A Note on Liz Truss, Pension Funds, Financial Markets, and Systemic Risk

The common wisdom is that the financial markets punished Liz Truss and her Chancellor of the Exchequer, Kwasi Kwarteng, for their plan to cut taxes and increase deficit financing. However, Narayana Kocherlakota, a former president of the Federal Reserve Bank of Minneapolis, in a Bloomberg Opinion article (also appearing here in the Washington Post), and others argue that the Bank of England is responsible for the end of the Liz Truss government. Kocherlakota writes: 

The common wisdom is that financial markets “punished” Truss’s government for its fiscal profligacy. But the chastisement was far from universal. Over the three days starting Sept. 23, when the Truss government announced its mini-budget, the pound fell by 2.2% relative to the euro, and the FTSE 100 stock index declined by 2.2% — notable movements, but hardly enough to bring a government to its knees.

The big change came in the price of 30-year UK government bonds, also known as gilts, which experienced a shocking 23% drop. Most of this decline had nothing to do with rational investors revising their beliefs about the UK’s long-run prospects. Rather, it stemmed from financial regulators’ failure to limit leverage in UK pension funds. These funds had bought long-term gilts with borrowed money and entered derivative contracts to the same effect — positions that generated huge collateral demands when prices fell and yields rose. To raise the necessary cash, they had to sell more gilts, creating a doom loop in which declining prices and forced selling compounded one another.

Given this observation, Kocherlakota draws two conclusions about the Bank of England. The first conclusion is that it failed in its regulatory mission and did not do anything about too many pension funds following similar investment strategies that go under the rubric “LDI” (“liability-driven investing”). This failure forced the Bank of England to buy gilts even though it was following a monetary policy of tightening credit conditions. Mr. Kocherlakota makes a good point here.

The second conclusion Kocherlakota makes is more speculative: “[The Bank of England] refused to extend its support beyond Oct. 14 — even though its purchases of long-term government bonds were fully indemnified by the Treasury. It’s hard to see how that decision aligned with the central bank’s financial-stability mandate, and easy to see how it contributed to the government’s demise.” The head of the Bank of England, Andrew Bailey, denies that he was trying to force Liz Truss out.

The Liz Truss government is history, but going forward this aspect of her downfall demonstrates potential problems in financial markets as interest rates increase. The advice that pension funds and other institutional investors receive may not have a full discussion of the risks, and regulators may have difficulty identifying these issues before they become major problems.

In the early 1980s when I was working on financial market issues at the U.S. Treasury, pension funds investing to manage their liabilities for defined benefit plans were generally advised “to immunize” their balance sheet. One way of doing this was to strive to have the same “duration” for their assets as for their liabilities. (Duration is not maturity; rather, in its simplest form, it is an average of the time to each cash flow, including interest payments, weighted by the present value of each payment.) When the durations match, a given change in interest rates will produce offsetting changes equal in magnitude to a pension fund’s assets and liabilities. For example, an increase interest rates will decrease the current value of assets but will also decrease the current value of liabilities by approximately the same amount if the portfolio is immunized.

Apparently, some investment advisers to pension funds have now proposed that defined benefit plans use derivatives so that only part of their assets are used to immunize their liabilities This frees up room for them to invest in assets they believe will achieve higher returns. The problem is that when interest rates increase, they may be subject to margin calls on the derivatives that are in effect long positions in some underlying asset. If the interest rate increase is significant, then the pension funds will need to sell assets to meet the margin calls. If a number of funds need to do this at the same time, this can cause problems, depending on their collective relative size. (For those interested, here is some marketing material for LDI for pension funds.)

As for the implications in the U.S., an article in Pensions & Investments, “U.K.'s LDI-related turmoil puts spotlight on use of derivatives,” indicates that people in the pension industry are thinking about it. I assume that the Financial Stability Oversight Council, chaired by the U.S. Treasury, and its member agencies are also looking at this issue, and, one assumes, that the Labor Department, which has responsibility for pension fund under ERISA, is also looking at it.

