Sweeping new U.S. breast cancer guidelines released on Monday recommend against routine mammograms for women in their 40s, and suggest women 50 to 74 only get a mammogram every other year.

The new guidelines by the U.S. Preventive Services Task Force, an influential panel of independent experts, would sharply curtail the number of breast mammograms done in the United States, sparing women the worry of false alarms and the cost and trouble of extra tests.

But U.S. cancer experts say the altered schedule may mean more women will die from breast cancer.

Should you and your loved ones get mammograms? What are the implications for health care reform, with members of Congress looking for ways to cut costs?

Join us for a live online on breast cancer screening and mammograms on Tuesday, Nov. 17, at 12pm ET. The event will be moderated by Reuters Health Executive Editor Ivan Oransky and joined by Reuters’ editor in charge of health and science, Maggie Fox.

Our confirmed participants:

Heidi Nelson, research professor of medical informatics and clinical epidemiology and medicine at the Oregon Health Sciences University, who has led systematic evidence reviews for the U.S. Preventive Services Task Force.
Daniel B. Kopans, professor of radiology at Harvard Medical School and director of breast imaging at the Massachusetts General Hospital.

You’ll be able to follow the discussion by listening in on the conference call line below or via the live blog here (it’s also embedded lower on this page.) If you have any questions for the participants, please leave them in the comments below. We’ll ask a selection on your behalf.

Update: Thanks to everyone who participated. You can hear a recording of the call here

By John Aloysius Farrell — the views expressed are his own. This article first appeared on GlobalPost.

The death of Sen. Edward Kennedy will cost the United States not just a passionate voice for economic and racial justice, but also its irreplaceable champion of a liberal, less belligerent, humanistic foreign policy.

Step back to Friday, October 11, 2002, when only 23 U.S. senators voted against the resolution authorizing President George W. Bush to go to war in Iraq.

The anger and fear spurred by the 9/11 attacks was too raw, and Democrats named Clinton, Kerry, Biden and Edwards, nursing ambition, dared not look “soft” on terrorism. Election Day was just weeks away. The two Democratic leaders — Sen. Tom Daschle and Rep. Dick Gephardt — gave Bush the green light for war. Kennedy’s pal, Sen. Chris Dodd, voted “yes.” Even Rep. Patrick Kennedy, the Democrat from Rhode Island, voted for war.

But not Patrick’s dad. Not Ted.

In what seemed, at the time, a quixotic performance, Ted Kennedy returned to the Senate floor time and again, warning Americans and his fellow senators of the catastrophe ahead. His prestige gave cover to other Democrats, and the number of “no” votes doubled, then tripled.

“Just one year into the campaign against Al Qaeda, the administration is shifting focus, resources and energy to Iraq,” Kennedy warned. “The change in priority is coming before we have fully eliminated the threat from Al Qaeda … Even with the Taliban out of power, Afghanistan remains fragile.”

In the end, Kennedy still got creamed that day — 77 to 23. But a few years later, when asked what vote made him the proudest, in all those thousands of roll calls in almost five decades of service in the Senate, he pointed to his vote against the Iraq war.

And that is what I, you, we, the world will miss: the big guy with mighty shoulders and international stature, willing to shout “No!” when the drums of war are being pounded by the cons and neo-cons, the neo-libs and triangulators, the chicken hawks and profiteers.

“It is possible to love America while concluding that it is not now wise to go to war,” Kennedy said in 2002. What American politician will have the guts to say something like that, at a pivotal moment in US history, after Ted joins Jack and Bob beneath the grassy slope at Arlington?

Sure, the guy was no saint. Great politicians, in my experience, rarely are. Kennedy’s personal failures have been amply catalogued.  And the same senator who could rail against the military arms industry did pretty well over the years, using his roster of behind-the-scenes tricks to add fighter planes and advanced research funds to the Pentagon budget in order to protect jobs and promote industry in Massachusetts.

Nor can we forget how the Kennedy family legacy mixed such gems as the “missile gap” and the Bay of Pigs debacle with genuine accomplishments like the nuclear test ban treaty, the Cuban Missile Crisis and the Alliance for Progress. Or how Jack Kennedy’s inaugural vow to “pay any price, bear any burden” led us into the bloody swamps of Vietnam.

