Government & Policy


National Public Radio quotes ARI’s Onkar Ghate

NPR SignJust the other day, an NPR reporter interviewed Dr. Onkar Ghate, a senior fellow at ARI, in connection with a story (audio here) arising out of the Boston terrorist bombing and the chemical factory explosions in the town of West, Texas. According to the report, Democrats were busy reminding everyone that opponents of “big government” would leave police and regulators unable to remedy or prevent such catastrophes.

Here’s the published quote, selected from a much longer interview: “They [regulations] impose an enormous cost on companies and all individual Americans of the amount of paperwork and regulations that you have to go through when you’re not doing anything wrong.”

I think it’s worth amplifying on that true and insightful comment with two points of context:

1. Contra the setup of the story, “big vs. small government” is not the best way to frame the debate. The real issue is “the proper role of government,” a question on which ARI differs from both conservatives and liberals. We are in favor of proper government functions like the police force, a function which in a laissez-faire society would not be reduced. But we would entirely eliminate improper functions, like wealth redistribution programs and regulations that burden the innocent.

2. There’s a conservative line that “government costs too much”—as if a high price tag should discourage Americans from pursuing justice and saving lives. Dr. Ghate’s point differs from that. The tremendous costs are important, of course, but only in the larger context that regulations penalize the innocent, and that preventive law is an evil that infringes upon individual rights.

Image: Creative Commons License Mr. T in DC via Compfight


Altner on Forbes.com: What Explains GM’s Problems With The UAW?

I have a new piece on Forbes.com on General Motors, the United Auto Workers, and the nature of labor laws. It contains a blend of history and analysis.

Long before General Motors neared collapse, it was a proud and flourishing symbol of American manufacturing. In the 1950s, GM was the first company to ever make $1 billion in a single year, and it had 50% of the domestic automobile market. GM executives used to proudly quip, “we’re still losing 5 out of every 10 sales!” What happened to this great company?

Many factors are acknowledged as contributing to GM’s decline: it juggled too many brands, over-extended its dealer network, failed to respond rapidly to market cues, and struggled to work with its union, the United Auto Workers.

But the extent of its problems with the UAW is astonishing—and the problems themselves warrant explanation. Consider some of the onerous arrangements that GM’s management agreed to. …

Read the whole thing.


Health Care in Headlines [#01]

Here is a roundup of some recent health care items making headlines, with my comments:.

  • Obamacare “scares the daylights out of” small businesses, who, through a crippling new tax, will be forced to pay the medical bills of others.
  • Last fall one compounding pharmacy made headlines when steroid injections it sold caused a meningitis outbreak. Now the FDA wants to control all compounding pharmacies. Whatever happened to being treated as innocent until proven guilty?
  • Grocery stores will have to spend $1 billion in the first year alone to meet Obamacare’s requirement of displaying calorie labels on all their foods. Says one executive at Kroger, “We might have thousands of SKUs for birthday cakes and thousands of types of prepared pizza. The problem is [Obamacare] forces us to label all of that, down to the olive bars and salad bars.” Much of the cost will go towards not signage but just figuring out how many calories are in each food item they sell.
  • Last week Obama addressed concerns over the “train wreck” that is expected from implementing Obamacare, saying, “We still have a lot of work to do in the coming months to make sure more Americans can buy affordable health coverage.” One crucial task is convincing young people to sign up for insurance (in order to fleece them to pay for the medical bills of others). Look out this summer for a mass marketing effort in this vein.

Upholding the value of collaboration between doctors and drug companies

RxOver at TheAtlantic.com, David A. Shaywitz has a thoughtful essay called “Getting to the Right Relationship Between Doctors and Drug Companies.” Shaywitz, a medical doctor with a Ph.D. to boot, works for a biopharmaceutical company and has a healthy appreciation for the value of collaboration between doctors and drug companies.

Shaywitz opposes the growing movement to demonize, and eventually end, the consulting relationships through which doctors help pharmaceutical companies develop and market new drugs. After noting how hard it is to find commercially feasible ideas, Shaywitz writes:

To advance even a solid idea requires, ideally, close communication between industry and outside experts: university researchers, who often developed the science and understand it the best; practicing clinicians, who can describe where the medical needs are the greatest, and what properties an ideal therapeutic would have; and patients, of course, who understand better than anyone else what they need, and where existing approaches may fall short.

We should strive to cultivate, not demonize, these sorts of interactions.

This is just a taste of Shaywitz’s solid, fact-rich argument in favor of preserving such collaboration against a rising tide of attacks. Unfortunately, Shaywitz’s argument falters when he attempts a moral defense of drug companies’ profit-seeking.

Shaywitz, an adjunct scholar at the conservative American Enterprise Institute, takes an approach similar to that favored by AEI’s president, Arthur Brooks. (My colleague Don Watkins has analyzed Brooks’ weaknesses here, here, here and here.) In essence, Shaywitz asserts that drug company profits should be tolerated because they allow companies to serve other people’s needs. In support he quotes Whole Foods CEO John Mackey: “Making high profits is the means to the end of fulfilling Whole Foods’ core business mission. We want to improve the health and well-being of everyone on the planet though higher quality food and better nutrition, and we can’t fulfill this mission unless we are highly profitable.”

