Explaining Washington’s Love of Zombies

Explaining Washington’s Love of Zombies

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Plus, Trump's plan to import cheaper drugs
Wednesday, December 18, 2019
While we await the vote to impeach President Trump, here’s what’s happening on the fiscal front.

Explaining Washington’s Love of Zombies

In one of Washington’s less appealing year-end rituals, lawmakers have once again passed a package of tax extenders — special tax breaks aimed at specific industries, such as race-track owners, craft-beer brewers and short-line railroad operators. The Wall Street Journal’s Richard Rubin on Wednesday took a look at this year’s all-too-inevitable extenders — called that because they extend what are supposed to be temporary tax breaks into the next year and sometimes beyond — while searching for the reason they persist. Here’s Rubin’s general take:

“Extenders have been around for decades, and the incentive to keep them alive is just too strong. Short-term extensions let lawmakers hide the true cost of tax breaks, and the $54 billion, 10-year estimate for this week’s deal would be much larger if it assumed the breaks would get extended again and again. Passing a last-minute package also reduces scrutiny of individual breaks.”

But there’s an even simpler way to express the logic of the annual extender ritual, provided to Rubin by a former Republican House aide who now works as a lobbyist: “It is not easy to convince Congress to just take something away from a constituent without offering something in exchange.”

In other words, once granted, the industry-specific tax breaks are seen as a possession, a thing of value that will be experienced as a loss if taken away. And, as critics have long decried, lawmakers are much better at providing new benefits than taking away old ones.

In any event, the tax extenders, which some critics thought might finally bite the dust amid the partisan rancor in Washington this year, will once again live to see the New Year. Their vitality inspired Rep. Kevin Brady (R-TX) to tweet Tuesday, “When I die, sprinkle my ashes over the extenders - so I live thru eternity.”

Chart of the Day: Americans Think the Tax System Is Unfair

Most Americans think the tax system is unfair, according to a new report from the Pew Research Center. A Pew survey found that 62% of respondents say the federal tax system is either not at all fair (23%) or not too fair (39%), while 37% say it is moderately fair (35%) or very fair (2%).

Opinions are fairly consistent across incomes levels, but the issue shows a clear partisan divide.

“Democrats are broadly critical of the fairness of the tax system, while Republicans hold more mixed views,” Pew said. “About half of Republicans and Republican-leaning independents (48%) say the tax system is either moderately or very fair, while about as many (51%) say it is not too fair or not at all fair. By contrast, 71% of Democrats and Democratic leaners describe the federal tax system as not too fair or not at all fair; just 29% of Democrats say the system is at least moderately fair.”

Trump’s Plan to Allow Drug Imports from Canada Has a Long Way to Go

The Trump administration on Wednesday formally proposed a long-awaited plan to allow states to import certain prescription drugs from Canada, marking the first time that U.S. health agencies have taken up then idea as a way to lower drug prices.

But the plan, first announced in July, is likely still a long way from being enacted, and many expensive drugs, including insulin, wouldn’t be allowed in state plans in any event.

What the administration is doing: The plan would create two pathways for drugs to be imported.

A proposed rule would allow states, wholesalers and pharmacies to propose programs for purchasing certain brand-name drugs from Canada. States will have to submit their proposals to the federal government for approval, and the drugs would be tested for authenticity and safety. The proposals will also need to demonstrate that they will lower costs for American consumers. “Under this option, states could not import more complex — and often more expensive — medications, such as biologic drugs, intravenous drugs, products injected in the spinal column or eye, or controlled substances,” the Post explains.

HHS also said it was issuing draft guidance for pharmaceutical manufacturers explaining how they could facilitate importation of their FDA-approved drugs made overseas for sale in foreign countries. “This would potentially allow for the sale of these drugs at lower prices than currently offered to American consumers, giving drugmakers new flexibility to reduce list price,” Azar reportedly said. But many experts doubt that drug companies would choose to do so, the Post says.

Bucking Republican orthodoxy, and the drug industry: “The decision is an unusual one for a Republican administration,” writes New York Times reporter Katie Thomas. “Progressives have long supported such a policy, but the pharmaceutical industry vehemently opposed drug imports by claiming they were unsafe. Food and Drug Administration commissioners had also opposed importing drugs intended for overseas use, citing safety issues.” The administration now says its proposal will establish a process that will ensure that drugs being imported pose no additional health or safety risks and will reduce consumer prices.

What the critics say: Democrats charge that Trump is failing to deliver on his promises to lower drug costs and allow the government to negotiate prices directly with drugmakers. “Once again, the Trump White House is tiptoeing around Big Pharma with a spectacularly pinched and convoluted proposal that excludes insulin and has no actual implementation date,” Henry Connelly, a spokesman for House Speaker Nancy Pelosi, said. “If President Trump actually wants to lower drug prices, he should pick up the phone and tell Senator McConnell to send him the House-passed Lower Drug Costs Now Act which provides the negotiations he promised the American people.”

In an analysis of the proposal, The Washington Post’s Paige Winfield Cunningham wrote, “Here’s a big reason this task is so hard for Trump and other Republicans: They don’t want the U.S. government to directly force drugmakers to lower their prices.”

The big questions: The outlook for Trump’s plan is clouded by a number of other questions, including:

1. What will happen if or when the pharmaceutical industry brings legal challenges?

2. How many states will pursue drug importation plans?

3. Will it be possible to import significant quantities of prescription drugs from Canada? (Prescription drug prices are cheaper in Canada because a federal body there sets a price ceiling for patented drugs, The Washington Post’s Yasmeen Abutaleb and Laurie McGinely explain.) But Canadian officials have objected to the plan and warned that their supply of drugs is far too limited to fulfill the demands of the U.S. market or affect prices here. They also fear Canada could face shortages as a result.

The bottom line: Health and Human Services Secretary Alex Azar told reporters Tuesday that the administration is “moving as quickly as we possibly can,” according to the Post, but that he could not predict when the plan might take effect. It likely won’t be anytime soon. “Analysts said it could be years before any drugs are actually imported from Canada — if they ever are — given myriad regulatory and legal requirements involved in finalizing and implementing the plan,” Abutaleb and McGinley write.

So those early "Star Wars" reviews are kinda disappointing. On the other hand, critics liked "The Last Jedi," so what do they know? Send your tips and feedback to yrosenberg@thefiscaltimes.com. Follow us on Twitter: @yuvalrosenberg, @mdrainey and @TheFiscalTimes. And please tell your friends they can sign up here for their own copy of this newsletter.

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