Of course, the move by corporations to offer their employees defined contribution plans rather than defined benefit plans means that the share of retirement money that need some sort of immunization strategy has declined. The Pensions & Investments article suggests that the risks of something similar happening in the U.S. to what happened in the UK are not that great, but of course the regulators have access to more complete information, should they choose to ask for it, than do reporters.

While it may be true that LDI, as implemented in the U.S., does not pose a systemic risk in the U.S., though it may be a significant risk to some particular defined benefit plans, there may be other systemic risk issues in the U.S. and internationally as the Federal Reserve increases interest rates. One aspect of the 2008 financial crisis highlights the problem. I remember that even shortly before the crisis hits in full force, many investment professionals were arguing and providing detailed charts in support of their contention that the subprime mortgage market was relatively small and that problems there would not be a big deal. Many probably even believed that.

I hope the U.S. regulators learned from that experience and can put aside their turf issues and their “clientitis” inclinations and examine what dangers may be lurking. The Federal Reserve, to its credit, has made no secret of what it intends to do in the coming months.

Inflation is a Global Problem

This New York Times newsletter focusing on global inflation is worth reading. One can debate whether supply chains, excessive government spending, or monetary policy is the chief culprit for the current inflation, though they all play a role. Here is, in part, what the newsletter written by German Lopez says:

“The big factors that drove up inflation in the U.S. also affected the rest of the world: the disruption of supply chains by both the pandemic and Russia’s invasion of Ukraine, and soaring consumer demand for goods.

“But increasing inflation has played out differently in different countries, said Jason Furman, an economist at Harvard University. The U.S.’s earlier, bigger price spike had different causes than Europe’s more recent increase. (Countries differ in how they calculate price changes, but economists still find comparisons of the available data useful.)

“In the U.S., demand has played a bigger role in inflation than it has elsewhere. That is likely a result of not just the American Rescue Plan but also economic relief measures enacted by Donald Trump. Altogether, the U.S. spent more to prevent economic catastrophe during the pandemic than most of the world did. That led to a stronger recovery, but also to greater inflation.

“In Europe, supply has played a bigger role. The five-month-old war in Ukraine was a more direct shock to Europe than it was to the rest of the world, because it pushed the continent to try to end its reliance on Russian oil and gas. That prompted Europe’s recent jump in inflation.”

Trump Plans to Fire Civil Servants Involved in Policy If Reelected

This article in Government Executive caught my attention: “If Trump Is Reelected, His Aides Are Planning to Purge the Civil Service: Officials are looking to revive a controversial order issued in Trump's waning days and have already identified 50,000 federal positions to target.”

Trump wants to revive “Schedule F” and transfer civil servants into this new schedule which does not have the traditional civil servant protections. This was originally reported by Axios.

From the Government Executive article:

“The plan, as detailed to Axios and confirmed by Government Executive, would bring back Schedule F, a workforce initiative Trump pushed in the 11th hour of his term to politicize the federal bureaucracy. The former officials and current confidantes are, through a network of Trump-loyal think tanks and public policy organizations, creating lists of names to supplant existing civil servants. They have identified 50,000 current employees that could be dismissed under the new authority they seek to create, Axios reported and Government Executive confirmed, though they hope to only actually fire a fraction of that total and hope the resulting ‘chilling effect’ will cause the rest to fall in line.” 

From the Axios article:

“They [Trump allies] say Schedule F will finally end the “farce” of a nonpartisan civil service that they say has been filled with activist liberals who have been undermining GOP presidents for decades.

“Unions and Democrats would be expected to immediately fight a Schedule F order. But Trump’s advisers like their chances in a judicial system now dominated at its highest levels by conservatives.

“Rep. Gerry Connolly (D-Va.), who chairs the subcommittee that oversees the federal civil service, is among a small group of lawmakers who never stopped worrying about Schedule F, even after Biden rescinded the order. Connolly has been so alarmed that he attached an amendment to this year’s defense bill to prevent a future president from resurrecting Schedule F. The House passed Connolly’s amendment but Republicans hope to block it in the Senate.”

