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Author Topic: A new direction
Everard
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Umm, actually warsaw, my previous post that you say is anecdotal is... based upon studies that try to control for other factors. Amazing huh? You know what your posts have brought to the table? Your personal experience in southern california.

[ June 19, 2006, 12:42 AM: Message edited by: Everard ]

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WarrsawPact
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... and economic theory.

Please post links to the studies. I'll read them.

But I maintain that firms won't employ as many people. Somewhere you are taking deadweight losses, just as if you imposed a tax on a sector and a sliding subsidy to some of the workers. Somewhere you are encouraging jobs to leave the domestic "white market." I'd like to see anything that says otherwise.

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Everard
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I'm sorry, I don't currently have online access to academic journals.

If you're really interested, you can pretty much read any analysis not put out by a right-wing think tank, though, and it will indicate that unemployment is mostly in teens, and that job reduction occurs as lower increase in the rate of job increase.

http://en.wikipedia.org/wiki/Minimum_wage

There's some links in there you should probably follow. The Card/Krueger, and Great Britain stuff, is worth following up on, if you want to read the other side of the debate.

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Jesse
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Four times sounds like a serious lack of foresight and planing to me. So does a failure to compete in the quality and organic markets.

I worked for Gourmet Awards prior to the strike. While the higher end Pavillions stores were starting to do a pretty good job of adressing some of the changing desires of consumers, the corporation seemed totally ignorant of the need to adress some of those needs in the, for want of a better term, lower end Vons stores. They were still doing a much better job than Kroger.

Executive Management made mistakes, and tried to rectify them by reducing labor costs. It's not a new story. It rarely works. Customers simply don't like to be served by people who are miserable.

I don't know what happened at your store, but at many of them years of experience were lost. Some of my former co-workers who continued to deliver during the strike later quit because of frustration with the ineptitude of the recieving clerks who replaced competent workers that cashed out early.

An increased minimum wage drives wages up across the board. It doesn't make it any harder or easier for a given business to compete with the guy down the street. It leads to a short term increase in revenue and a decrease in benefits paid out.

We (the US) aren't in competition for low-end manufacturing jobs. What can be done cheapily elsewhere is already being done cheaply elsewhere.

I understand your argument that certain jobs cannot be profitable at a given wage, yet I also see the creation of jobs. There may very well be fewer jobs available (just for the sake of convience) at Vons, but the people who are working are being paid more. Untill inflationary effects reduce the value of their increased wage, they have more buying power, and the purchases they make create other jobs.

Before long, however, the inflationary effects start to be felt, and it's no more expensive to hire another bagger, and baggers have, in total, no more or less purchasing power than they did before.

Mostly, it spurs the short term consumption of low-end luxury goods and services and increases revenues. In short order, inflation ensues and we get back to stasis.

We have experienced massive economic growth in the past during periods of rapidly increasing federal minimum wage. We have also experienced massive jobs growth after increases in the federal minimum wage. We have also experienced the reverse.

Given that, I have a very hard time seeing it as that much of a factor.

[ June 19, 2006, 01:14 AM: Message edited by: Jesse ]

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WarrsawPact
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Ev -

I can look up academic journals through the library or my econ profs (heck, one of my roommates is working for the Department of Commerce this summer, maybe he can help me out), if you know of any good ones. I really would like to read them.

Now, as for the "right-wing think tank" comment, has it occurred to you that economists as a profession tend to lean quite noticeably to the Right (or, rather, toward conservatism and libertarianism and other related movements)? Why can't I marshal my evidence from them? I'd accept something from Brookings if you posted it; why can't I post links to Cato or AEI?

