Fighting the externalities of sugar

New York Mayor Michael Bloomberg, or The Nanny as his detractors like to call him, has lost a round in his battle to make New Yorkers lighter — and so less of a burden on the public health system and the fiscus – by limiting the size of SSD servings in most of the city’s stores, bodegas and restaurants to 16 fluid ounces (500ml) or less.

SSD is short for sugary soft drink and how the New York Health Department abbreviates non-diet Coke, Pepsi and their ilk. The trim billionaire founder of the financial news service that bears his name wishes to mitigate what he sees as the negative externalities of the SSD business – obesity-related diabetes and other preventable illnesses – and the costs they impose upon society.

Comes Justice Milton Tingling of the State Supreme Court in Manhattan last week to thwart him.
Bloomberg’s proposed regulation, said Tingling in granting the interdict sought by the American Beverage Association and others, was “arbitrary and capricious”, violated the separation of powers and “would need an administrative Leviathan” to enforce.

The mayor has appealed. Whether or not his appeal succeeds, he has focused attention on an important question: should government deter people from making bad personal choices and if so how and under what circumstances?

From agribusiness giants like Archer Daniels Midland who produce high fructose corn syrup (the primary US sweetener), to owners of SSD brands and formulae like Coca Cola, to bottlers, distributors, retailers, restaurants and convenience stores , to the fledgling entrepreneur selling drinks from a cooler by the side of the road — everyone in the SSD value chain wishes to maximise sales of a perfectly legitimate product for which there is a perfectly legitimate market.

No one is deliberately trying to make the consumer overweight, or increase her risk of diabetes, cancer or heart disease, nor will the product have such effects if used in moderation. Trouble is, SSD’s often aren’t used in moderation. They are, after all, carefully designed and marketed to be craved.

So it is hardly an unforeseen consequence that people will drink more than is good for them or without first having a plan to work off the 140 or so calories in each 250ml serving. Coke now openly admits as much with an ad campaign suggesting ways consumers can burn off those calories.

Most Americans would agree with John Stewart Mill that “the only purpose for which (state) power can can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good…is not a sufficient warrant.”

Alcohol is regulated because an inebriated person can be a danger to others. But things go better with Coke, don’t they? That’s what the ads used to say, at any rate. Bloomberg and his health department have a different story.

They point to city’s latest community health survey which they say shows a clear correlation between SSD consumption and obesity. At one end of the scale, in the Bedford Stuyvesant neighbourhood, the adult obesity rate is 33 per cent and 47 per cent of adults reported drinking one or more SSD’s a day. At the other, on the Upper West Side, home of Tom Wolfe’s social X-rays, only 12 per cent are obese and only 14 per cent indulge in one or more SSD’s.

Overall, 23.7 per cent of New Yorkers were officially rated obese in 2011. Obesity increases the risk of diabetes and a host of other serious conditions. One in eight New Yorkers – up to 700 000 — is diabetic. A person with diabetes in New York can expected to incur $6 649 more a year in medical costs than a person who does not suffer from the condition.

And there’s the rub. The high incidence of obesity and related health problems is overwhelmingly among lower income New Yorkers the cost of whose treatment is borne by the public, contributing to fiscal deficits, consuming resources that could otherwise be spent on education and infrastructure, and putting upward pressure on insurance premiums for those who have to pay them.

Would capping the permissible size of an SSD serving reduce consumption? Behavioural science says it’s possible. Choices are strongly influenced by the way the choices are framed. In a typical US convenience store, a litre cup of Coke will always cost much less than twice a 500ml cup and so will look like a great value. That alone will convince many consumers to pick the size that will supply half the calories they need for a whole day. Anything smaller will not be such a deal, a cheat almost.


Rebranding Brand USA


Brand USA, under attack from the Tea Party and working hard to rebrand itself, scored a public relations coup on Sunday as the subject of a friendly lead article in the Washington Post’s business section headlined “A campaign to lure back foreign tourists – and their money”.

From its launch in 2010, America’s first federally funded destination marketing organisation has been under fire as “corporate welfare” for the US travel and hospitality industry, representatives of which, by law, occupy each of the seats on its 11-member board.

Supporters say it is a badly needed and cost effective effort to recoup America’s share of the international travel market. This fell from 17.2 per cent in 2000 to 12.4 per cent at the end of the decade, more than partly due to the increased hassle, post-9/11, of getting across the border.

The Travel Promotion Act of 2009 under which Brand USA was created specifically requires the organization to “develop and implement a plan…identify, counter and correct misperceptions regarding United States entry policies around the world.”

The US waives visa requirements for passport holders from 37 countries – not, alas, South Africa as yet — whose citizens are judged friendly and not an inordinate risk to overstay their welcome. They still need to obtain a “travel authorization” for which they must pay $14 (much less than the $160 others have to pay for a 90-day tourist visa). It can done online, but payment is by credit card only.

The $14 fee was created solely to fund Brand USA. $10 of it goes into a Treasury account from which Brand USA may draw up to $100 million a year. The remaining $4 goes to the Department of Homeland Security for administering the fee.

Congress was determined that Brand SA should be a public-private partnership in more than name.

Initially, Brand USA was permitted to draw two dollars from the Treasury for every dollar it raised via its board members, each of whom, by statute, represents a specific segment of the travel business. This fiscal year, the matching requirement is one for one.

The private sector contribution can be up to 80 per cent in kind rather than cash. The definition and valuation of in-kind contributions have inevitably been a source of controversy.