Father Coughlin ‒ Right Wing Predecessor of Tucker Carlson

Father Charles E. Coughlin was a right-wing radio personality in the 1920s and 30s. It is estimated that his radio audience reached 30 million at its peak. That is enormous.

Two articles on Father Coughlin: “When Radio Stations Stopped a Public Figure From Spreading Dangerous Lies” and “How a Canadian-born Irishman paved the path of hatred that leads to Tucker Carlson.”

From the Smithsonian Magazine article:

“In speeches filled with hatred and falsehoods, a public figure attacks his enemies and calls for marches on Washington. Then, after one particularly virulent address, private media companies close down his channels of communication, prompting consternation from his supporters and calls for a code of conduct to filter out violent rhetoric.

“Sound familiar? Well, this was 1938, and the individual in question was Father Charles E. Coughlin, a Nazi-sympathizing Catholic priest with unfettered access to America’s vast radio audiences. The firms silencing him were the broadcasters of the day.

“As a media historian, I find more than a little similarity between the stand those stations took back then and the way Twitter, YouTube and Facebook have silenced false claims of election fraud and incitements to violence in the aftermath of the siege on the U.S. Capitol – noticeably by silencing the claims of Donald Trump and his supporters.”

From the Yahoo article:

“It was a descendant of the Irish who became one of mass media's most famous racists and a fellow traveler of the Nazis. Father Charles E. Coughlin was a Catholic priest and the founder of the Shrine of the Little Flower in Detroit. Born in Canada, Coughlin preached a particularly poisonous brand of hatred and antisemitism in the 1930s. Through his radio show, he reached 30 million Americans a week, or one-quarter of the U.S. population at the time. For comparison, today's best-known racial dog whistler, Tucker Carlson, reaches about 3 million out of 340 million.”

Manchin's Inflation Concerns Make No Sense

John Cassidy of the New Yorker writes that Senator Manchin's opposition to climate change provisions of the Democrat's proposal "made no sense," since they would have reduced the budget deficit. It sure looks like Manchin is just using excuses to block this. From the article: 

“…Manchin’s reference to inflation made no sense. In devoting only half of the money that would have been raised from tax increases for new spending, and keeping the rest for deficit reduction, the proposal that Democrats were working on would have had a deflationary impact in budget terms. The obvious answer is that Manchin, yet again, is protecting the fossil-fuel industry, which has donated heavily to his campaigns and still plays a big role in West Virginia’s economy. But there are unanswered questions here, as well. 

“Thanks to Manchin’s earlier lobbying, the parts of Build Back Better that would have affected the coal industry most directly had already been eliminated. If he’d followed through on his support for a narrower green-energy package, Manchin could probably have used his leverage to extract concessions on expanding oil and gas drilling, something he has been calling for recently. ‘He could have asked for anything!’ Jesse Jenkins, a Princeton energy expert who has modelled the climate impact of the Build Back Better proposals, commented on Twitter. ‘Instead he has nothing now, and he’ll be a nobody after November. His constituents have nothing. We all have nothing. So utterly SENSELESS!’ Yes. Senseless for Biden, the Democrats, the environment, and even for Manchin, who, yet again, has forfeited the opportunity to make a more positive contribution. What a woeful legacy he will leave behind him.”

Movie Review: “Never Stop Dreaming: The Life and Legacy of Shimon Peres”

 Netflix put the film “Never Stop Dreaming: The Life and Legacy of Shimon Peres” on its streaming service on July 13, 2022. The movie is a documentary about the Israeli politician and prime minister, who died in 2014.

I had a mixed reaction to the film. It is a good but selective review of the history of Israel through the experiences and activities of Peres. The film makes no attempt to take a balanced view of its subject; no matter the historical episode, Peres is always right. Alternative perspectives are not offered, and, Israel being Israel, you know they exist. 