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WarrsawPact
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Jesse -

Some mistakes were indeed made, but the other remodels were all part of a multi-phase larger remodel.
And yes, we had a lot of experience drain out of the company (at the store level) in the wake of the strikes, many for the reasons you're talking about.

quote:
An increased minimum wage drives wages up across the board. It doesn't make it any harder or easier for a given business to compete with the guy down the street.
But it does, if they had any difference in labor/wage structure before. If I'm paying $8 an hour plus benefits to my clerks, and the shop across the street is paying $5.15 to its clerks without benefits, and then they're suddenly forced to pay $7.25 an hour plus benefits, you bet their ability to compete with me is going to change dramatically.

quote:
We (the US) aren't in competition for low-end manufacturing jobs. What can be done cheapily elsewhere is already being done cheaply elsewhere.
That's belied by the continued existence of jobs below minimum wage without benefits that still exist in this country (though we meet some of that demand just across our southern border). We still have comparative advantage in many sectors despite not being able to produce the most efficiently.

We're in the competition somewhere in virtually every major sector, except that some regulations get in the way of open competition.

quote:
I understand your argument that certain jobs cannot be profitable at a given wage, yet I also see the creation of jobs. There may very well be fewer jobs available (just for the sake of convience) at Vons, but the people who are working are being paid more. Untill inflationary effects reduce the value of their increased wage, they have more buying power, and the purchases they make create other jobs.
That's necessarily offset by the greater amount of total wealth that would be earned by more people working more hours (edit for clarity - as they would if minimum wage were lower or did not exist). And some of the rising prices, remember, have nothing to do with more buying power being concentrated in fewer hands; they have to do with the actual price of domestically produced goods rising due to increased input costs.

Re: your last line: If it's not that big a deal, then why do it? What are the positive effects?

[ June 19, 2006, 02:34 AM: Message edited by: WarrsawPact ]

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potemkyn
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WP,

I don't think you actually read my post because I stated that my problem was not what you had to say, but the way you said it. I don't think I can be more explicit than that. [edit: Which you can ignore at your leisure. It's an observation, not a judgement.]

Furthermore, you didn't even bother to address the port security/border issue at all, which seems to doubly confirm my belief.

"In the meantime, expect to keep being called on the same points over and over again, which is an awfully stupid waste of money and time, and to keep losing elections despite the gross incompetence of many Republicans."

OK, now it's official. You didn't even bother to read what I wrote, or at the very least you only read the first line before responding. I explicitly said twice that I agree with many of your points. Furthermore, I expressed open frustration with the Democrats for their rather unimaginative plan. I understand that you had a lot of people to respond to but please, don't prentend to read. I read your posts in their entirety to ensure I know where you stand. The least you can do is to do the same for me.

Potemkyn

[ June 19, 2006, 02:41 AM: Message edited by: potemkyn ]

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Jesse
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I'm just saying I don't care, or really think it makes all that much of a difference. Also, that I don't think it can be blamed for economic downturns.

We really don't have much in the way of low-wage work that can be outsourced is my point, not that we don't have plenty of low-wage and below minimum wage jobs.

I work with and around illegal aliens in the construction trades all the time. Most of them actually make more than the CA minimum wage. However, they are routinely subjected to conditions just about any legal worker would report to OSHA, occasionaly stiffed for their pay, forced to work while sick enough to routinely vomit on the job site, ect.

The drive for hiring illegal workers isn't primarily to avoid minimum wage restrictions.

Now...if the guy across the street has to start paying benefits and 7.25 an hour, you're right that your ability to compete will change, but it will change in two ways.

For most people, where to work now becomes a matter of conditions and demands. 75 cents an hour, assuming similar benefits, won't be most employees primary consideration in deciding which of you to work for.

Yes, his costs will rise, but you're both in competition for workers. If you want superior workers, and why else were you paying more to begin with, you're also going to have to raise wages in order to be on the same competative basis for labor that you were before.

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canadian
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quote:
How does raising the minimum wage alleviate inflation?
I didn't say that, actually.

My point was that inflation is one reason minimum wage goes up. A very simple idea.

If you have a hot local economy firing on all cylinders, the price of sh*t goes up and a lot of people start calling out for minimum wage increases because their pay may not have increased at the same rate as the cost of living.