It was the Vietnam War, and Lyndon Johnson’s relentlessly ineffective prosecution of that war, that split the Democratic Party, shattered the liberal consensus, and gave Ted Kennedy his voice.

Kennedy’s initial venture into foreign affairs occurred in 1965, when he helped steer a historic immigration reform bill through the Senate; it was an issue he would stick with, and a cause he would champion, for more than 40  years.  As Kennedy’s biographer, Adam Clymer, relates in “Edward M. Kennedy, A Biography,” he used that same Judiciary Committee perch, with its oversight of American refugee policy, to hold hearings and fact-finding missions about Vietnam.

In 1966 and 1967, Ted and his brother Robert began to split with Johnson over the war. After losing a second brother to assassination in 1968, Ted picked up the fallen colors. He quickly became a leader of the New Left — in both domestic policy and foreign affairs. It was a job he never relinquished.

In the Senate, Kennedy fought Richard Nixon’s Vietnam and nuclear weapon policies and vexed the White House with his strong human rights stands on Biafra, Chile and Bangladesh.  He tangled with Ronald Reagan over nuclear arms, El Salvador and Nicaragua. And throughout his career, he was an outspoken critic of the British crackdown on Catholics in Northern Ireland, the Soviet government’s brutal treatment of dissidents and South Africa’s racist system of apartheid.

As Conor O’Clery, Andrew Meldrum and Pascale Bonnefoy will tell you here at GlobalPost, Ted Kennedy will be mourned in Ireland, South Africa and Chile, as well as in Massachusetts tonight.
The culmination of Kennedy’s Irish ventures came during the Clinton administration, when I happened to be covering the White House for a Boston newspaper. It was a great perch, and given my own Irish ancestry, I took an abiding interest in what was going on.

Oh it was fun. For years, Kennedy and a few other Irish-American politicians — Tip O’Neill, Pat Moynihan, Hugh Carey — had resisted the sentimental blarney, rampant among their constituents, that glorified the violent acts of the hard men of the Irish Republican Army.  Then their friend John Hume called from Derry with a message: the IRA might be ready to deal.

And suddenly there was Teddy, mischievous and grinning and determined as hell, employing his skillful staff, exploiting his contacts with former Kennedy staffers at the White House, and mightily pissing off the English, the British desk at State, and some of Bill Clinton’s own advisers by suggesting that a visa be granted, and a hand extended, to Gerry Adams and his Sinn Fein brothers-in-arms and their Protestant counterparts on the other side of the divide.

Teddy had Bill’s back, and Clinton responded with nerve and verve and insight. George Mitchell earned his own brand of sainthood negotiating the Good Friday peacemaking agreement. And, typically, Teddy cashed in by getting his sister, Jean Smith, appointed as U.S. ambassador to Ireland. Honey Fitz and PJ would be proud.

I will miss the big guy. There are few in American politics who loved the game, and played it so well, for so many years — who did so much for so many, despite the inevitable tragedies. Kennedy joins an elite handful — Clay, Webster, Calhoun and the like – who never made it to the White House, but define the word “senator” in American history.

Yeah, I will miss him. But I fear we all will miss him, in the pitch of a crisis, when our baser instincts come to the fore, and we need that bellowing independent voice, reminding us what America means. And I’m hoping tonight that, like John Steinbeck’s ghost of Tom Joad, Ted Kennedy will never leave us:

“Well maybe … a fella ain’t got a soul of his own, but on’y a piece of a big one … Then I’ll be all aroun’ in the dark. I’ll be ever’where — wherever you look. Wherever they’s a fight so hungry people can eat, I’ll be there. Wherever they’s a cop beatin’ up a guy, I’ll be there … I’ll be in the way guys yell when they’re mad an’ — I’ll be in the way kids laugh when they’re hungry and they know supper’s ready. An’ when our folk eat the stuff they raise an’ live in the houses they build — why, I’ll be there.”

More from GlobalPost:

Kennedy’s death: Ireland mourns a “true friend”

Ted Kennedy, anti-apartheid crusader

Analysis: Lessons of Europe’s history with terrorism

John M. Berry is a guest columnist who has covered the economy for four decades for the Washington Post and other publications.

By John M. Berry

Financial crises and the policies to deal with them top the agenda at the Kansas City Fed's Jackson Hole conference. But what is actually going to be on everyone's mind at the august gathering is the uncertain future of the Federal Reserve itself.