One episode near the beginning of the film focuses on Peres’ efforts to get French help in getting arms in the 1950s and on the subsequent Suez Crisis. The narrator (an off-screen George Clooney) explains that Peres reasoned that Egyptian President Gamal Abdel Nasser, who was anti-Israel, was also supporting the Algerians fighting for their independence from France, and that this would incline the French to be helpful. Peres was not wrong, but the film makes no mention of the atrocities the French were committing in Algeria nor does it mention the political havoc the war caused in metropolitan France (if you think Vietnam was bad domestically, you should read about France during this period). The war ultimately led to Charles de Gaulle returning to power after years in the political wilderness as the last premier of the Fourth Republic in order to liquidate it and replace it with the Fifth.  

As for the 1956 Suez Crisis, this started as a conspiracy between Israel, France, and Britain. The British and the French wanted to reverse Egypt’s nationalization of the Suez Canal and Israel was motivated to undo the Egyptian blockage of the Straits of Tiran, the passageway from the Red Sea to the Gulf of Aqaba. (Israel and Jordan have the neighboring port cities of Eilat and Aqaba at the top of the Gulf of Aqaba, which Israel calls the Gulf of Eilat). Israel was also motivated by the Egyptian-supported commando raids into Israel. 

The plan was that Israel would send troops into the Sinai and that the French and the British would then send troops under the pretext of keeping the peace and would, in the operation, seize the Suez Canal. The major error of the plan was that none of the parties had bothered to inform or find out what U.S. President Eisenhower thought of this. It turned out that he was opposed, and the U.S. successfully pressured the parties to pull back. As it turns out, this was a disaster for Britain and France. The documentary, though, only mentions the Israeli success in getting the Straits of Tiran reopened and deterring terrorist acts until 1967. It does not mention the British and French humiliation or how this episode affected Israeli relations with the Eisenhower Administration. 

The lack of context given on these events near the beginning of the film makes one suspicious of what the documentary presents later. For those episodes I know something about, the facts are accurate, but sometime important aspects are omitted. However, one learns a lot about Peres from this documentary. Particularly interesting is the failure of the 1987 London Agreement between Peres, then foreign minister, and King Hussein of Jordan. This was an enlightened agreement to the Palestinian issue, and the documentary argues convincingly that if it had been put in place, the subsequent history in the Middle East would have been substantially different. It was undercut by Yitzhak Shamir, then the prime minister. Given the importance of this initiative, it would have been useful for the documentary to have included the reasons for Shamir’s opposition. 

Inflation, Budget Deficits, Monetary Policy, Climate Change, and Senator Manchin

The big news regarding the Administration’s budget proposal has been Senator Manchin’s rejection of much of the Democrat’s compromise budget proposal, including measures to address climate change. Senator Manchin claims he has been right about inflation and has indicated he will not negotiate any more about increased government spending until inflation comes down.

Journalists reporting on this have generally written that Manchin has been correct about inflation. However, the story is more complicated. In fact, reading what prominent economists say indicates considerable confusion. It could be that Manchin is using inflation as an excuse to oppose climate change measures which affect fossil fuels.

One of the arguments currently being used is that government spending generates inflation by putting more money into the economy. But let’s look at what happens. When the Treasury needs to spend more money than it has on hand, it borrows the funds it needs by selling Treasury securities. In other words, if the federal government is spending more than it is receiving, it takes money out of the economy by borrowing and puts it back in by spending. In the first instance, this is more or less a wash. 

That, though, is not the end of the story. There are models addressing how deficit spending affects the economy, with the impact dependent on what else is happening in the economy. Usually the assumption is that deficit spending increases aggregate demand, because it involves direct spending or results in transferring money to those with a high propensity to consume. If the economy is running at near capacity, the increased demand is postulated to increase inflationary pressures. However, some who were more relaxed about the spending measures during the pandemic thught the inflation risks were minimal because some of the recipients would save some of the money rather than spend it. 