I hope that clears things up for you.

[ June 19, 2006, 03:14 AM: Message edited by: canadian ]

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WarrsawPact
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quote:
I don't think you actually read my post because I stated that my problem was not what you had to say, but the way you said it.
I know what you said. And I'm telling you, unless you can point out where I did something wrong, that I'm not going to change my tone. What I said didn't disrespect anyone here; it was critical of the Democrats' seemingly stupid "new direction" that's really a rehash of older positions... and positions that many Democrats won't fight for, now that I think about it.

If the tone offended you, be specific about where I went wrong. Or just grin and bear it.

quote:
Furthermore, you didn't even bother to address the port security/border issue at all, which seems to doubly confirm my belief.
I have limited time. I went out for dinner with everyone I know who's in my dorm this summer, and I'm studying for my two classes -- I have an exam tomorrow.
The reason I didn't respond to the security/border thing is, I think it's pretty obvious where this "new direction" stand is going. It's a redeployment of resources from abroad to our borders; it's military isolationism in a nutshell.

quote:
"In the meantime, expect to keep being called on the same points over and over again, which is an awfully stupid waste of money and time, and to keep losing elections despite the gross incompetence of many Republicans."

OK, now it's official. You didn't even bother to read what I wrote, or at the very least you only read the first line before responding. I explicitly said twice that I agree with many of your points. Furthermore, I expressed open frustration with the Democrats for their rather unimaginative plan. I understand that you had a lot of people to respond to but please, don't prentend to read. I read your posts in their entirety to ensure I know where you stand. The least you can do is to do the same for me.

Actually, as I've shown, the least I can do is not read or respond at all.
Anyway, I'm happy someone else thinks the Democrats have an unimaginative plan. I realize you typed that earlier. But you're still getting a bit defensive because of, what, the tone of my post? Am I hammering it a little too hard on some soft spot? Well, why shouldn't I show contempt for what you recognize as a bad political maneuver? These guys are being paid millions of dollars and have been effectively out of power for the better part of a decade, and the best they can come up with is this? This is not how an opposition party works!
-=-=-=-=-=-
Jesse -
quote:
I'm just saying I don't care, or really think it makes all that much of a difference. Also, that I don't think it can be blamed for economic downturns.
Not solely. But I don't think it helps ameliorate economic downturns or enhance economic expansions, and I don't think it creates overall positive effects, even for the people it's designed to help. I think it does the contrary.

quote:
We really don't have much in the way of low-wage work that can be outsourced is my point, not that we don't have plenty of low-wage and below minimum wage jobs.
It's after 3 AM and I have a class at 8, but you're sort-of right. Check out a paper by Blinder at Princeton, came out late last year I think. It's about outsourcing.

quote:
I work with and around illegal aliens in the construction trades all the time. Most of them actually make more than the CA minimum wage. However, they are routinely subjected to conditions just about any legal worker would report to OSHA, occasionaly stiffed for their pay, forced to work while sick enough to routinely vomit on the job site, ect.

The drive for hiring illegal workers isn't primarily to avoid minimum wage restrictions.

Oh, I agree. Not that raising the minimum wage or increasing mandatory employee benefits is going to create less of that. In fact, it does exactly what domestic environmental regulations on industry often do: it sends the job to a dirtier place out of sight and out of mind. You want to subject illegal aliens to more of that, create more jobs that only illegals will be willing or able to take.

quote:
Now...if the guy across the street has to start paying benefits and 7.25 an hour, you're right that your ability to compete will change, but it will change in two ways. [...]
True, and then some. But it will change, and it's not a wash.
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WarrsawPact
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canadian - I apologize. I meant to say, "How does raising the minimum wage alleviate the effects of inflation?"

My point is, you don't have to raise the minimum wage for people to keep up with the cost of living increasing. I don't think the price floor for labor does what you think it does.

