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Cato Daily Dispatch for December 31, 2003

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Whatever Happened to Deregulation?
Power Failures Could Happen Again
Despite FDA Threats, States Push for Canadian Drugs

Whatever Happened to Deregulation?

"The Bush administration's twin moves on Tuesday to ban the dietary supplement ephedra and the sale of meat from cows that appear to be sick on the way to the slaughterhouse underscores a simple White House maxim these days: with an election approaching, even a president who came to office assailing government regulation cannot do too much to protect consumers," The New York Times reports.

"The man who drew cheers in 2000 by promising to roll back government interference with the private markets has, in recent months, gladly signed legislation to restrict telemarketing and e-mail spam, and boasts at fund-raisers that he will lock up executives who abuse the public trust in their companies. It is a line that always draws big cheers, a reflection of how the political atmospherics about big government have changed in the three years Mr. Bush has been in office."

Director of Technology Policy Clyde Wayne Crews Jr. documented the plethora of new regulations in "Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State." He found that in 2002, the Federal Register contained an all-time record of 75,606 pages, a 9 percent increase over 2001, and 4,167 final rules were issued by agencies in 2002.

Power Failures Could Happen Again

"The cause of the August 14 blackouts has now been established, but how the US can reduce the likelihood of future power failures is less clear," the Financial Times reports.

"Last month a joint US-Canada task force concluded that the blackouts were caused when transmission lines owned by FirstEnergy, an Ohio electric utility, came into contact with trees causing them to short-circuit.

"But the investigators found that the more serious problem - the cascading of the power failure across to New York and into Canada - could have been prevented if FirstEnergy had followed voluntary electricity reliability guidelines."

In "Outside the Grid," Jerry Taylor and Peter VanDoren, respectively Cato's director of natural resource studies and editor of Cato's Regulation magazine, write about their solutions for reducing the risk of another blackout:

"Market actors must be allowed to discover the most efficient transmission and generation arrangements without politicians imposing some uniform model upon the industry. Neither politicians nor regulators know how to organize industrial sectors or systematically arrange business transactions. If it were otherwise, Cuba and North Korea would be economic powerhouses."

Despite FDA Threats, States Push for Canadian Drugs

States leading the drive for legal purchases of lower-cost medicines from Canada are not backing down despite threats by federal regulators. One state health official accuses the Bush administration of raising 'bogus' safety concerns to protect drugmakers' profits," USA TODAY reports.

"More than a dozen states are moving ahead with various programs. Some would direct their residents to approved drug sources in Canada. Some states intend to buy the drugs for state workers and retirees or help pharmacies purchase them."

In "Conservative Drug Split," Cato President Edward H. Crane and Vice President for Legal Affairs Roger Pilon write: "Because our drug market, burdened as it is with regulations and cost controls, is still free relative to such systems [abroad], America's drug companies, which do most of the world's drug research and development, recoup most of their costs, including R&D costs, in the domestic market, then sell abroad at prices far below true costs. Foreigners are thus classic free riders. As with defense, Americans are underwriting a good part of the health-care costs of the rest of the world."

They go on to say: "[D]ropping trade barriers and freeing U.S. consumers to purchase drugs at far lower prices overseas would significantly threaten the profit margins of the pharmaceutical companies. These companies would be forced to present the price-setting countries with an ultimatum: Either liberalize your market or we will leave. It's hard to imagine that countries in this situation will deny their citizens access to life-saving drugs. Instead, they will most likely ease their controls and increase the price they are willing to pay for their drugs. ... It is neither right nor good that Americans bear so great a portion of the health-care costs of the world."

Jonathan Block, editor, jblock@cato.org