Government and Politics

May 15, 2020 4:00PM

California’s Budget and Rainy Day Fund

Congress is considering passing additional financial aid for state and local governments. I argued against further aid in this Fox News op‐​ed. One reason is that many states have built substantial rainy day funds, which will help them balance their budgets even as tax revenues decline. Federal bailouts would undermine incentives to build such useful funds going forward.

California has built a substantial rainy day or reserve fund over the past five years, as shown in the chart below from this state report. State residents passed a referendum in 2014 to create the fund structure, and so kudos to Californians for approving Proposition 2 by 69–31. The state is in a better place today both because the reserve fund can be tapped during the crisis and because contributions to the fund during the boom helped to reduce program growth.

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California political leaders who supported Proposition 2 should also be commended, including former Governor Jerry Brown. Brown scored poorly on Cato’s Report Cards, but I did note his support of expanding the rainy day fund.

California needs a larger rainy day fund than most states because its revenue system is so volatile. The system is heavily dependent on highly “progressive” income and capital gains taxes, which are tied to growth in Silicon Valley. The top 1 percent of earners pay almost half of California’s income and capital gains taxes, which is remarkably lopsided.

The California Legislative Analyst’s Office (LAO) includes this graphic in its CalFacts publication:

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To better handle downturns and promote economic growth going forward, California should restructure its tax system to rely more on sales taxes and less on income and capital gains taxes.

California also needs budget reform because spending rises too quickly during booms. General fund spending rose 6.2 percent in 2018 and 12.1 percent in 2019. The governor has just released projections showing slower 3.3 percent spending growth in 2020 and spending cuts in 2021. The rainy day fund helps, but California government will need to downsize in coming months as revenues fall. Hopefully, the sobering new projections will encourage policymakers to reopen the state economy as quickly as possible.

Over the longer term, California should shrink overall taxing and spending. But its experience shows that even states on the political left can build substantial reserve funds. I argue here and here that when the current crisis passes and the economy starts growing, states should begin building reserves for the next rainy day.

By the way, California’s LAO produces excellent data and studies, perhaps superior to that produced by federal agencies. The CalFacts booklet, for example, has many interesting charts on taxes, budgets, education, and other topics.

May 13, 2020 10:56AM

CDC Failures: Mission Sprawl Is One Problem

The Centers for Disease Control and Prevention (CDC) says that it “has a unique mission—to save lives by deploying effective, proven strategies to prevent, detect, and rapidly respond to disease outbreaks at their source.”

But the CDC was slow to recognize the size of the COVID-19 threat and it fumbled the ball in numerous ways. CDC Director Robert Redfield tweeted January 14 that “there is no confirmed person‐​to‐​person spread” of the illness, and on January 28 he emailed CDC colleagues that “the virus is not spreading in the U.S. at this time.”

A ProPublica analysis found, “Internal Emails Show How Chaos at the CDC Slowed the Early Response to Coronavirus.” The analysis concluded that “the CDC underestimated the threat from the virus and stumbled in communicating to local public health officials what should be done.” Meanwhile, an NPR investigation found that the CDC’s initiative to create an early warning system in selected cities was a flop.

This CDC brochure lauds the agency’s success at battling COVID-19. It says, “An important part of CDC’s role during a public health emergency is to develop a test and equip state and local public health labs with testing capacity.” The brochure does not mention that the CDC’s test failed and that federal actions delayed the deployment of private‐​sector tests.

The CDC and other federal health agencies told the public not to wear masks. The official line was: “CDC does not recommend that people who are well wear a facemask to protect themselves from respiratory illnesses, including COVID-19.” The U.S. Surgeon General was insistent about masks: “They are NOT effective in preventing general public from catching #Coronavirus.”

Why should we spend billions of dollars on health agencies that give us harmful advice?

Some pundits claim that budget cuts were the problem, but the table below suggests otherwise. The CDC workforce increased 12 percent between 2010 and 2019, based on data in CDC budget submissions here and here.

The largest employment increase was in “Global Health,” a group that monitors foreign outbreaks of infectious disease. The group’s employment jumped from 272 in 2010 to 1,263 in 2019. The CDC says the group “supports global efforts to detect epidemic threats earlier, respond more effectively, and prevent avoidable catastrophes.” The agency should have been ready.