Yes, people often call for an increase in minimum wage. I'm questioning the wisdom of such a move, though it's kinda the opposite of my view on their oil subsidy position: it's smart politically because some people will buy it, but it's dumb economically. Especially given their rhetoric in the recent past about us doing too much outsourcing.

[ June 19, 2006, 03:36 AM: Message edited by: WarrsawPact ]

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canadian
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My name is Inigo Montoya...
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Jesse
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No, Warrsaw, I don't want to subject illegal aliens to more of that, although I understand if you think that would be the result of raising the minimum wage.

[ June 19, 2006, 03:36 AM: Message edited by: Jesse ]

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WarrsawPact
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canadian - I didn't kill your father. I'm not preparing to die.

Jesse - The way that's meant to be read is, "If you want to subject illegal aliens to more of that, create more jobs that only illegals will be willing or able to take."
Like, "you want to die, go ahead and grab the last chicken wing."

I didn't think you wanted to do it.

[ June 19, 2006, 03:39 AM: Message edited by: WarrsawPact ]

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canadian
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I don't think my quote means what you think it means...
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WarrsawPact
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Actually, I have no clue what it means, and I didn't guess. Just tossing out a response indicating that, yes, I get the Princess Bride reference.
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canadian
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Inconceivable
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WarrsawPact
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Now, with my exam tomorrow evening (edit - err, that's this evening), I probably won't be able/willing to post until tomorrow after at least 7:30pm eastern time.

And even then, I might not be back for a little while -- I've got other things I'm doing with my time. So, some other free marketeer, feel free to pipe in with your own responses.

[ June 19, 2006, 03:49 AM: Message edited by: WarrsawPact ]

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A. Alzabo
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quote:
A. Alzabo, RickyB - What's wrong with the government "negotiating" down prices is, the government doesn't negotiate with private parties. They coerce. If the government wants to have companies bid for contracts, that's fine -- but that's not what the government is talking about.

Again, I'm not sure you are correct here. The government is currently expected not to act like any other large buyer here -- often by people who otherwise slam government for being more expensive or inefficient than the private sector.

In other areas governments at all levels are expected or even required by law to negotiate pricing for goods and services if they can -- mostly with entities they already have contracts with. It happens all the time, and I've experienced it from both sides.

quote:
If they want to buy drugs cheaper than they could with bidding, that means they either refuse to buy above a certain price, or they offer businesses an offsetting tax cut or subsidy behind the curtain. That's not negotiation.

If they opt for the former, the companies will pass on costs to the consumer one way or the other, and the market will suffer in the aggregate because the firms won't be willing to supply the country/world with as much medicine if they're forced to sell at a lower price. Price ceilings hurt people. They also tend to lead to a drop in quality.

If they opt for the latter, taxpayers will be the ones paying instead of consumers. We won't really be getting the drugs cheaper; it'll just be that the people who pay taxes will be the ones bankrolling everyone who actually signs on to the government's program. Many Democrats undoubtedly love this plan. And they especially love it because they plan on doing this without raising taxes on anyone but the top 2%, who are all bad people who don't deserve their money (that's putting words in their mouth ).

But let's place ourselves in fantasyland for a second, and say that the firms' managers are all hopped up on crack and decide not to pass on direct costs to the consumer. Instead, they'll be forced to cut back on costs somewhere. Who wins in that situation?
Nobody. Funds will undoubtedly come from research budgets or from something relating to quality, not from advertising, because now the firms have to advertise their products that much harder just to make their money back on each new drug. We all have to wait that much longer for new drugs that would otherwise be saving lives and making people more comfortable. In the meantime, people are uncomfortable, sicker than they need to be, and even die.
I mean, where do people think new drugs come from?

This entire segment seems to be based on a subjective reading.

Look, I'm not a defender of this new drug benefit -- I think it's a boondoggle of the worst sort. If it were up to me, I'd start over.

But there are ways I think the government can partner with companies that aren't the sort of blatant "coercion" you describe.

