevalent diseases. Time for an amendment to patent law.