CDC leaders may have been distracted because of mission‐​sprawl. The CDC’s 512‐​page budget submission for 2021 reveals a vast and disparate array of activities. What are occupational safety and injury prevention doing in the government’s infectious disease agency?

The CDC highlights its recent accomplishments on pages 18 to 23. How is CDC Director Redfield supposed to remain alert to emerging epidemics when he is also supposed to manage programs on tiny teeth, colon cancer, opioids, child abuse, diabetes, workers’ compensation, lead‐​based paints, mold in buildings, and lifting heavy objects on construction sites?

From the highlights:

“In 2019, CDC launched the Protect Tiny Teeth initiative in collaboration with partners. The initiative includes an oral health toolkit to raise awareness about the importance of oral health as part of prenatal care.”

“As part of the Combatting Opioid Overdose through Community‐​Level Intervention program, CDC expanded efforts to partner with public safety (e.g., law enforcement, first responders) by collaborating with the Office of National Drug Control Policy to fund 25 pilot projects.”

“Using CDC resources, the Forest County Potawatomi Community, a tribal nation in Wisconsin created a media campaign, in collaboration with the Tribe’s Executive Council, targeting the stigma associated with opioid use disorder within the Native American culture.”

“CDC’s Essential for Childhood program recipient states increased the percentage of Community‐​Based Child Abuse Prevention dollars invested in evidence‐​based programs from 24% to 52%.“

“CDC’s Colorectal Cancer Control Program grantees have partnered with over 760 health system clinics that serve over 1.2 million patients age‐​eligible for colorectal cancer screening.”

“As of December 2019, more than 1,500 organizations have received CDC‐​recognition for delivering CDC’s National Diabetes Prevention Program lifestyle change program…”

“CDC Project 3–3: Children with Asthma is working to identify factors associated with asthma exacerbation in children following the 2017 Hurricanes Harvey and Maria and aims to establish or improve programs to reduce asthma burden among children during and after hurricanes.”

“CDC published a web‐​based data visualization dashboard to explore 1.4 million workers’ compensation claims in Ohio, creating a causation‐​specific injury surveillance system using existing claims databases.”

“CDC’s Data Linkage Program facilitated evidence building which supported policy decisions for the U.S. Department of Housing and Urban Development (HUD). HUD’s 2018–2022 Strategic Plan cited findings from the NCHS-HUD linked data files to support the continued removal of lead‐​based paint hazards in HUD homes.”

“Using CDC resources, the CPWR‐​Center for Construction Research and Training, piloted and launched best​built​plans​.org to provide contractors and workers with practical tools, microgames, and information to prevent injuries from lifting and moving heavy materials while staying productive and profitable.”

“In 2019, the Coal Worker’s Health Surveillance Program provided 8,398 chest x‐​ray screening examinations and reviewed 2,758 spirometry test results from its mobile unit and 40 Spirometry Clinics in 11 states.”

“CDC released the Dampness and Mold Assessment Tool for both general buildings and schools to help employers identify and assess areas of dampness in buildings.”

In coming months, Congress should reassess the CDC’s budget and consider some of the agency’s failures during the COVID-19 crisis. Policymakers may want to take a pruning knife to the CDC and refocus it on the core mission of infectious disease and epidemics.

In general, less is more with federal agencies. Federal mission‐​sprawl often results in overlaps with state, local, and private activities, and it distracts federal leaders from their core responsibilities.

Dave Kemp assisted with research for this post. 

May 1, 2020 6:11PM

Trillion‐​Dollar Spending Bills Bring Out the Lobbyists

The Center for Responsive Politics reports that lobbying spending has jumped to near‐​record levels in the first quarter of 2020 “as powerful companies, trade groups and other clients rushed to influence the government’s response to COVID-19, particularly its $2.2 trillion stimulus bill.” Federal lobbying spending totaled $903 million in the first quarter, the most since the legislatively active first two years of the Obama administration — which had exceeded the last few months of 2008, when TARP was on the table.

OpenSecrets found that at least 3,200 clients reported lobbying on issues related to coronavirus and the stimulus bill. More than 1,500 lobbying clients specifically reported attempting to influence the House version of the CARES Act. Among all non‐​appropriations bills introduced since 2005, only the 2009 stimulus package drew more lobbying clients.