Left out of much of the discussion of Manchin's and other's inflation warnings is monetary policy.  The Federal Reserve, if it decides it is appropriate, can effectively monetize the federal budget deficit by buying Treasury securities. The Fed is prohibited by buying directly from the Treasury, but if it buys roughly the same amount of securities in the market that the Treasury has issued, it has effectively monetized the budget deficit. In other words, it has replaced deficit financing with securities by creating bank reserves. (When the Fed buys securities in the open market, it credits the accounts banks have at the Federal Reserve Banks with the purchase amount. The amounts it credits the private banks are liabilities on its balance sheet and the purchased securities are assets.) The Fed was effectively monetizing much, if not all, of the budget deficit during the pandemic, and this likely has contributed to inflation. (This story can be expanded with more detail, but the details do not matter for the main point of this blog post. Suffice it to say that the effect of monetary policy has been difficult to analyze with short-term interest rates near zero and bank holdings of large excess reserves. These both are unprecdented in our modern history.)

There is a growing consensus that the Fed kept interest rates too low for too long. There may be a price to be paid for that. The Fed has now reversed course, and there is the likelihood that it will not achieve a “soft landing.” If a recession does happen, an increase in government spending would be helpful in pulling us out of it. Mancin appears to ignore this point.

In addition, the current inflation is a global problem. It is hard to make the argument that this is due to excessive U.S. government spending. There are some global factors at work -- among them, war in Ukraine, reduced global grain supplies, oil price increases, reduced production in China due to severe Covid lockdowns, and supply chain issues. What portion of U.S. inflation is due to U.S. government spending and overly loose monetary policy and what portion is due to global issues and supply shortages, rather than excessive demand, is unclear. Except for some economists who project certainty in their pronouncements, there is general uncertainty in the profession about exactly what is going on and what is likely to happen.  

While Senator Manchin may believe what he is saying about inflation, focusing the blame for inflation solely on government spending is misguided. Monetary policy needs to be factored in. No one can predict with certainty how long the current inflation will last, but it should not be used as an excuse to avoid enacting urgently, needed measures to address the growing problem of climate change. 

(This post was revised on July 22 in an attempt to make it clearer.)

Paul Krugman and Inflation

Paul Krugman, who had been on “team transitory” about the current inflation, has become more pessimistic about the outlook. In an April 12, 2022 opinion piece for The New York Times (“Inflation Is About to Come Down — but Don’t Get Too Excited”), Krugman argues that inflation may be coming down in the next few months because supply chain problems will be less of a factor and oil prices may have overshot and will come down.

However, Krugman argues that there is still an inflation problem because wage increases are unsustainable. To show this, he reproduces a graph from the Federal Reserve Bank of Atlanta showing that in April 2022 wages had shot up by 6% over a year. This, he states, is an “unsustainable pace” and “won’t recede until the demand for workers falls back into line with the available supply, which probably — I hate to say this — means that we need to see unemployment tick up at least a bit.”

Krugman, though, fails to note that wages have not kept pace with inflation. The CPI in April rose 8.3% over the year. In other words, the current tight labor market shows the limit of workers’ bargaining power; their real wages have gone down. One could tell a story that the tight labor market has resulted in increased nominal wages, which led for consumer prices to increase even faster than wages. Krugman does not make that argument, and, while it might be correct, it would be hard to prove.

There are different reasons being given for the current inflation. Some blame a too expansive fiscal policy. Another reason, sometimes linked to fiscal largess, is that demand had been suppressed because of the pandemic, and now with the general impression that Covid is diminishing in seriousness, people are spending more.  Others put the blame on the Federal Reserve, which, the argument goes, kept interest rates too low for too long. And, as mentioned, supply chains and labor market tightness are also blamed. Of course, all these factors may be contributing to the current inflation; their relative importance is unclear as is the how long we will have to endure too high inflation.