This kind of argument amounts to: “Please excuse our profits—we’re really out to benefit others, not ourselves.” No matter how often conservatives resort to this strategy, it will always ring false because it concedes the impropriety of profit-seeking while simultaneously attempting to excuse it. Such arguments are worse than useless in the current controversy, because the anti-collaboration movement succeeds by decrying the profit motive as a source of corruption and conflicts of interest.

In reason, however, the progenitors of progress in medicine—especially the scientists, physicians, engineers, and executives who work in and for pharmaceutical companies—have no need to apologize or justify themselves altruistically. What’s urgently needed here is a defense based on rights—the moral right of doctors and drug companies to work together to advance their own productive interests, and their legal right to do so without interference from government regulators.

Image: Creative Commons License Eric via Compfight


Regulations versus food trucks in New York City

Off The GridOne nice thing about living in Orange County, California, is that food trucks are seemingly everywhere that is convenient. A waffle food truck pulls into my apartment complex, offering a late Saturday breakfast. Different trucks rotate in on Thursday evening, offering a quick dinner. Food trucks visit the corporate park where I work, offering lunch. Food trucks also have a strong presence at local parks and events. And the variety is wide: I have seen food trucks serving lobster, sushi, pizza, Thai, vegetarian, Mexican, monster burgers, etc. If you can think of the food, it is probably served out of a truck in Orange County.

Orange County, California, is surely no free market when it comes to the mobile food industry. But contrast the industry’s presence in O.C. to the dearth of food trucks in New York City, as described in this recent New York Times column:

As I was walking through Prospect Park recently, I wanted to find a healthful snack for my son and something for me. The only options, though, were the same sort of carts that my dad took me to in the ’70s: Good Humor ice cream, overpriced cans of soda and overboiled hot dogs sitting in cloudy water. This seemed ridiculous. In the past few decades, food in New York City has gone through a complete transformation, but the street-vendor market, which should be more nimble, barely budges. Shouldn’t there be four Wafels & Dinges trucks for every hot-dog cart?

Why are food trucks not easy to find in New York City? He blames regulations:

There are numerous (and sometimes conflicting) regulations required by the departments of Health, Sanitation, Transportation and Consumer Affairs. These rules are enforced, with varying consistency, by the New York Police Department. As a result, according to City Councilman Dan Garodnick, it’s nearly impossible (even if you fill out the right paperwork) to operate a truck without breaking some law. Trucks can’t sell food if they’re parked in a metered space . . . or if they’re within 200 feet of a school . . . or within 500 feet of a public market . . . and so on.

Things can get so bad that one food-truck employee spent eight hours in jail for vending falafels without the proper license!

The author concludes by comparing New York City regulations with the Third World:

In Ecuador, for example, it takes about 56 days and 13 separate procedures to get all the legal paperwork done to start a new business. In the United States, it’s an average of six days and six procedures. But if you want to open a mobile-food business in New York, it’s essentially like starting a business in Ecuador — and that’s if you can somehow arrange a permit.

I do not agree with everything the author says, but this whole article is worth reading because it illustrates how regulations can mire and discourage business activity.

Photo Credit: Telstar Logistics via Compfight cc


Are web giants “scary monopolies that somebody needs to do something about”?

Federal Trade CommissionOver at TheAtlantic.com, Justin Fox offers thoughts on how antitrust policy will impact social media companies going forward. The article is worthwhile reading, in part for what it reveals about the smug sense of entitlement policymakers exhibit when it comes to America’s most successful companies.

The Web’s New Monopolists” floats a number of trial balloons, including:

  • The desirability of regulating companies like Twitter and Facebook as “utilities”
  • Whether Internet giants such as these, not to mention Apple, Amazon, and Google, should be seen as “scary monopolies that somebody needs to do something about”
  • Whether a company like Facebook should be nationalized
  • Whether “it’s possible to spin a credible tale of antitrust lawyers enabling disruption and innovation” through enforcement measures such as those against Microsoft in the 1990s.

What’s on display here is the idea that the more success a company earns, the more it must put up with coercive control over its business practices. Fox’s conclusion says it all:

So all praise to today’s would-be utilities and monopolies, as they try to build enterprises that own their markets and that we can’t do without. But when they actually succeed, don’t think we shouldn’t be sniffing around in their business. At a certain point, it becomes our business, too.

Unfortunately, the businessmen subjected to antitrust enforcement typically accept it as a cost of doing business. “There’s a joke in Silicon Valley,” says UC Berkeley economist Carl Shaprio. “‘You know you’ve really made it when you’ve got antitrust problems.’ That’s the sign of success.”

Notably, Fox’s article contains not a single quote or mention of anyone—businessman, academic, or policy analyst—who opposes antitrust regulation of Internet companies on principle.

Image: Creative Commons License Cliff via Compfight


The Obamacare train wreck shouldn’t be ignored

4515656569_19c6697c7d_bIt seems indisputable by now that Obamacare will wreak havoc on the American health care system. Even Sen. Max Baucus, an architect of the law, recently predicted that implementing Obamacare will be a “huge train wreck.”