Many members of Congress want to clip the Fed's wings for failing to prevent the crisis and for its actions since the meltdown began two years ago. In particular, most are angry about government bailouts, starting with the $29 billion in Fed backing for the purchase of Bear Stearns by JPMorgan Chase.

Financial institutions got into trouble because they took enormous risks, and the public bailouts look suspiciously like unjustified rewards for fat cats' wildly reckless behavior. But the bailouts were an unavoidable cost of halting the country's plunge into a second Great Depression. Congress has got to swallow its anger and do what is needed for the future.

The first objective on the financial reform agenda when Congress reconvenes next month should be to do no harm. That means killing legislation that would direct the Government Accountability Office to "audit" the Fed's monetary policy actions. Such audits could allow politicians to influence those decisions, which is exactly what some of the bill's sponsors want.

Angry as they may be at the central bank right now, members of Congress would surely rue the day they had to deal directly with raising interest rates -- a step that will inevitably be needed at some point to curb inflation and keep the economy on an even keel.

Whatever else the role of the Fed is to be, its monetary policy independence should be preserved as it pursues its twin mandates of stable prices and maximum sustainable employment. And Fed officials need to be insulated from political pressures.

In return for that insulation, the Fed has become ever more open and accountable. Since 1994, the central bank has started announcing policy changes as soon as they are made, quickly publishing detailed minutes of policymaking meetings, and releasing transcripts after a five-year lag. It also now makes public details of the long-term forecasts of its top officials.

The second Fed role that must be preserved in the national interest is that of lender of last resort to financial institutions. Solvent banks that get squeezed for cash must be able to borrow directly from the central bank to prevent a failure that could trigger a collapse of other institutions.

Of course, the Fed, led by Ben Bernanke, went far beyond that traditional lending role last year. Citing legal authority not used since the 1930s, it loaned money not just to banks but to brokers, investment banks and insurance companies. And when that failed to stabilize money markets, it risked hundreds of billions of dollars of taxpayer money to buy mortgage-backed securities and other private credit instruments to make credit more available to businesses and households.

Bernanke and other Fed officials were uncomfortable extending credit in these unusual ways, which really ought to have been the Treasury's responsibility. But, objectionable as they were to many members of Congress and to a number of economists, these measures have proved essential. In any case, the Treasury Department did not have the money or the authority to act. To settle this for the future, Treasury should be granted both under the financial system overhaul.

There is also plenty of opposition to the administration's proposal to give the Fed broad oversight of financial markets as a regulator of systemic risk. The crisis has demonstrated that such a regulator is badly needed, and the Fed should win this one by default. Despite the central bank's failure to head off the crisis, there is simply no other agency -- not the Securities and Exchange Commission, the Federal Deposit Insurance Corp, the Comptroller of the Currency or any other -- capable of doing the job.

As for the remaining key issue, consumer protection, Bernanke should cede responsibility for truth-in-lending and all related activities to the new consumer agency proposed by the administration. If he does that, the Fed will be more likely to keep the powers it really needs.

– Stephen M. Davidson, a Boston University School of Management professor, is author of the forthcoming book, “In Urgent Need of Reform: Saving The U.S. Healthcare System.” The views expressed are his own. —

Polls suggest the president is losing some popular support for his health care reform efforts apparently because people worry about some of the possible secondary effects. They fear that quality of care would decline, their out-of-pocket costs and taxes would increase, and they would not be able to choose their own doctor. The fact that there is little reason for these worries is beside the point.

Ordinarily, when a problem arises, we try to figure out what the cause is and fix it.  With legislation, especially something as complex as healthcare, we don’t do that. Instead, we impose constraints that are unrelated to the diagnosis. In this case, Congress is trying to fix the problems using private insurers, without raising taxes, and keeping a limited role for government. So, leaders try to fashion a bill that accomplishes at least the main goals of reform – reducing the numbers of uninsured and containing costs – are at a considerable disadvantage. Partly as a result, it is much harder to persuade the American people that the complicated plans they come up with will do the job without harming them.

The fact is that much simpler solutions are available.  For example, require that everyone contribute an income-related amount (that is, more for higher-income people) to a dedicated federal health insurance fund (HIF), which would be used to pay insurers and health plans. And then issue vouchers which entitle everyone to choose a health plan or insurance policy.