The Federal Reserve is on course to raise interest rates substantially. The Fed can of course stop the inflation; the question is at what price. Paul Volcker’s judgement in the early 80s was to do whatever it takes given the high inflation of the time. The price was high; but his judgement was that leaving inflation unchecked was worse for the economy and, I am not sure he explicitly said this, the future of our liberal democracy. Most economists and others agree he made the right call, painful as it was.

As the Fed raises interest rates, economic activity will slow down, and unemployment will increase. Krugman is right about that. He seems disconcerted that workers are effectively put on the front line to fight inflation, but the Fed has no choice. The real, long-term problem for the U.S. and other developed economies is the increasing inequality in income distribution. As an IMF annual meeting a few years ago demonstrated, economists are unsure why this is happening and what to do about it. It is a pressing issue. While I cannot prove this, the appeal of the siren call of authoritarianism in the West may be linked to this growing inequality and the anger it causes, though there are likely other reasons too. In the U.S., Democratic Administrations have failed to address the income inequality issue in a meaningful way, and, while those on the right flirt with such questionable measures as protectionism, their policies have usually benefitted those with high incomes.

Florida Governor Ron DeSantis and Math Education

Florida’s Department of Education recently rejected 54 math textbooks for classes K-12. This blog post is not about the reasons given for the rejections of these books but a comment on a tweet about this from Florida Governor Ron DeSantis.

The governor’s tweet said: “Math is about getting the right answer, not about feelings or ideologies. In Florida, we will be educating our children, not indoctrinating them.”

The teaching of math is not only about getting the right answer but in learning to think mathematically. In other words, to arrive at the right answer one often first has to frame a problem in way that can be solved by using math. Specific problems and their solutions may have an emotional component.

An example of how to use math to get insight on a particular issue, in this case not ideological nor emotional, is the question of whether a rectangular television screen or a square television screen has the greatest viewing area for a given diagonal length.

The correct answer is a square, but how does one determine that? While it is fairly easy using calculus to determine that the largest area of a rectangle with a given perimeter is a square, it is more difficult to prove that a square also provides a larger area than that of any other rectangle with the same diagonal. You have to be able to think like a mathematician to prove this. Not all math is learning rote skills to get the correct answer, as DeSantis implies. (Since I don’t have the proof, I am going to resort to that statement in math textbooks which annoys math students no end: the proof is left as an exercise for the reader.)

As a final comment, in the example I gave, some may see a public policy issue. As the aspect of television screens changed to become more rectangular, television manufacturers characterized their models by diagonal size, not area. This may have misled some into thinking that a television set with an equal diagonal to their old square one had the same viewing area. This is not an issue I think is worth fretting much about, but only a way of saying that using math to get insight into real issues can have implications.

A Brief Comment on the Economy – Krugman and Summers

Paul Krugman said yesterday (April 10, 2022) on his twitter feed that he is worried about inflation due to wage pressures, even though inflation may decline somewhat in the near future because of the “bullwhip effect,” which can cause some freight and wholesale prices to decrease in the short-term. 

Krugman is now beginning to agree with Larry Summers and has quit what had been called “team transitory.” Both now agree that the Fed needs to increase interest rates; Summers has called for, among other things, an increase in immigration to alleviate wage pressures.        

However, there may be some differences in view. Summers has criticized the Fed for keeping monetary policy loose for too long and the Administration and Congress for too much spending to counteract the effects of the pandemic. Krugman has not as of now been critical of these government actions and has praised the good job growth in the economy which he says the media has underplayed. The data, though, compel him to recognize the inflation risk. 

Both Krugman and Summers are old enough to remember the stagflation of the 1970s and what Paul Volcker felt compelled to put the economy through to end a dangerous inflation cycle. Out of control inflation can be deeply corrosive to both the economy and the political system. Krugman and Summers do not want to relive any part of that again. For now, they are both correct; the Fed has to keep inflation in check even if that means some economic pain in the next couple of years. 