Curiously, this news has evoked not much more than a shrug from some people. For example, New York Times columnist David Brooks dryly summarizes the disasters expected to occur (“chaos” that will unfold in “cascades”) and then chalks it up to: “When you build [a] complex [regulatory regime], it takes a while to work through the consequences.” (Brooks is more interested in the political ramifications of Obamacare’s failure than its effects on people.)

But the damage that Obamacare will inflict on American health care—and as a result, on all of us—is not something to dismiss so nonchalantly. Brooks suggests that the pain may be temporary and eventually things will “settle down to a new normal.” Even if this were true (it isn’t—the “new normal” will be a health care system permanently crippled by greater government control—read one example here), Obamacare’s consequences should not be minimized.

The law will severely alter people’s lives—and not for the better. Here are just a few recent news headlines:

These consequences, far from being shrugged off, should call into question the goal and rationale of the law itself.

Photo Credit: Free 2 Be via Compfight cc


Any way you slice it, Obamacare fleeces some to pay the medical bills of others

3466862143_c9005b6fdd_bObamacare requires young people to pay higher health insurance premiums in order to subsidize older people’s coverage. But don’t worry, say Obamacare’s defenders: Many young people will qualify for federal subsidies to offset the higher premiums. For example, health policy analyst Austin Frakt says, “[M]ost of the cross subsidization is not flowing from younger to older individuals. It’s flowing from the treasury to everyone with low enough incomes.”

This defense doesn’t hold water.

First, only those earning below 400% of the federal poverty level are eligible for subsidies, which means if you are a young single worker who makes more than $45,960 a year, you must pay the higher premiums imposed by Obamacare entirely out of your own pocket. In my view, even one young person fleeced to pay for the older generation’s health care expenses is too many.

Second, the government obtains money for the promised subsidies by confiscating funds from its citizens—in the form of taxes, borrowing, or printing money (this last effectively depletes savings). So when Frakt says the federal government will effectively be subsidizing the coverage of those older, what he means is that everyone (including young people) whose earnings are drained by the government will pay for the coverage of those older. But it’s wrong for the government to force any group of people—be they young, of higher-income, or classified by any other category—to pay the medical bills of others.

Photo Credit: herzogbr via Compfight cc


Don’t drug companies have rights?

7637352_78d9d02e5d_bIn a recent op-ed Judith Stein of the Center for Medicare Advocacy explains why she thinks government should lower drug prices for Medicare recipients. The article is worth reading because it is an example of a pernicious assumption that permeates most health policy discussions.

Stein argues at length that lower drug prices would benefit Medicare recipients, the federal government and taxpayers. Considered out of context, who could oppose the possibility of cheaper life-saving drugs for the elderly?

But consider the means Stein supports to bring about this result—a congressional initiative to impose price controls on drug companies (a process dressed up by calling it a “rebate”).

By what right does the government dictate to drug companies—those who have spent billions of dollars and worked countless years to figure out how to alleviate the complex ills that can plague the human body—what they can charge for their efforts? Stein doesn’t bother to consider this issue in her article—the assumption is that since some people need cheaper drugs, it’s okay to pay the producers, not what they’re charging, but what the consumers decide is enough.

Imagine doing this in any other context—for example, walking into an Apple store, picking up an iPad that costs $499, deciding it’s not worth that much, slapping a hundred dollar bill on the counter and walking out. It would be inconceivable (not to mention a crime).

Yet this attitude is ever-present in health policy circles, where there is much discussion about how to distribute the efforts of others without any consideration of the rights of the producers. In this case, there is no consideration for the fact that these drugs belong to the companies that have invested the time and resources to produce them—and that nobody else has the right to decide the price at which they are sold.

Photo Credit: selva via Compfight cc


A glimpse of the red tape that cab drivers deal with

Taxi SignI never cease to be shocked by how people who I meet on a regular basis are held back by regulations. For instance, I was having a nice conversation with a cab driver who was transporting me to my home after a business trip. He recently came to the country from Africa and he was ecstatic to be living here, especially in beautiful Southern California.

Naturally, I was curious to learn about the different kinds of regulations that taxi drivers must comply with. In California, my driver explained, cab drivers who have a local-government-issued permit to pick up passengers in one city are not necessarily permitted to make pickups in a neighboring city.

“How does this impact you?” I asked him.

He indicated that he often picks up passengers from John Wayne Airport in the city of Santa Ana, where he is licensed, and takes them to Disneyland. But since Disneyland is in the neighboring city of Anaheim, he is legally forbidden to pick up passengers there and take them back to the airport. Instead, he is forced to drive back to the airport without a passenger, wasting his time and costing him a potential fare.

Of course, he could try to jump through the regulatory hoops to get a permit from the city of Anaheim as well. But this requires money, time, and a lot of paperwork. And even if he tries, the city of Anaheim might not give him a permit anyway, because they may want to cap the number of cab drivers who are allowed to operate in their city, just as some other cities do.

This is yet another example of the often unseen aspect of the regulatory state: an imbroglio of rules that make it more cumbersome for decent, hardworking people to earn a living.

Image: wpclipart