Profit Tears

There are obvious consequences when there are many buyers seeking a product verses a consortium of buyers joining together to act as a single unified buyer, an aggregation that may add additional price reductions by reason of the increased volume. It’s the most basic economic rule: supply and demand. And if the buyers are governmental bodies and hospitals, bidding against each other for the same supplies, the market automatically charges what the market will bear. While they may be confined by statutes and administrative governmental bodies to prevent “price gouging,” it takes a pretty egregious abuse of the ability to charge absurdly high prices to trigger governmental intervention. But when those who must foot the ultimate bill are taxpayers, hospitals and insurance carriers are assessed, not only do virtually all of us get slaughtered in the feeding frenzy, but often state and hospital budgets simply run out of funding, shutting down other valuable programs to pay for the excess.

Indeed, N95 masks, which cost way less than a dollar each before the COVID-19 pandemic now can cost ten times that sum in an open trading arena, even with gigantic orders. As Donald Trump seems to be willing to use his power to force domestic manufactures in emergency times under the Defense Production Act solely against his outspoken critics, only two so far (General Motors and 3M), he is instead proselytizing free market capitalism as the legitimate solution to most shortages of health supplies and equipment.

Oh, and the states have to bear most of the responsibility. Horrific prices and egregious profits, it seems, are right down Mr Trump’s core business philosophy. Let the rich get richer. But what is incredibly ironic is that most of those supplies are coming from the nation Trump blames for this outbreak: China. So, Mr. Trump is making sure that American taxpayer and hospital money makes China and her manufacturers even richer. And, of course, the big boy middlemen who are paid to ship these orders. So, we’re buying more from China, and they’re not buying much from us since that Trump-touted trade agreement had a pandemic out. Hmmmm. The best negotiator who ever lived!

Consistent with the President’s mounting pressure to reopen a plunging economy long before it is medically prudent to do so, he is encouraging protesting scoff laws gathering in their respective state capitals  (notably Minnesota, Michigan and Virginia), not exactly practicing safe-distancing, who are arguing to lift governmental lockdowns because these restrictions violate their rights. Gee, the second and even potentially third waves of CV19 that might result from such gatherings just might kick up the demand for those medical supplies, so who knows how much more profits can be generated at our collective expense. Way to go capitalist Trump!

“The president took to Twitter with the kind of rhetoric some of his supporters have used to demand the lifting of the orders that have thrown millions of Americans out of work… ‘LIBERATE MINNESOTA!’ ‘LIBERATE MICHIGAN!’ ‘LIBERATE VIRGINIA,’ Trump said in a tweet-storm in which also lashed out at New York Gov. Andrew Cuomo to stop complaining about the federal response.

“On Thursday [4/16], Trump laid out a three-step, weeks-long map for easing the restrictions in places where the virus is being brought under control, assuring the nation's governors: ‘You’re going to call your own shots.’

“But some governors around the country made it clear they are not ready to break out the roadmap, with some saying they badly need help from Washington in ramping up testing for the virus first. Cuomo accused the federal government of ‘passing the buck without passing the bucks… The federal government cannot wipe its hands of this and say, `Oh, the states are responsible for testing.' We cannot do it. We cannot do it without federal help…’” Associated Press, April 17^th.

As Trump chastised Cuomo for complaining too much, bits and pieces of new information continue to pour emphasizing just how devastating delays, lack of truth and inaction have been against this aggressive contagion.

“China acknowledged that the coronavirus death toll in the one-time epicenter city of Wuhan was nearly 50% higher than reported, underscoring just how seriously the official numbers of infections and deaths around the world may be understating the dimensions of the disaster.” AP.

And then there’s little game where the feds are showing how they are helping get those over-price supplies with government-chartered cargo flights from places like China. But there are no price negotiations. No ceilings on what can be charged, just a generic pledge to be “reasonable.” This federal subsidy of profiteers, helping them make even more money, has the euphemistic name, “Project Air Bridge.”

“[It’s a] secretive Trump administration project that enlists private companies to bring masks and other medical equipment to the U.S. to fight the coronavirus outbreak has provided tens of millions of dollars in taxpayer subsidies to the nation’s largest medical-supply companies with little public accounting.

“Over the last three weeks, taxpayers have paid to fly the companies’ supplies to the U.S. from Asia on government-chartered cargo flights, while the firms have been free to sell the material to hospitals, clinics and others at prices they choose… That has saved the companies more than $25 million in shipping costs, savings they are not required to pass on to the medical systems, state governments and others who buy their products. The supply companies’ profits topped $2 billion last year, financial statements show…. The administration has refused to disclose crucial details of the operation..., including its financial arrangements with the companies involved. These include multibillion-dollar firms such as McKesson Corp., Cardinal Health Inc., FedEx and UPS.

“Five of the six medical distributors involved in Project Air Bridge — the biggest companies — also wouldn’t answer questions about their participation… Only Medline Industries Inc., a private company based outside Chicago, agreed to discuss Air Bridge. A spokesman said the company’s agreement with the government includes a stipulation that it charge ‘reasonable’ prices, but the spokesman would not detail what that meant or how it would be enforced.

“The Federal Emergency Management Agency [FEMA], which is running Air Bridge, required The Times to file a Freedom of Information Act request to get copies of any contracts or other financial agreements with the participating companies, a process that can take weeks or months… Smaller competitors say the administration has effectively excluded them from the government-subsidized program.

“‘It seems like you have to be one of the big boys running things to get a ride on the bus,’ said an executive at a company that was not invited to participate in Project Air Bridge… ‘That seems pretty unfair,’ the executive said, noting that the cost of air freight can add 10% or more to the price of medical supplies for firms that have to pay to ship from Asia themselves…

“As of Monday, Air Bridge had brought in 400,000 N-95 masks, 25.7 million surgical masks and 24,000 face shields, the administration says. The program has included more than 35 flights, which have cost about $750,000 per flight, according to FEMA. Vice President Mike Pence gave a slightly different count on Wednesday, saying that 44 flights had taken place and roughly 50 more were scheduled.

“Medline spokesman Jesse Greenberg defended the company’s participation in the government-funded shipping operation and disputed the suggestion that Medline is getting preferential treatment… ‘The fact is that we are getting additional products in an expedited fashion at a time when they are needed most,’ he said.” Los Angeles Times, April 17^th.  

It’s always the same story: the federal government constantly tilts the field towards the biggest in the land. Shutting down major EPA restriction on heavily polluting industries. Slashing corporate taxes while running a deficit that the rest of us have to pay for and encumbering the federal government with so much more debt that it severely limits the ability to deploy needed cash for other more generally beneficial policies. Income inequality is the worst in the developed world. This pandemic is creating new opportunities for Mr Trump to further widen that gap, and he is making that happen.

Trump’s palliatives, misinformation, manipulating the market to cause prices for vital supplies to skyrocket have only made a terrible situation so much worse. And still his approval ratings hover around 45%, suggesting that there just may be a genetic cross-fertilization between human beings and lemmings.

            I’m Peter Dekom, and watching rolling mistakes that so obviously and consistently lead to results that are as bad, if not worse than, projected is deeply disheartening.