The contribution can be called a tax, which makes it a non-starter, even though it would probably mean that almost everyone would pay less than they do now. It would substitute for the premiums they now pay as well as for most of the taxes that go to health-related activities.  (If Medicaid were folded in, the savings would be even greater; Medicare is so popular with an important constituency that it would be harder to include it in a new plan.) The amounts paid could be based on a person’s income (like our progressive income tax), which means those with pre-existing conditions would not face unaffordable premiums.

Using our vouchers, we would choose our own insurance policies from private insurers.  Not only would the insurance cover the services we need, but instead of basing our choices on what we can afford (which might not cover what we need, which is the case for millions of Americans today), they would be based on the providers available and the quality of the insurer’s service. The insurers, in turn, could be paid risk-adjusted amounts from the HIF, which would protect them against the possibility that large numbers of people with pre-existing conditions and other risk factors would choose them.

The federal agency that administers the HIF would have only a few jobs to do:  estimate the total needed for the next year and set contribution rates to produce a large enough fund; certify insurers as capable of performing the necessary insurance functions and inform the public about those firms; and set the risk-adjusted rates to be paid to the insurers.

Insurers would negotiate compensation arrangements with providers for the patients who choose them.  Risk-adjusted payments would protect them to a considerable extent, but some might decide to transform themselves into prepaid group practices like Group Health of Puget Sound or find other ways to assure quality care at reasonable cost.  Plenty of models are available for them to choose.

This approach sounds radical.  But if you think about it – without the Congressionally imposed constraints – it is really quite simple.  The federal government already knows how to set and collect progressive taxes, private insurers and providers already negotiate with one another, and having a voucher assures coverage and simplifies the insurance choice process.  Most importantly, it would actually accomplish the two main goals of reform: providing insurance to everyone and containing costs.

– Dr. Steffie Woolhandler and Dr. David Himmelstein are both associate professors of medicine at Harvard Medical School and primary care doctors at Cambridge Hospital. They co-founded Physicians for a National Health Program. –

Once they’re finished mandating that we all buy private health insurance, Congress can move on to requiring Americans to purchase other defective products. A Ford Pinto in every garage? Lead-painted toys for every child? Melamine-laced chow for every puppy?

Private health insurance doesn’t work. Even middle class families with supposedly good coverage are just one serious illness away from financial ruin. In a study carried out with colleagues from Harvard Law School and Ohio University we found that medical bills and illness contributed to 62 percent of all personal bankruptcies in 2007 – a 50 percent increase since 2001. Strikingly, three quarters of the medically bankrupt had insurance – at least when they first got sick.

In case after case, the insurance families bought in good faith failed them when they needed it most. Some were bankrupted by co-payments, deductibles, and loopholes that allowed their insurer to deny coverage. Others got too sick to work, leaving them unemployed and uninsured.

Now Congress seems poised to fulfill insurance executives’ prayers; make failure to buy their faulty product a federal offense. We’ve seen this brave new world in Massachusetts. Here, beating your wife, communicating a terrorist threat and being uninsured all carry $1000 fines. Our law has halved the state’s already low uninsurance rate – mostly by expanding Medicaid and similar programs at great public expense.

But reform hasn’t made care affordable for middle class families, or for the public treasury. A middle income uninsured 56 year old is now forced to lay out at least $4,800 for a policy with a $2,000 deductible before it pays for any care, and 20 percent co-payments after that. Skimpy, overpriced coverage like this left one in six Massachusetts residents unable to pay their medical bills last year.

Even among the insured, 18 percent skipped care because they couldn’t afford it. Meanwhile, as costs rise for subsidized coverage our state Senate plans to drop 28,000 people from the insurance rolls, and public hospitals and clinics have suffered draconian cuts as funds were diverted to shore up the reform.

Such shrunken coverage for the middle class and the evisceration of institutions that care for the poor prefigure the ugly reality of the president’s plan. Searching for the $150 billion extra he’d need each year just to cover the uninsured, Obama threatens to tax health benefits for those who are currently insured, effectively increasing its price. And he’d drain Medicare and Medicaid funds from safety net hospitals, anticipating a sharp drop in those unable to pay for care – a drop which has largely failed to materialize in Massachusetts.