This is no surprise, of course. When you lay out a picnic, you get ants. When you lay out taxpayers’ dollars, you get lobbyists. And the CARES Act is the biggest picnic in a decade. (I’m not addressing here whether the money being spent on Covid‐​19 response is necessary or justified, just the fact that big spending bills lead to big lobbying.)

Journalists have noticed. A few headlines from the past few weeks: “Coronavirus fuels K Street lobbying gush, new disclosures show” (Politico). “How Lobbyists Robbed Small Business Relief Loans” (New York Times). “Investment firms spent millions lobbying Trump administration and Congress on coronavirus relief bill” (CNBC). “Lobbyists Pile On to Get Wins for Clients Into Coronavirus Stimulus Package” (Wall Street Journal)

Everybody wanted a piece of the $2.2 trillions. (Well, except the Cato Institute.) Airlines, pharmaceutical companies, utilities and shrimp processors. Apple, CVS and Toyota. The Metropolitan Opera and casino operators. Medical device makers. It always helps to have political connections.

What can we expect? With a federal budget headed toward $5 trillion even before the extraordinary spending now being contemplated, many companies and interest groups see a profit opportunity. It’s worth hiring platoons of lobbyists to get just a small, an infinitesimal, sliver of that pie.

People invest money to make money. In a free economy they invest in building homes and factories, inventing new products, finding oil, and other economic activities. That kind of investment benefits us all — it’s a positive‐​sum game, as economists say. People get rich by producing what other people want.

But you can also invest in Washington. You can organize an interest group, or hire a lobbyist, and try to get some taxpayers’ money routed to you. That’s what big business, small business, the farm lobbies, AARP, industry associations, and teachers unions do. And that kind of investment is zero‐​sum — money is taken from some people and given to others, but no new wealth is created.

If you want to drill an oil well, you hire petroleum engineers. If you want to drill for money in Washington, you hire a lobbyist. And more people have been doing that.

The trillions of dollars being spent on Covid‐​19 response may well be necessary and appropriate. And maybe all this lobbying activity is just the price we pay for government help. But we should understand how much deadweight loss goes along with government spending, especially spending that’s being rushed through Congress without any serious deliberation. And we should at least insist on serious oversight of the spending, which is not yet happening.

May 1, 2020 8:00AM

Happy 90th Birthday, Ed Clark

Ed Clark for President 1980 poster

Ed Clark, the 1980 Libertarian Party presidential nominee, turns 90 years old on May 4. Now that Rep. Justin Amash has thrown his hat into the ring for the 2020 nomination, I thought I’d offer some reminiscences about the earlier campaign.

In my misguided youth I was a teenage Young Democrat, a College Republican, and a young adult Libertarian Party activist, before I gave up politics for ideas and policy. In 1978, a few years out of college, I left my conservative job to become co‐​manager of Ed Clark’s campaign for Governor of California on the Libertarian ticket. (He was actually on the ballot as an independent because it was much easier to get ballot status that way.)

As I wrote in the Encyclopedia of Libertarianism, Clark was a corporate attorney in New York and Los Angeles. He opposed the Vietnam War while remaining a Republican, but when President Richard Nixon imposed wage and price controls in 1971, he joined the Libertarian Party and quickly became a member of its national committee and California State Chair. As one of the most successful and articulate professionals in the fledgling party, he was persuaded to run for governor in 1978.

A political campaign with co‐​managers sounds like a recipe for disaster. It wasn’t, for two reasons: because libertarian impresario Ed Crane hovered over the campaign as Chairman and guiding light, and because the two managers had entirely different skills. I was the words‐​and‐​policy guy, and Bob Costello was the people‐​and‐​organization guy, and even in a two‐​desk office we actually managed to stay out of each other’s way.

Clark spent two months campaigning, with Bob and me scrambling to set up schedules. Mostly he stayed in the big cities of San Diego, Los Angeles, San Francisco, and Sacramento, plus one trip through Bakersfield, Fresno, and Stockton in the Central Valley. We had enough money for radio ads. They were very policy‐​oriented, addressing school choice, busing, victimless crimes, the antigay Briggs Initiative, and the tax‐​cutting Proposition 13, which only Clark of all the gubernatorial candidates had supported enthusiastically before it passed overwhelmingly. We also got enough last‐​minute money to run some full‐​page newspaper ads and put together a half‐​hour interview (with then‐​Reason columnist Tom Hazlett) that ran in major markets. (I wrote recently on Facebook about how I also directed actor Orson Bean in a couple of Clark commercials.)

