August 4, 2020 4:43PM

The Surgeon General Restates and Reemphasizes His Support of Syringe Services Programs

In the most recent issue of Public Health Reports, the official journal of the U.S. Public Health Service, Surgeon General Jerome Adams restated his strong support of syringe services programs (SSPs). While most people know of them as “needle exchange programs,” “syringe services programs” more accurately describes them because they actually provide a much wider array of services in addition to providing clean needles and syringes to people who inject drugs.

As Dr. Adams pointed out when he spoke at the Cato Institute last January, such programs distribute opioid overdose antidote naloxone, offer screening tests and treatment referrals for HIV and hepatitis C, and have brought many users with substance use disorder into rehab programs. With the advent of the COVID-19 pandemic SSPs can also provide COVID-19 testing.

Dr. Adams’ commentary in Public Health Reports detailed the long and proven track record of SSPs in reducing the spread of HIV and hepatitis. Now that they are distributing naloxone, they are likely to reduce overdose deaths.

The federal government does not prevent states from legalizing SSPs, and the Surgeon General along with the National Academy of Sciences, Engineering and Medicine are encouraging states to allow them to proliferate. Unfortunately, state‐​based drug paraphernalia laws make them illegal in 20 states. My state of Arizona is one of them.

Hopefully, if the Surgeon General continues to promote them, lawmakers in the holdout states will soon come to their senses.

August 4, 2020 10:21AM

Maryland Governor Reverses County’s Decree Against Private School Reopening

Invoking its public health powers, Montgomery County, Maryland, late Friday announced that it was banning private and religious schools “from physically reopening for in‐​person instruction” through October 1, no matter what combination of precautions (outdoor instruction, ventilation, small numbers only, masks, distancing) they might have been planning to manage risk.

The move sparked an instant furor in the Washington, D.C. suburban community. Gov. Larry Hogan was among the first to voice criticism, and on Monday he signed an executive order withdrawing from county health boards the authority to order school closings, saying that school districts themselves should make that decision for public schools, and that counties should not force private/​religious schools to close so long as they are operating within state and federal safety guidelines.

I’d been puzzled about why, in its now‐​overturned order, Montgomery County had selected a particular date, October 1, two months out—did that reflect some sort of public health or scientific insight? Then someone pointed out that September 30 is the cutoff date in Maryland to count official public school enrollment. Many real‐​world consequences, including but not limited to the magnitude of state and federal grants, depend on the count as of that date.

Note also that at a press briefing July 22, Montgomery County Public Schools (MCPS) Superintendent Dr. Jack Smith said MCPS enrollment of new students was coming in well below expectations, with only about 300 K-12 new students enrolled as of the beginning of July compared with the more than 2,500 that had been projected by the end of August.

The safety issues here are complex and I don’t know what the right answers are, or whether there is exactly one such answer right for all kids and schools. While Montgomery County and nearby areas have had a lot of success getting COVID-19 transmission levels down, both the local prevalence of the virus and the state of knowledge about transmission and risk change constantly.

But I can see why there’s a problem in leaving an arbitrary power to shut down private and religious schools in the hands of their biggest competitor.

August 3, 2020 9:54AM

Occupational Licensing Reform Moves Forward

By Michael D. Tanner and Kelly Lester

With an unemployment rate currently over 10 percent and many businesses permanently closing due to the pandemic, policymakers should make it as easy as possible for unemployed workers to find new opportunities.

State policymakers have tools at their disposal that could help put the unemployed back to work by eliminating barriers that prevent workers from moving between careers. Despite a wave of deregulation early in the COVID-19 crisis, many states still have occupational licensing requirements on the books that are hindering economic recovery by choking off access to new jobs, hindering interstate mobility for workers, and increasing costs for consumers.

The often lengthy and costly process involved in getting a license to practice hair‐​braiding, nail care and many other trades represent a significant barrier to would‐​be small business owners who cannot afford the time or expense involved. Nearly two million jobs are lost annually due to licensing requirements — a burden that falls hardest on low‐​income communities.

Despite claims by licensing proponents, studies looking at a wide variety of professions have found that the licensing process does not significantly protect public health and safety. Some research has even found that licensing has a slightly negative effect on quality. But, while quality remains unchanged, prices to consumers increase. According to economist Morris Kleiner, licensing can raise prices anywhere from 5 to 33 percent depending on the type of occupation and location. It is estimated that consumers pay, in total, $200 billion annually in extra costs due to licensing.

And forget easily moving your business from one state to another. Most states will not recognize an occupational license from another state, requiring entrepreneurs to go through the costly hassle all over again.

As a result, both the current and previous administrations have called for licensing deregulation. Licensing reform is one of the major aspects of President Trump’s Governors’ Initiative on Regulatory Innovation.

States have slowly begun to act. In signing legislation that allows his state to recognize licenses from other states, Missouri Governor Mike Parson said, “Eliminating governmental barriers to employment and allowing citizens to become licensed faster is an impactful, commonsense step that we believe will have a positive impact in the lives of a lot of Missourians.”