The President’s other proposed funding streams aren’t objectionable, just illusory: unenforceable pledges from hospitals, insurers and the AMA to slow health inflation – a repeat of the empty promises made when Presidents Nixon and Carter threatened cost controls; and the assumption of windfall savings from computerization and care management, assumptions that the Congressional Budget Office has dismissed as wishful thinking.

A single payer reform could realize about $400 billion in savings annually on health care bureaucracy – enough to cover the uninsured and to provide first dollar coverage for all Americans. But the vast majority of these savings aren’t available unless we go all the way to single payer.

Adding a public insurance plan option – as the president proposes – won’t fix the flaws in Massachusetts-style reform. A public plan might cut private insurers’ profits, which is why the insurers hate it. But insurers’ roughly $10 billion in annual profits is only a sliver of the money squandered on bureaucracy.

The complexity and fragmentation of an insurance system with multiple competing payers breeds this massive waste. In addition to their profits, insurers spend vast amounts on overhead for marketing (to attract healthy, profitable members); demarketing (to avoid the sick); keeping track of their ever-shifting roster of enrollees and collecting their premiums monthly; fighting with hospitals and doctors over bills; and lobbying politicians. And doctors and hospitals spend tens of billions more keeping track of who got every band-aid and aspirin tablet, and fighting with insurers to collect payment.

A single payer plan would eliminate most insurance overhead, as well as these other paperwork expenses. Hospitals could be paid like a fire department, receiving a single monthly check for their entire budget, eliminating most billing. Physicians’ billing could be similarly simplified.

While a public plan option could save on profits, it would forego most of the other $390 billion that single payer could save. Hospitals and doctors would still have to maintain their elaborate billing systems. And overhead for even the most efficient competitive public plan would be far higher than Medicare’s, which automatically enrolls seniors when they turn 65 and disenrolls them only at death, deducts premiums directly from social security checks, and does no marketing.

Moreover, a kinder, gentler public plan would quickly fail in the health care marketplace. Insurers compete by NOT paying for care: by seeking out the healthy and avoiding the sick; by denying payment and shifting costs onto patients; and by lobbying for unfair public subsidies (as under the Medicare HMO program). Competition in health insurance involves a race to the bottom, not the top.

A public plan that abstained from marketing would soon be saddled with the sickest, most expensive patients, whose high costs would drive premiums to uncompetitive levels. Similarly, failure to emulate private insurers’ schemes that shift costs to patients and other payers would be a crippling competitive disadvantage. To compete effectively, a public plan would have to copy private plans’ bad behaviors.

When addressing liberal audiences, proponents of mandated private coverage with a public plan option conflate it with single payer reform, hoping to deflect criticism from their left. Meanwhile, Republicans warn that such a plan is a back door route to socialized medicine. Both are wrong.

Eight decades of experience teach that private insurers cannot control costs or provide families with the coverage they need. A government-run clone of private insurers cannot fix these flaws. It’s bad enough that insurers are peddling damaged goods. Why make things worse by requiring Americans to buy them?

- Deborah Weinstein is the executive director of the Coalition on Human Needs. The opinions expressed are her own -

As the House and Senate Budget Committees begin work this week on their versions of the Congressional Budget Resolution, the usual suspects are lining up to oppose proposals that would pay for health care reform, reduce global warming, create more jobs and improve our education system. Beyond the expected Republican opposition, however, some key Democrats are also calling for changes that would seriously weaken Presidents Obama’s groundbreaking budget.

Although the chairs of the House and Senate Budget Committees are expected to craft resolutions that remain faithful to the President’s priorities, many of the revenue sources proposed by Obama are being called into question.  Further, the skittish-on-spending Blue Dog Democrats in the House and similarly inclined Senate Democrats are urging reductions in domestic appropriations, which pay for education, job training, housing, child care and child welfare services, public health, and other family and community services.

Last week’s significantly increased deficit projections from the Congressional Budget Office have provided further ammunition for those waving the banner for reduced domestic spending. In large part because the economy worsened dramatically since the Obama Administration prepared its budget, CBO projected a deficit of $1.4 trillion for fiscal year 2010 compared with the Obama budget estimate a $1.17 trillion.