In the end Clark got 5.46 percent of the vote, which we thought was pretty good for a candidate no one had heard of before the campaign and who had minimal money. We got the most votes in populous Los Angeles and Orange counties, but Clark’s percentages in both counties were below the state average. He did best in rural Nevada County, where there was a strong local organization, and in Kern County, where the Bakersfield Californian endorsed him and then actually ran news stories about him for a week — as newspapers always do for the Republican and Democratic candidates. And even one on‐​the‐​trail feature story, which began (if I recall) “He has the charisma of John F. Kennedy and the verbal agility of Bill Buckley.” Which might just be a description that no candidate could live up to. With that minimal coverage he got almost twice his statewide average in Kern County. Good thing we made that one trip to Bakersfield, where he met with the paper’s editorial board. He also did well in the San Francisco suburbs and in the northern counties of Humboldt, Mendocino, and Trinity — known as the “Emerald Triangle” for their widespread pot growing. Probably should have taken a campaign swing up that way.

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April 30, 2020 2:57PM

Epidemiological Models Can’t Tell States When to Open or How

With more than a dozen states starting to relax mandatory social distancing edicts, some organizations are offering advice to states on when they might prudently alleviate or decentralize current mandates. The most ambitious effort is an offshoot of a model from the Institute for Health Metrics and Evaluation (IHME) at the University of Washington. Having been made famous in White House briefings by Doctors Birx and Fauci, that “Murray Model” could conceivably be influencing federal and state official about the proper timing and design of state decisions to relax mandates.

I assembled a table “Evaluating State COVID-19 Rules” to examine IHME recommended dates for states to begin “opening up” businesses, shopping, recreation and employment, while adding two sources of relevant facts.

Evaluating State COVID-19 Rules

Deaths

per Million

Reproduction

Rate (Rt)

IHME

Opening Date

IHME

Score

AK

12

0.82

N/A

5

AL

50

0.85

19‐​May

5

AR

19

0.99

28‐​Jun

3

AZ

42

1.01

6‐​Jul

3

CA

48

0.9

20‐​May

5

CO

133

0.9

1‐​Jun

5

CT

583

0.88

17‐​Jun

4

DC

278

0.93

27‐​May

5

DE

144

1.08

20‐​May

5

FL

57

0.79

21‐​Jun

4

GA

101

0.81

28‐​Jun

4

HI

11

0.79

11‐​May

5

IA

43

1.06

1‐​Jul

4

ID

36

0.84

19‐​May

5

IL

166

0.91

21‐​May

5

IN

149

1.05

22‐​May

5

KS

44

1.05

28‐​Jun

3

KY

51

0.9

22‐​Jun

4

LA

386

0.76

26‐​May

5

MA

462

0.9

21‐​Jun

4

MD

169

0.92

27‐​May

5

ME

38

0.97

19‐​May

5

MI

358

0.69

21‐​May

5

MN

54

1.06

7‐​Jun

4

MO

54

0.89

17‐​Jun

4

MS

80

0.99

1‐​Jun

5

MT

14

0.86

18‐​May

5

NC

36

0.95

13‐​May

5

ND

19

1.09

20‐​Jul

2

NE

29

1.14

7‐​Jul

3

NH

45

0.97

17‐​May

5

NJ

725

0.91

28‐​May

5

NM

53

0.94

5‐​Jun

4

NV

77

0.94

23‐​May

5

NY

1180

0.83

28‐​May

5

OH

69

0.92

15‐​May

5

OK

53

0.85

N/A

4

OR

24

0.91

30‐​May

4

PA

161

0.93

28‐​May

5

RI

226

0.93

22‐​Jun

4

SC

39

0.94

14‐​Jun

4

SD

13

0.89

2‐​Jul

2

TN

28

0.9

1‐​Apr

4

TX

25

0.74

15‐​Jun

4

UT

15

0.9

7‐​Jul

3

VA

58

0.93

27‐​May

5

VT

75

0.8

24‐​Mar

5

WA

108

0.88

31‐​May

5

WI

52

0.99

22‐​May

5

WV

21

0.81

10‐​May

5

WY

12

1.08

1‐​Jun

3

The first column in the table shows COVID-19 deaths per million by state. The national average death rate is 179 per million, yet 31 of the 50 states have experienced fewer than 60 deaths per million. On the basis of experience, these 31 states (at least less‐​populated counties within the states) appear to be relatively low‐​risk places to experiment with relaxing restrictions.