Senator Jim DeMint, a now retired Tea Party icon, and his Republican colleague Tom Coburn, a fierce deficit hawk, issued a report in October blasting Brand USA and its board – all appointees of President Obama — for lavish spending and dodgy accounting.

Among the things that stuck in their craws was board members’ first class airfares, limousine bills, baseball tickets and tips to porters being treated as a matchable donations.

“It is immoral to ask the federal government to shell out $100 million every year to pay for high ranking executives to enjoy parties in London and luxury suites at major league baseball games in the name of ‘travel promotion,’ “ Coburn thundered.

DeMint’s soundbyte: “Only Washington could think that taxing tourists will increase tourism or that we need a new bureaucracy to duplicate our vibrant tourism industry’s advertising budget.”

Brand USA relies heavily on outside contractors – PR agencies and the like – to do much of its work. Some, it is alleged, padded their bills and then agreed to forego full payment so that they difference between what they said they were owed and what they were actually paid could be booked as contributions.

Questions have also been raised about that quality of Brand USA’s management. The Daily Caller, a conservative news site, obtained a copy of an internal audit which stated “a majority of the staff did not have any idea what the mission was” and “staff spends money without any checks and balance or funds tied to a budget”. Staff turnover appears to have been high.

Brand USA’s business plan for 2013 implicitly acknowledges shortcomings. Among other changes, accounting standards of in-kind contributions, including “earned” media, are being tightened. Marriot International CEO Arne Sorenson, who joined the board in December, told the Post that “if we had to start the whole thing over again, some…hiccups would have been avoided.”

Travel to the US is picking up, especially from markets on which Brand USA is starting to focus. Arrivals from Brazil were up 26 per cent in 2011, to 1,5 million, from China up 36 per cent, to 1.1 million. Between them, they spent an estimated $16,2 billion.




Willful Ignorance

“It is impossible to make a man understand something when his salary depends on his not understanding it,” the muckraking American journalist Upton Sinclair told audiences when he was running unsuccessfully for governor of California in 1934. The Republicans controlling today’s US House of Representatives appear to confirm this observation.

What they cannot or do not want to understand is that President Obama has already offered them much of what they said they wanted if they were to call off the sweeping autopilot budget cuts or sequestration they obliged him to sign into force on Friday night.

This, as the Washington Post’s Ezra Klein was the first to report, they could have have discovered simply by visiting the White House website.

There, plain as day, is Obama’s plan for reducing the already shrinking federal budget deficit by $4.2 trillion over the coming decade. As of Sunday, House Majority John Boehner was still insisting the White House had no plan.

Not only is there a plan, it contains concessions on so-called entitlements whose alleged absence Republicans have been citing as grounds for refusing to negotiate. These include reduced cost-of-living increases for Social Security pension cheques and increased means testing for publicly subsidised retiree health benefits.

Klein reported that when he met with senior Republicans for a background briefing on Thursday, they were simply unaware of these things.

This is hard to fathom without concluding that members of the Republican majority in the House of Representatives continue to assume their livelihoods depend on their not reaching any accommodation with the president unless they get 100 per cent of what they want.

For many there can be no compromise because they are ideologically committed to taking a meat cleaver to the federal government. They are not interested in simply putting government on a fiscally responsible trajectory by cutting or reforming existing programmes.

They wish to shrink government revenue, period, whether it comes from higher taxes rates on the wealthy, new taxes on, say, carbon emissions, or reduced tax expenditures and closed loopholes.

It is perhaps no coincidence that the Republican Party, once the party of the great emancipator Abraham Lincoln, now owes much its strength to the former slave states which rebelled disastrously against federal power a century ago and still chafe against the centre.

Not all Republicans are of this ilk, of course, but breaking ranks has become increasingly career threatening. To be willing to negotiate with Obama in good faith is to risk finding oneself up again a well-funded primary opponent.

Obama is readying for a showdown in the 2014 mid-term elections. He and his advisers believe the best hope for achieving his agenda — gun control, a living minimum wage, immigration reform, meaningful steps to address climate change — is to regain the full Democratic control of Capitol Hill he lost in 2010.

The Democrats need to pick up 17 seats in the House to regain control. This will be a challenge. It is rare for the party of an incumbent to gain seats during the incumbent’s second term although it did happen on Bill Clinton’s watch in 1998 while he faced impeachment for lying about sex.

Democratic candidates won a majority of the votes cast in last year’s House races. It did not translate into seats. The Republicans controlled the post-2010 census demarcation of constituencies in more states than the Democrats and used that edge to their advantage. The edge will still hold in 2014.

Polls show Obama’s agenda is broadly popular, but the trick will be to convince the public that whatever pain sequestration inflicts is the fault of Republican extremists out of step with the concerns of middle class America.

To make the case, Obama’s political team are retooling his presidential campaign machine as “Organising for Action” (OFA), a non-profit tax-exempt entity legally permitted to raise unlimited funds to press for the president’s priorities.

OFA’s initial fundraising goal is $50 million, at least half of which is expected to come from a core group of donors giving $500 000 or more apiece.Grassroots supporters will be mobilised around the country to lobby Congress, hold rallies and an act as a counterweight to conservative groups like the National Rifle Association.

The initiative is not without controversy. Top donors will be invited to sit on a national advisory board which has quarterly meetings with the president. This has Republicans and some good government groups denouncing OFA as a potentially corrupt “cash for access” scheme, a charge adamantly rejected by the White House.