As serious as the deficit is, cutting domestic appropriations is not the answer. These programs contribute minimally to the deficit, and are crucial to pulling our country out of the deepest recession in decades and creating long-term economic stability for all Americans. And while cutting waste in such areas as Medicare, military contracts and farm subsidy programs are important sources of potential savings, they won’t provide enough to fund the desperately needed shift in priorities called for under President Obama’s budget.

Instead, those who criticize the President’s proposals must come up with fair and responsible alternatives for increasing revenues and reducing the deficit over time.

The President’s budget provides a blueprint for doing just that. To pay for health care reform, for example, Obama proposes funding his $634 billion expansion of health care, which would take a giant step towards quality care for most Americans, in part by lowering the value of income tax deductions for the wealthiest households (those making more than $250,000 a year) from 35 cents on the dollar to 28 cents.  This change, which brings the rate back to what it was during the later part of the Reagan Administration, would produce $318 billion in savings over the next 10 years. When combined with the Obama budget’s $316 billion in projected savings from reduced payments to expensive private plans, it would cover much of the cost of the health care reform plan.

Although 98.8 percent of tax payers would be unaffected by the change, opposition in Congress has been swift, much of it claiming that reducing the itemized deduction for a very small segment of wealthy households would lead to a reduction in charitable giving. However, the Center on Budget and Policy Priorities found that there would be little impact, with charitable giving dropping by an estimated 1.3 percent. It also found the lower deduction rate would have a minimal effect on home-buying and home construction.

Many of the same Congressional leaders who have expressed opposition to reducing the deduction rate are also supporters of health care reform. Yet few have suggested a better way to pay for it.

Similarly, critics of the President’s proposal to reduce global warming by auctioning off permits to businesses that pollute have yet to explain how they would come up with the needed revenue. In addition to limiting greenhouse gas emissions, the plan would raise $65 billion in revenue to pay for permanent expansion of tax credits that reach the lowest-income families. These credits would reimburse families for the increasing costs of energy that will accompany efforts to reduce greenhouse gases and provide an important financial boost for the poorest families.

It is no longer acceptable for our political leaders to avoid making the tough choices when it comes to supporting government programs that make a difference to millions of people in need. Short term political gain may come to some of those who rail against increased domestic spending.  But the price will be a bleaker economic future for all Americans.

Click here to read a related opinion column, “Trillion-Dollar Deficits Are Not the Answer” by Diana Furchtgott-Roth, a senior fellow at the Hudson Institute.

—James Saft is a Reuters columnist. The opinions expressed are his own. –

By all means reform accounting, but for pity’s sake take your time and keep your expectations low.

Suspending mark-to-market accounting immediately as a means of levitating banks out of peril simply won’t work. While transparency may or may not be the foundation of banking, trust undoubtedly is.

“Adjusting” or suspending fair value accounting, even if you swear up and down that this time it’s even more fair will erode rather than build trust and repel rather than attract capital.

The House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, led by Congressman Paul Kanjorski of Pennsylvania today is holding a hearing on mark-to-market and already the industry knives are out.

A group of 31 industry groups and financial institutions, including the American Bankers Association, Mortgage Bankers Association and U.S. Chamber of Commerce, have petitioned the committee to take “immediate action” to stop the “spiral of accounting-driven financial losses,” according to the Los Angeles Times.

They argue that current rules, which force banks to carry some securities on their books at levels that reflect current market prices, mean they have to recognize losses that “do not have a basis in economic reality”.

That’s as may be, but so far market prices have arguably been a better directional indicator of the future performance of collateral than some hopeful internally generated marks. Is mark-to-market perfect? No. Might reform, in the fullness of time, adjust some of its pro-cyclical effects? Yes. Will doing that in the midst of a crisis have the desired effect? No.

This whole effort fundamentally misunderstands the situation facing banking.

The problem facing the banking industry is not just solvency on some accounting or regulatory basis, it is solvency on, for want of a better phrase, a solvency basis. Thus banks are unwilling to do business with one another and investors unwilling to lend banks money or invest in them. They do not reliably know who is bust and who is not.

Some may possibly be tarred unfairly by mark-to-market, but allowing everyone to step back from market discipline will make investors less willing to commit capital to banks and banks less willing to do business with one another.

Regulators and accountants may turn a blind eye, but given the current set of economic circumstances people with money on the line won’t find internally generated prices for assets more inspiring of confidence than market derived ones. Quite the opposite.