The second column shows the Reproduction Rate (Rt) in the latest week. In this series, “(Rt) represents the effective reproduction rate of the virus.” That is, if each person affects one other then Rt equals 1. The curve is then flat, since everyone cured is matched by someone newly infected. While Rt is below 1.0, on the other hand, that means new cases are smaller than the number cured so the number still infected is declining.

By the week ending April 25, 42 states had an Rt below 1.0. Among some of the first to lighten restrictions, Rt was down to 0.83 in Florida and Oklahoma by April 30, 0.78 in Georgia and 0.75 in Texas.

Soon after famously projecting that U.S. deaths would total only 60,000­ –a number already exceeded­– the IHME model’s latest update “raises the outlook for the cumulative U.S. death toll through Aug. 4 … to a new figure of 74,073.” The new curve projects that nationwide daily deaths will drop to 0–10 by July 1. But that is said to depend on maintaining “current social distancing… until infections [are] minimized and containment implemented.” That may explain why these modelers recently began advising states what to do and when to do it. “A recent analysis from the Institute for Health Metrics and Evaluation,” noted an April 22 local news story, “suggests that Oklahoma may be among several states that need to continue social distancing until late June or early July.” Oklahoma Governor Kevin Stitt ignored that advice and allowed haircuts.

The IHME team created a 1–6-point scorecard awarding the most points for the most severe “current social distancing” rules. They use these scores to propose specific dates in May‐​July when each state is granted approval to begin graduating from business and school closures and universal home isolation to more‐​targeted “containment strategies… [such as] testing, contact tracing, isolation, and limiting gathering size.”

The table’s third column “IHME Opening Date”– shows when “relaxing social distancing may be possible with containment strategies.” The last column shows each state’s “IHME Score,” which I argue is mainly what determines each state’s date for relaxing “social distancing” as they define it.

The modelers “evaluate [State] government‐​mandated social distancing measures… based on the New Zealand Government alert system Level 4″ (which was eased to Level 3 on April 28). They rate the virtue of states by how many of six equal‐​weighted broad categories of restrictions they implemented. A perfect score of 6 would require (1) closing nonessential businesses, (2) closing nonessential services, (3) closing all schools, (4) banning large gatherings, (5) issuing stay‐​at‐​home orders, and (6) “travel severely limited.”

No state scored more than 5, because no state could meet the New Zealand standard for domestic or international immobility. New Zealand banned foreign travelers on March 12 (because 5 people died out of 4.8 million) following other island nations Hong Kong and Singapore. New Zealand’s March 23 Level 4 plan also decreed “Public transit is closed.” Period.

Since no U.S. state lived up to New Zealand’s travel and transit bans, that left the highest possible score at 5. As a result, the unparalleled risks of proximity to strangers in New York’s subways, trains, busses and airports became irrelevant to scorekeepers who granted New York the same 5‐​point safety score as states with no mass transit or international airports. So, the IHME gives New York its blessing to relax social distancing after May 27. All others states that checked five boxes are likewise sanctioned to open in May, some a week or two earlier.

States with a score of 4, on the other hand, have to wait until June before doing anything different. And states with a score of 2 or 3 have to wait until July when the IHME model predicts zero COVID-19 deaths nationwide (we may not believe that, but they should because it’s their model).

In short, the timing recommended for opening a state’s economy depends on points earned on the basis of adherence to New Zealand’s formerly tough rules. However, the IHME makes a contrary claim that the “timeline is based on the date by which our model projects that COVID-19 infections will drop below 1 per 1 million people.” Yet the model projects only deaths per day, not “infections” (most of which are asymptomatic and uncounted) or even cases (which are sensitive to testing). Also, the model tracks actual deaths, not deaths per million.