My agency partners with and negotiates with all kinds of private sector entities that it doesn't have the power to force to do anything.

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Richard Dey
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WP: You are absolutely right about 'gov negotiating'; it is coercion -- but on both sides. Listen to the House Ethics Committee sessions and how they rationalize lobbying! It's a bad joke -- and it was never worse than under LBJ and his guns-and-butter policy.
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A. Alzabo
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RD:
quote:
WP: You are absolutely right about 'gov negotiating'; it is coercion -- but on both sides.
Well, if you put it this way, then I agree. [Smile]

I guess my point is that there are areas where the private sector doesn't find such "coercion" to be a burden -- many entities in many areas gladly tussle over the right to be "coerced" by the government.

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WarrsawPact
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quote:
This entire segment seems to be based on a subjective reading.
It's based on possibilities open to the government.

The government can always tax or borrow (future-tax) more to pay for something a business is offering. That makes them distinct from any other "large buyer" in the market. They are capable, in fact, of exercising monopsony and monopoly power -- which is what many Lefties have threatened/promised -- simply by coercing money from others, i.e., taxpayers.

There's nothing subjective about this. When government negotiates, it has as many carrots as it can take from the people and as big a stick as you can imagine. This is not a compromise arrangement the Democrats are talking about. This is 100% stick and 0% carrot, or the Democrats are planning on using someone else's money to pay for bringing down the point-of-sale cost of those drugs. Period.
I'm not comfortable with the government agencies exercising as much market power as they already do on both the buying and selling ends, so it's especially bad to promise that the government will "negotiate" prices down when that is just blatantly calling one thing by another name.

[ June 20, 2006, 10:26 AM: Message edited by: WarrsawPact ]

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Everard
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Warsaw-
The drug deal that the government "negotiated" with the drug companies for the medicaid bill several years ago involved the government paying a higher then market price for many prescription drugs.

I think you are way off base in your analysis, in other words.

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A. Alzabo
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quote:
It's based on possibilities open to the government.

The government can always tax or borrow (future-tax) more to pay for something a business is offering. That makes them distinct from any other "large buyer" in the market. They are capable, in fact, of exercising monopsony and monopoly power -- which is what many Lefties have threatened/promised -- simply by coercing money from others, i.e., taxpayers.

They can do what you say in the abstract -- I just think your take on it was a worst-case scenario (never thought I'd say that).

quote:
There's nothing subjective about this. When government negotiates, it has as many carrots as it can take from the people and as big a stick as you can imagine. This is not a compromise arrangement the Democrats are talking about. This is 100% stick and 0% carrot, or the Democrats are planning on using someone else's money to pay for bringing down the point-of-sale cost of those drugs. Period.

The subjective part to me was the scenario you presented. Nothing says it has to go that way. Given the Democrats' track record over the last decade, I'm not even worried this will even be implemented (again a subjective judgment).

quote:
I'm not comfortable with the government agencies exercising as much market power as they already do on both the buying and selling ends, so it's especially bad to promise that the government will "negotiate" prices down when that is just blatantly calling one thing by another name.

Again, I disagree that it has to be that way (or that it even will).

As I've said before, I've been involved in negotiations and renegotiations on all sides that really were straightforward business transactions without threat or other coercion, and I can't imagine that it would be good to eliminate that practice.

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WarrsawPact
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Okay, just for the hell of it, why don't you propose the way it could go?
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A. Alzabo
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quote:
Okay, just for the hell of it, why don't you propose the way it could go?
My opinion of what is likely to happen is that their platform proposal dies an early death as the Dems realize how hard it is to get people fired up about something as complicated and bureaucratic as this crappy drug benefit coupled with the "value-added" bonus of trying to explain government purchase/vendor policy in an exciting way.
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WarrsawPact
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Okay, we somewhat agree on that. I'm asking, though, what are the scenarios besides the ones I posted? How else can the government "negotiate" prices down?
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livermeer kenmaile
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Anyone remember wage/price controls, back in the late 60s/early 70s, when the government was frantically trying to curb inflation by putting a cap on wages and commodity prices?