– At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund –

– Diana Furchtgott-Roth is a senior fellow at the Hudson Institute and former chief economist at the U.S. Department of Labor. The views expressed are her own. –

This week Treasury Secretary Tim Geithner unveiled a financial stabilization plan that could cost $2 trillion, in addition to the $790 billion that Congress plans to spend on economic stabilization. All this without any consultation with Congress.

That’s financial stability?

The Dow Jones Industrial average fell almost 400 points Tuesday on the news, and the Asian equity markets followed. This steep decline is symptomatic of the unease that permeates financial markets.

It’s not just the amount of money that is troubling. The markets were also distressed by a lack of detail, especially on how to deal with so-called toxic assets - loans with diminished and uncertain value. The previous Treasury secretary, Henry Paulson, proposed to buy toxic assets, then discovered the difficulties of pricing and so switched to purchases of banks’ preferred stock to infuse capital into the banks.

Geithner promised “to consult closely with Congress” as he moved forward, but Congress has not held hearings on implementing the program, even though it would leverage $1 trillion of Federal Reserve funds and close to that in private-sector funds. The public fears that the $2 trillion dollar bank bailout fund would be just throwing good money after bad.

Last October Congress allocated $700 billion to the Troubled Asset Relief Program. But TARP, with roughly half the funding disbursed, has not yet delivered on its promises. Then, on February 10, it was déjà vu all over again. Geithner declared, “Our plan will help restart the flow of credit, clean up and strengthen our banks, and provide critical aid for homeowners and for small businesses.” He didn’t say how long it would take - because no one knows.

The Geithner plan is another version of TARP, but with more bells and whistles. Banks with assets over $100 billion would be subject to an intensive audit, to measure their capabilities. A Public-Private Investment Fund would purchase troubled assets, although how private money is to be mobilized was unclear.

Carnegie Mellon economics professor Allan Meltzer disagrees with Geithner’s approach. He proposes to allow banks access to government funds only if they can first raise an equivalent sum on their own. If not, it’s off to bankruptcy court they must go, with their competitors free to snap up any worthwhile assets at bargain prices.

The idea behind TARP was not new. Similar programs had successfully been put in place in the Asian banking crisis of the late 1990s. A government agency, a so-called “bad bank,” would buy the toxic assets, paying for them with fresh capital so that the banks could continue to function.

By definition, if the government is purchasing distressed assets it is paying more than the “market price,” more than a private buyer would pay.

Geithner might be better off admitting that these assets will have to be purchased by the Treasury at prices higher than market, and then going to Congress and the American people to make his case. He could say that this will be expensive, but will allow banks to clear underperforming assets off their balance sheet, enabling banks to start lending again. With revived credit markets, the economy can grow.

The implicit reason for going beyond Congress is: “Trust us, we know what we are doing.” Yet Geithner undermined that message by stating that all of this is uncharted territory and that mistakes would certainly be made. Neither the message nor the messenger reassures financial markets. Quite the opposite.

Indeed, Geithner and the Administration may have done what the Democratic leaders, Senator Harry Reid and Speaker Nancy Pelosi have consistently failed to do - make Congress appear to be the last best hope for responsible government in Washington.

Diana Furchtgott-Roth, dfr@hudson.org, is a senior fellow at the Hudson Institute and former chief economist at the U.S. Department of Labor.

– Peter Morici, a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission, testified before the Senate Banking Committee on the proposed bailout for the domestic auto industry. The following is his written testimony to the committee. The opinions expressed are his own. —

The domestic automobile industry has two major components—the Detroit Three and the Japanese, Asian and European transplants that also assemble and source components in the United States and Canada. Both contribute importantly to the vitality of our national economy. Ensuring these companies have the means to compete globally is vitally important.

The gradual erosion of the market shares of the Detroit Three over the last several decades stems from higher labor costs—having origins in wages, benefits and work rules–poor management decisions, and less than fully supportive government policies. Although the U.S. government has been sympathetic to the needs of the industry, the industry has fallen victim to currency manipulation and other forms of protectionism in Japan, Korea, India, and China.

The Detroit Three are rapidly running out of cash and face filing for Chapter 11 reorganization. It would be better to let them go through that process and reemerge with new labor agreements, reduced debt and strengthened management that would permit these companies to produce cars at costs comparable to those enjoyed by their Japanese and other foreign competitors assembling vehicles in the United States.