Even if the dates for relaxing social distancing depended on projected deaths falling to 1 per day (rather than infections per million) that goal has been met by South Dakota ever since April 8 which you might think would make the state safe to open up entirely. South Dakota never closed anything but schools and large gatherings, in fact, which is why it is cursed with the lowest IHME score of 2. So, this remarkably safe state is admonished by the IHME to keep its two little rules in place until “after July 5, 2020.”

The fact that some states have a larger number of social distancing rules cannot explain why some had fewer deaths than others. On the contrary, South Dakota and 18 other states had fewer than 60 deaths per million regardless of their sub‐​par IHME scores of 2–4 and their resulting late dates for changing current rules in any unapproved way (such as confining home isolation to the sick and vulnerable)

Policies to deal with epidemics should be evaluated more on actual results and less on illusions that anyone really knows which schemes will prove more cost‐​effective and durable than others.

After graphically comparing mitigation policies with results among many states and countries, and finding no clear connections, Yinon Weiss concluded that “legal shut downs may only play a small role in the slowing down of the spread when compared to other factors such limiting travel to/​from hot spots, degree of public transportation use, washing hands, cancelling high transmission events such as conferences, and whether people are staying home when sick or exposed.”

The first columns of my table provide two relevant measures to discern how well states are actually coping with COVID-19, rather than relying on malleable model projections or subjective points scored in the IHME 1–5 virtue award contest. New tests, cases, hospitalizations and deaths also bear watching for potential hot spots, of course. Thankfully, no infectious disease has ever before been so quickly and transparently monitored by so many private and state online trackers.

If federal or state officials are instead considering relying on dates and scores from the University of Washington’s IHME team to decide what to do and when to do it, they should carefully reconsider delegating such authority to unaccountable technocrats to make social, health and economic choices that will deeply affect many millions of American lives.

April 23, 2020 4:53PM

Top‐​Down Regulations for COVID-19?

Governments often fail because they tend not to learn lessons. They make similar mistakes over and over for reasons described in this study.

The FDA botched its COVID-19 response by using its regulatory powers to monopolize the development of virus tests. I have not heard any apologies for the failure or that any officials have been fired. As a Wall Street Journal investigation of HHS leadership suggests, the gross testing failure has led to lots of finger pointing, but not institutional reforms.

After the testing debacle, one might think that federal leaders would hesitate to impose further one‐​size‐​fits‐​all solutions for COVID-19. But no—the Wall Street Journal reports that House Democrats want to require OSHA “to order all companies to implement comprehensive plans to protect workers who continue in their jobs during the pandemic. The new, emergency standard would have to be issued within seven days after any legislation is signed into law.”

Thus, in seven days federal bureaucrats would apparently write‐​up a Giant Safety Plan to impose on millions of businesses in hundreds of industries across our huge and diverse nation. That makes no sense.

Federal policymakers seem to have little comprehension that their actions often sideline the vast brain power and innovation that lives outside of Washington. At the stroke of a pen, federal regulations nullify the experimentation, dynamism, and speed that America’s private sector can mobilize to solve problems.

As they consider imposing COVID-19 safety regulations, policymakers should ponder the pro‐​active steps that businesses are already taking or actively considering, as discussed in another Wall Street Journal article. Businesses are separating workspaces, taking temperatures and screening health at work entrances, testing employees before they get to work, closing lunch rooms, installing workspace partitions, adjusting shifts, modifying production lines, changing entrances and exits, closing facilities and tracing contacts if workers test positive, placing materials down rather than handing them to others, sanitizing workspaces, having safety experts instruct workers, spacing bathroom urinals, wearing electronic bands to alert workers if others are too close, and providing masks, gloves, and hand sanitizer.

A central plan quickly thrown together in Washington could not impose a “best” way for millions of businesses to install these sorts of changes. Every business is unique. Here are some reasons why allowing businesses to address their own safety challenges is superior to top‐​down federal mandates:

Trial‐​and‐​Error. The Journal story puts a negative spin on diverse business approaches to safety as a “patchwork” and “ad hoc.” But anyone who studies innovation knows that trial‐​and‐​error processes are crucial to economic and societal improvements. Private institutions change direction all the time as they try different things and receive feedback from stakeholders. To discover the best ways to adjust each workplace for COVID-19, businesses need the freedom to experiment and to change course.