Sock puppets over Adam Smith's Invisible Hand. But then it's no longer invisible, and once we can see what it's doing, it no longer works freely.

But whatEVER you do don't call it socialism (if you're a Western citizen) or call it free-market capitalism (if you're a Chinese national). Doin't want to hurt the sock puppets' feelings.

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A. Alzabo
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WP, part of it is what you already mentioned -- bidding and contracts.

If the government offered contracts (say 3-year contracts)to supply bulk drugs at a discount, I think pharmacos would actually line up to bid. And over the course of the partnership, negotiations and adjustments could be made.

Getting surly with would-be suppliers is really counterproductive if the goal is to actually lower drug prices for the benefit. But it might make for better T.V., which needs to be taken into account -- angry populism seems to get more airtime than policy wonkery.

So I agree with you that there might be a few Dem leaders on television ripping into the evil drug companies. But I think that if we see a lot of that it will basically be an admission that they're not serious about actually making it happen -- it's elections-only stuff. The more bluster and "sticks" we see proposed, the less likely any of those things are to occur. The issue will evaporate after November.

edited for clarity

[ June 20, 2006, 01:02 PM: Message edited by: A. Alzabo ]

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WarrsawPact
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kenmeer - Wage and price controls are socialism. Who calls them anything else?

A. Alzabo -
Bidding, I have less of a problem with that -- y'know, aside from my general dislike of monopsony and government regulation in general. But that's not what people usually mean by "negotiation," agreed?
If the Dems want to talk longer-term contracts, they're going to have to be far more explicit about how their plan is different from the current plan. If it's really as simple as "1 batch and renegotiate contracts" versus "three year contracts," what are the objections to this plan? Why isn't it part of the current plan? And why do so few Democrats know the answer to this question?

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Everard
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"kenmeer - Wage and price controls are socialism. Who calls them anything else?"

Everyone who wants to be accurate with their terms?

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A. Alzabo
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WP:
quote:
But that's not what people usually mean by "negotiation," agreed?

I've renegotiated standing contracts before, and have even hammered things out as I've gone. I was just on a committee that worked with various sites all last year to secure meeting spaces for our division. In some cases, we were still negotiating as the event occurred. It doesn't have to be confrontational -- vendors, etc. were willing to work to accommodate us. I guess I'm saying that in my experience there's more leeway than just at bidding time.

quote:
Why isn't it part of the current plan? And why do so few Democrats know the answer to this question?
My opinion is that they're not actually serious about carrying it out, so they haven't though it through all that deeply.
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Ev -

Challenge me on that in another thread if you like; socialism in practice means and has always meant wage and price controls by one means or another, though it means many other things as well.
-=-=-=-=-
A. Alzabo - No no, I asked if bidding is what people usually mean by negotiation. Contracts are negotiated (sometimes with vastly more power on one side than the other, but I digress), but who means open "bidding" when they say "negotiation"?

[ June 20, 2006, 01:21 PM: Message edited by: WarrsawPact ]

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A. Alzabo
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quote:
A. Alzabo - No no, I asked if bidding is what people usually mean by negotiation. Contracts are negotiated (sometimes with vastly more power on one side than the other, but I digress), but who means open "bidding" when they say "negotiation"?

Well,for example, we are in the process of selecting a private-sector vendor (or vendors) to perform some of our business processes (we are basically required by law to hire a company to do these things).

They don't just bid -- there's a long requirements process. So we need negotiate with all of them about what they can/will offer in differnet areas before bidding or contracts can even realistically happen.

In other areas we have negotiated partnerships that eliminate the need for bidding or "official" contracts, basically with government and private entities making "gentlemen's agreements" to promise behave in certain ways (ie. how they provide data to us, how we sieze accounts, etc.).

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