Points to ponder

by Melvyn R. Copen

Sedona, AZ (May 22, 2011) – Every now and then, issues arise which I believe are important, but which can be dealt with in substantially less than a full column. When I accumulate a few, “points to ponder” is the result.

Gas Prices: My last article, entitled “Congress does it again,” dealt with the window dressing that has been applied to “address” the subject of Executive compensation – and the fact that the American Public lets it happen. Here’s another. Near-record breaking prices at the gas pumps and general consumer unhappiness has forced Congress to address this issue too. However, despite an indication that prices have little to do with supply and demand, and huge increases in oil company profits, the Senate rejected an attempt to repeal tax breaks and subsidies to oil companies (about $4 billion worth) – lots of rhetoric, no action. All this took place as 4 of the big five oil companies reported enormous increases in first quarter profits over last year (Exxon Mobile up 69% to $10.7 billion, Royal Dutch Shell up 30% to $6.3 billion, Conoco Phillips up 43% to $3.0 billion and Chevron up 36% to $6.2 billion). Only BP, suffering the after-affects of the Gulf of Mexico oil spill, showed a decline. Perhaps it is more than just tax breaks and subsidies that need to be addressed – none of the top 10 recipients of campaign funds in Congress received less than $200,000 from big oil interests. Is this what the voters (and gas purchasers) of the nation desire?

Health Insurance: In a similar vein, health insurers are reporting record profits, largely as they explain, because people are postponing medical treatment. Now the catch – since this is likely to build future demand for services, many are requesting an increase in premiums – despite record profits in the preceding two years. Very little of the focus on health care seems to be directed towards reducing costs. Most of it seems to be on finding ways to pay for ever-increasing costs of treatments – many of which are of questionable value. Clearly, the industry does not seem to be able to regulate itself. That raises the question: “How or when will Congress be able to focus on important issues in the interface between industry and the population without the potential influence of huge industry-dominated campaign contributions? Seems like a good argument for term limits.

Prescription Drugs: AARP reports a significant increase in the prices of some popular drugs that are close to the expiry of their patent protection. The report indicates that “the retail price of brand-name drugs that have faced generic competition in 2010 rose by 31% between the end of 2004 and…2009. This was supported by a study conducted by Thomson Reuters MarkeScan. Their conclusion: “The analysis indicates drug makers are scrambling to make as much money as possible from blockbuster drugs before their patents expire.” Again, this is an industry that has spent more than any other in “courting” members of Congress. According to OpenSecretes.org, it has lavished more than $2.1 billion for lobbying efforts since 1998, eclipsing insurance (in the #2 spot with only $1.5 billion) and Oil & Gas (#6 with $1.1 billion). But then there is the group in the #3 spot, business associations, adding another $1.2 billion to the effort. [Note: in all fairness, contributions by unions would be up there as well, except that they are reported in this data, as in the case of businesses, by the specific groups they represent.] Question: is all of this benign – or does it place the individual, unorganized consumer at a disadvantage?

Consumer Protection: A reader recently wrote a letter to the consumer protection advocate of a major newspaper. Her issue was that she had purchased a round-trip ticket for a vacation trip (cost $355) and then had to change the date of her departure. The airline informed her that seats were available on the earlier flight and they could make the adjustment, but it would cost her a change fee plus the difference related to the higher airfare that applied (vs. the air fare in place for her original booking). The additional amount that she would have to pay was just over $355. She checked and found a one-way fare for just over $100 and asked to be able to use the return trip portion of her original ticket. The airline declined and she wrote the consumer advocate to ask if there was “some regulator that would consider her complaint.” The response: “the airline did not break any rules…Basically they want to prevent the exactly the scenario you’re describing…Them’s the rules.” They told her next time to read the fine print. Yes, but the fine print is pretty much the same for all airlines and much of it is written and presented in such a way as to discourage reading and/or understanding. And who says that the “rules” are reasonable, sacred and appropriate? What has happened to our sense of reasonableness and fairness? Where can a single individual turn for help? Should there be some type of relieve, or should “caveat emptor” be the guiding principle for everything?

Airplane Seating: On a much lighter note, it would be interesting if someone could come up with a practical aircraft design that would permit more effective loading and unloading. Every time I travel by air, I am struck by the inefficiency in getting passengers onto and off the aircraft. In the United States, most trains are built the same way – with passengers entering from the front and rear, but other nations also use compartments, loading from the side, where everyone can board almost simultaneously. Be interesting if someone came up with modules which could be pre-loaded with passengers (and baggage) and then just slid into the plane body. I’m sure there are much more imaginative solutions – the trick, of course, being to make it cost effective, both with respect to aircraft design and airport facilities. Could be an interesting challenge for some of the engineering schools around the world!

The end of the world. I’m writing this at 3 p.m. on May 21 – with less than 3 hours to go before a significant number of people believe the world will end in a series of cataclysmic events. If it does, this column will never make it to print and no one will ever know what I wrote. Probably even better, we won’t have to worry about the daunting tasks of Congressional reform or consumer protection. If you are reading this, you might speculate on what it is in the human psyche that permits a significant number of people to accept a theory that has no basis in fact and has proved to be incorrect every time it has been expressed previously.

Hope a few of these items have given food for thought. Appreciate your reactions as you ponder the points above. [You may posts comments immediately below.]

© Mel Copen, May 2011