What is missing, though, is an explicit long-range model of the economy. Do they both really believe that the labor must be constantly subdued to keep inflation in check? Both are Democrats and should have some progressive ideas of how to deal with income inequality and not just at the margin (taxing a few billionaires more is probably justified but does not address the problem of growing income inequality). As far as their politics are concerned, I mention in passing that Krugman is the more progressive of the two, but Summers has been more active politically. 

Krugman is currently the more modest in his predictions, given that he felt compelled to leave team transitory. Also, to those who know him or follow him, it is no surprise that Summers is less than modest when giving his opinions, but he is almost always worth listening too, even if one does not fully agree. 

No one fully understands the economy, not even these two, and unpredictable events (there are those among us who thought Putin was bluffing to destabilize the west and get some concessions) can have an enormous effect. For example, Europe, too, is struggling with inflation under very different institutional setups than the U.S., different government policies, and dependence on Russian fossil fuels. Europe’s struggles undoubtedly will affect the U.S. both politically and economically.

Comment on the FDA and the CDC and Second Covid Boosters

Public health officials and agencies need to cultivate and maintain credibility in order to be fully effective. Unfortunately, there have been some missteps at the federal level. For example, remember the initial recommendation not to wear masks, which was subsequently changed. Also, recall the advice that the J&J vaccine was about as good as the mRNA vaccines, though anyone paying attention knew that this was likely not the case. Now the way the federal government has handled the approval of a second Covid vaccine booster makes one wonder what is going on in the federal health agencies.

On March 29, 2022, the FDA authorized the use of a second booster shot for individuals over 50. The CDC on the same day issued a media release, entitled “CDC Recommends Additional Boosters for Certain Individuals.”

The FDA took this action without consulting its Advisory Committee on Vaccines and Related Biological Products, even though the committee’s next meeting is on April 6. Why did the FDA not wait a few days and ask the committee for its advice on second boosters before taking regulatory action? Regardless of what the FDA officially says, my guess is that FDA officials thought they might get advice that was contrary to what they wanted to do. It is not clear that would have been the outcome, though, a prominent member of the committee, Dr. Paul Offit, has expressed skepticism of the need for second boosters for everyone over 50.

With regard to the CDC’s media release, its headline is misleading. The text of the statement does not recommend additional boosters. Rather, it says: “Following FDA’s regulatory action today, CDC is updating its recommendations to allow certain immunocompromised individuals and people over the age of 50 who received an initial booster dose at least 4 months ago to be eligible for another mRNA booster to increase their protection against severe disease from COVID-19. Separately and in addition, based on newly published data, adults who received a primary vaccine and booster dose of Johnson & Johnson’s Janssen COVID-19 vaccine at least 4 months ago may now receive a second booster dose using an mRNA COVID-19 vaccine.”

This wording is strange. It recommends that a broader group be "allowed" to get a second booster, though the CDC does not have the authority to do this. It reads as a recommendation to the FDA to do what it had already done a few hours previously.

The wording looks like a hasty bureaucratic compromise among government officials who probably are not in total agreement. There is disagreement in the medical community about this. The government's handling of this issue does not inspire confidence and is a further example of less than good public relations by public health authorities.

I do not know whether second boosters are necessary or a good idea for everyone over 50. I would like to see whether any consensus is achieved among the experts.

I also note that the attempt to manipulate press accounts on this subject have not been fully successful because of dissenting voices among experts. For example, here is an excerpt from a recent New York Times article, “Should you get another Covid booster”:

Many scientists are dubious about today’s decision.

The F.D.A.’s authorization allows anyone over 50 to receive a second booster. But experts pointed out that the limited research so far supports a fourth shot only for those older than 65 or who have underlying conditions that put them at high risk.

The most compelling data comes from an Israeli study that found that adults older than 60 who got a fourth dose were 78 percent less likely to die of Covid than those who got only three shots. The study was posted online last week and has not yet been reviewed for publication in a scientific journal.

“The Israeli study, in terms of mortality rate, is decisive,” said Dr. Robert Wachter, chair of the Department of Medicine at the University of California, San Francisco.