Circumstances are dramatically different today than in 1979 when Chrysler received assistance from the federal government. In those days, the challenge at Chrysler was to become competitive with Ford and GM, and Lee Iacocca had a clear plan to achieve that objective and succeeded. Today, the Detroit Three, though improved in productivity and with lower labor costs thanks to concessions from the United Auto Workers, are still not as competitive as the Japanese transplants.

Margins in automobile manufacturing are thin and there is no such thing as being competitive enough. Either a company is competitive or it is not—either it accomplishes the cost structure enjoyed by Toyota and Honda, operating in the United States, or it will continually cede market share and run into financial difficulties.

By assisting the Detroit Three, Congress can delay one or all of them going through Chapter 11 reorganization but sooner or later one or all will face reorganization. The communities and suppliers dependent on these companies would be better off going through that process now than by delaying it with assistance from the federal government.

Without a new labor agreement that brings wages, benefits and work rules in line with those at the most competitive transplant factories, and without reduced debt and other liabilities, the Detroit Three will continue to lag in product innovation and field too few attractive new vehicles, because their higher costs, debt and other liabilities require them to spend less on new productive development than they should. Also, they are inclined to field products with less desirable content to compensate for higher costs.

As consumers find vehicles made by Japanese and other transplants more attractive, like those imported from Korea and eventually from China, the Detroit Three will cede market share of one or a few percentage points each year.

If Chapter 11 is put off, the successors to GM, Ford and Chrysler that emerge from a bankruptcy reorganization process will be smaller and support fewer jobs than if these companies endure this difficult transition in 2009.

More jobs can be saved among GM, Ford and Chrysler and their suppliers if bankruptcy reorganization is endured now than in the future.

When Americans buy automobiles from the Detroit Three, more is contributed to the vitality of the U.S. economy than when Americans buy vehicles assembled here by transplants or imports. These vehicles have more U.S. content in terms of jobs, engineering and profits than do foreign nameplate vehicles.

The Congress could take steps to improve the attractiveness of making cars and parts in the United States by improving the public policy environment. This would include finally addressing, directly and forthrightly, undervalued currencies in Asia—currencies kept cheap by intervention by foreign monetary authorities in China and elsewhere. In addition, assertive efforts to develop fuel efficient vehicles could strengthen the industry and create export strength.

For example, Congress could offer an incentive for car buyers to trade in their gas guzzlers—the newer and the bigger the clunker, the more the car buyer would receive under the condition the vehicle is destroyed. This would raise the price carmakers receive from selling smaller vehicles.

Congress could provide substantial product development assistance to U.S.-based automakers and suppliers. The latter includes Toyota, Nissan and Honda, as well as the Detroit Three, battery makers and other suppliers to accelerate the production of innovative, high-mileage cars.

The condition for assistance would be that beneficiaries do their R&D and first large production runs in the United States, and share their patents at reasonable costs with other companies manufacturing in the United States. The huge U.S. market would help attract producers from around the world and rejuvenate the U.S. auto supply chain.

Congress is taking a hard look at Detroit's autos these days. But what about Detroit's jets?

When the chief executives of Ford and General Motors flew in to Washington yesterday to ask Congress for a $25 billion lifeline, they didn't fly coach.

General Motors CEO Rick Wagoner arrived on his company's cushy Gulfstream IV, ABC News reported. Ford CEO Alan Mulally flew in on a private company jet as well.

It costs about $20,000 to fly one of these jets round trip from Detroit to Chicago -- far more than the $900 cost of a first-class ticket on Northwest Airlines, ABC said.

Wagoner told ABC he took the private jet because he's a busy guy. Mulally declined to comment.

It's not exactly news that corporate fat cats prefer to fly in style. And assuming all eight seats on the G4 were taken, the private jet only cost about $13,000 more than flying commercial.

But it might not be the best move by Big Auto as it tries to convince Congress that a $25 billion bailout would be money well spent. The two have already been criticized for their generous pay packages ($22 million for Mulally in 2007, $15.7 million for Wagoner).

What do you think? Is this a tempest in a teapot, or further evidence of Detroit's poor business practices?

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Photo: REUTERS/Kevin Lamarque (Auto industry leaders testify in Senate on Nov. 18)