Government regulations undermine the steady improvements that are the hallmark of markets and free societies. Imposing COVID-19 safety regulations would reduce business incentives to implement new and better approaches. The question around every workplace would change from “Are we doing this safely and can we do it better?” to “Are we conforming to the OSHA rules?”

Horizontal Learning. Volkswagen is reopening some of its European factories after making 100 workplace changes. VW has been flooded with requests from other businesses about the safety procedures it is using, and so the company has posted its ideas online. American businesses are also studying Chinese businesses that were able to open safely. This sort of horizontal learning is superior to the often‐​ill‐​informed edicts from Washington. Similarly, horizontal sharing of resources during crises is better than vertical intervention, as discussed here.

Costs and Benefits. In theory, federal bureaucrats are supposed to design regulations by comparing the costs and benefits of various possible rules, but the process is a crude way of making decisions in an economy, even after rules have been studied for years. In the current crisis, regulators would have little time to even try and make balanced decisions. Business leaders know their own facilities, employees, and customers, and they can make better reopening decisions based on their local knowledge.

Flexibility. The nature of the COVID-19 threat will change over time. Scientists may learn more about virus transmission on surfaces and in the air. Drugs may be developed to reduce the health risks. New safety approaches and technologies may be developed. As such, businesses need the freedom to adjust their safety procedures over time. Regulations would lock‐​in rules that may be quickly outdated as conditions change.

April 23, 2020 3:04PM

Is Trump Acting Presidential?

Among the criticisms President Trump has received over his handling of COVID-19, one is that he’s playing politics with disaster aid. The Denver Post recently charged that he “is treating life‐​saving medical equipment as emoluments he can dole out as favors to loyalists.” Michigan Gov. Gretchen Whitmer has claimed that “vendors are being told not to send stuff here to Michigan.” Trump himself has said the governors “have to treat us well also” in order to get what they need.

So far, evidence of actual favoritism is mixed. A Washington Post review of federal distribution of ventilators, surgical masks, and N95 respirators found no apparent favoritism of red or blue states (though it also noted that overall distribution has been lousy). On the other hand, an early analysis of the Paycheck Protection Program, intended to support small businesses during the COVID‐​induced recession, found that businesses in states that supported Trump in 2016 have received much more generous support than businesses in states that went for Hillary Clinton.

If Trump is showing political favoritism with disaster aid, he wouldn’t be the first president or other federal policymaker to do so. As economists Steven Horwitz and Frank Stephenson explain in a forthcoming article in Cato’s policy journal Regulation, such favoritism is a D.C. tradition.

Horwitz and Stephenson summarize a rich academic literature finding that New Deal aid was channeled to swing states important to Franklin D. Roosevelt’s reelection. Other influences on New Deal money included FDR’s vote share (and that of fellow Democrats), and whether a district had lawmakers on appropriations committees.

Beyond the New Deal, empirical work finds that Federal Emergency Management Agency aid in the 1990s flowed more generously in election years (especially 1996) and that federal agriculture disaster aid flowed disproportionately to states that had members on the relevant House and Senate agriculture committees. Also, over the period 1981–2004, disaster declarations were issued more readily to politically competitive states than to noncompetitive states.

Most relevant to the COVID crisis is an analysis of the distribution of vaccines during the H1N1 (swine flu) epidemic that began in early 2009. Much like coronavirus, H1N1 was a novel strain of influenza, necessitating a new vaccine. Fortunately, research moved quickly and the first doses were available in October. According to the analysis, those doses went disproportionately to states that had Democratic members on the House Energy and Commerce Committee, which oversees the Department of Health and Human Services.

As Horwitz and Stephenson conclude, “Existing research repeatedly shows that political factors influence resource allocation in disasters, so it should come as no surprise if it is ultimately determined that politics affected the response to the COVID crisis.”

Still, Trump may break with that tradition. He seems to care far more about his self image than about his political standing. Though Michigan is critical to his reelection chances this fall, he may be willing to settle a score with a critic in the Great Lakes State even if it costs him Michigan’s 16 electoral votes.