But that study, while it offers the only evidence, is deeply flawed. The participants all volunteered to get a fourth shot — and are likely to be people who are naturally careful about their health, said Dr. Paul Offit, director of the Vaccine Education Center at Children’s Hospital of Philadelphia and an adviser to the F.D.A.

It will be interesting to see what happens at the FDA advisory committee meeting on April 6.

Book Review: "Cadillac Desert: The American West and its Disappearing Water" by Marc Reisner (Revised and Updated version)

Cadillac Desert by Marc Reisner is a long book about the history of water construction projects in the western United States. The book is well written and tells fascinating stories about the building of dams and aqueducts. Unfortunately, because of its length, I think many readers will not get all the way through it, but it is worth it. 

The book, originally published in 1986 with a revised version appearing in 1993, is written from an environmental point of view. At one time, Reisner worked for the Natural Resources Defense Council. However, Floyd Dominy, the longtime head of the Bureau of Reclamation, granted the author extensive access, resulting in a long chapter devoted to his career. Also, the book is nonpartisan; Democratic politicians are skewered for their support of non-economically justifiable water projects. The Democrats did control the House of Representatives for most of the period the book covers, and opposing water projects, the author demonstrates, could result in ostracization in Congress. 

Whether one is a confirmed environmentalist or not, the book is an eye-opener for all who read it. The amount of research the author did is stupendous. Disasters, such as the collapse of the Teton Dam in Idaho, are described in detail, as well as the remaking of California by providing enormous amounts of heavily subsidized water for agriculture in the Central Valley. Projects along the Colorado River are also discussed in detail, including both the Hoover and Glen Canyon dams. 

There is, though, one omission in the book. The author obtained extensive information about the Bureau of Reclamation, but much less about the Army Corps of Engineers, which was also heavily involved in water projects. There is one chapter about the rivalry of the two agencies, with each trying to get the right to build the same projects, but there is much less about the personalities and motivations of those who worked at the Army Corps of Engineers. 

All the easily justifiable and many not justifiable water projects have been built. There are few remaining good sites for major projects; in fact, the Glen Canyon Dam, which creates Lake Powell, is the last major dam built in the U.S. Construction on it started in 1956 and it was officially opened in 1966. It reached its targeted fill in 1980. 

The current problem is, of course, climate change, which has become a much more pressing issue since the book was written. One wonders what will happen to agriculture if there is less water for the Central Valley and farmers are forced to change the crops they grow. There could be a wholesale change where crops are grown and animals are raised, with attendant economic effects. The discussion in the book about California and the Colorado River made this reader think about these issues, which are briefly discussed in a postscript to the book written and added to the book by Mr. Reisner’s widow, Lawrie Mott, in 2017. 

Finally, as a native San Franciscan, I cannot resist repeating a story in the book about Governor Pat Brown (Jerry Brown’s father). Whatever one thinks of the Pat Brown, the major projects he pushed through (including the California Water Project and the California Master Plan for Higher Education), and his questionable methods and tactics (discussed in the book), he was obviously effective. In an interview for the University of California Bancroft Library Oral History Program, Brown talked about the California Water Project. The book recounts: 

...Brown suggested another motive that had made him, a northern Californian by birth, want so badly to build a project which would send a lot of northern California’s water southward: “Some of my advisers came to me and said, ‘Now governor, don’t bring the water to the people, let the people go to the water. That’s a desert down there. Ecologically, it can’t sustain the number of people that will come if you bring the water project in there.’

 

“I weighed this very, very thoughtfully before I started going all out for the water project. Some of my advisers said to me, ‘Yes, but people are going to come to southern California anyway.’ Somebody said, ‘Well send them up to northern California.” I knew I wouldn’t be governor forever. I didn’t think I’d ever come down to southern California and I said to myself, ‘I don’t want all these people to go to northern California.’” 

While dated, this book is essential reading for those interested in the past and future economic and environmental challenges of water policy or for those interested in the history and politics of water projects in the western United States.