Arizona enacted similar reforms last year. Iowa has also created a universal licensing system with hopes of increasing migration into the state. Several more states, including California, Florida, and Missouri, have made it easier for people with criminal records to receive licenses. Florida has loosened other licensing requirements as well, as has South Dakota.

While those reforms are a good first step, all states can and should go further, reviewing all current occupational licensing requirements with an eye toward standardizing requirements, reducing costs, and eliminating restrictions that are not related to public safety.

The pandemic has created a unique window of opportunity for reform, forcing states to reevaluate the impact of regulations on jobs and poverty. States should seize on this opportunity to expand the freedom to work.

July 31, 2020 1:07PM

No More State Aid

In response to the crisis, federal policymakers have passed a series of aid packages providing hundreds of billions of dollars to state and local governments. Legislation, here and here, has provided $150 billion in flexible aid to the states plus more than $280 billion in other state and local aid for health care, education, housing, transit, food stamps, and other programs.

Congress and the administration are working on yet another bailout package. The House plan includes $1.1 trillion further aid to the states, while the Senate plan includes $105 billion for schools and colleges.

Federal aid to the states is harmful for many reasons. When tax revenues fall during recessions, state governments should tap their rainy day funds, cut low‐​value programs, freeze salaries, furlough workers, postpone new initiatives, and sell assets. The federal government can help by repealing rules that block the states from cutting spending on activities that receive federal money. Millions of American businesses are tightening their belts, so why not governments? Today’s lean budget climate is an opportunity to improve efficiencies in state and local agencies.

Even if some crisis aid to the states made sense, further aid would be too much. The aid already passed would mainly cover budget gaps if states were allowed maximum flexibility with the funds.

During the last recession, state tax revenues fell 10 percent from the 2008 peak and then began bouncing back. Recent projections suggest a decline this recession of no more than that. Tax Foundation surveyed current forecasts for a dozen states, and found that tax revenues are expected to fall about 4 percent in fiscal 2020 and 7 percent in fiscal 2021 from the fiscal 2019 peak. Tax Policy Center recently surveyed 27 states and found similar estimated declines, as did a recent study by economists Christos Makridris and Robert McNab. The budget gaps were larger when compared to a no‐​recession baseline of rising revenues.

In the chart, the red line is Census data showing state tax revenues rising for a decade and peaking at $1.09 trillion in calendar 2019. Then the red dashed line assumes a 10 percent drop in 2020 and recovery in 2021 and 2022. Tax revenues would be down $109 billion in 2020 and $55 billion in 2021 compared to the 2019 level, for a two‐​year loss of $164 billion. The losses would be somewhat larger measured against a no‐​recession growth baseline. But either way, the aid handed out already would mainly fill state budget gaps if states were allowed to use the money flexibly.

The blue line in the chart shows total federal aid to state governments. The projection, 2020 to 2022, is based on regular aid growing per the pre‐​virus federal budget, plus the $150 billion in flexible crisis aid already provided. The media has focused on how much state tax revenues might fall, but even if the federal government provided no crisis aid, the large part of state budgets funded by federal dollars would chug along with steady increases.

Lastly, note that while state‐​level tax revenues may fall 10 percent this year, local government tax revenues may not fall much, if at all. During the last recession, overall local tax revenues were flat for a while and then began rising again.

July 30, 2020 12:44PM

Mission Accomplished?

“When net exports are negative, that is, when a country runs a trade deficit by importing more than it exports, this subtracts from growth.” — White House senior adviser Peter Navarro and Commerce Secretary Wilbur Ross, 2016


net exports and GDP

(For further insights on the trade deficit and GDP, see my Cato colleague Dan Ikenson’s work here and here.)

July 30, 2020 11:37AM

The U.S. Presidential Election Will Take Place on November 3, Whether The President Likes It Or Not

This morning President Donald Trump tweeted this:

To state what should be obvious, especially to someone who has taken an oath to preserve, protect, and defend the Constitution of the United States:

  • Under Section 1 of the Twentieth Amendment to the U.S. Constitution, the President’s term ends at noon on January 20, 2021. The President cannot himself extend this term, nor may Congress by legislation extend it. “Emergency” doesn’t matter.
  • Under the Constitution, Congress can set the date of the election by law. It has chosen to set it on the Tuesday following the first Monday in November. Changing this to, say, the equivalent date in December would require legislation to which both Houses of Congress, including the Democratic House, would have to agree.
  • Unless Congress chooses to prescribe through legislation the details of questions like mail‐​in balloting, states are broadly free to set their own procedures. Any national mandate of this sort would require legislation to which both Houses of Congress, including the Democratic House, would have to agree.

Neither the Constitution nor federal law confers on the President any power to suspend these provisions, and in fact the Constitution imposes on the President a duty to “take care that the laws be faithfully executed.”

Short of the enactment of a constitutional amendment between now and then, the term of office for which Trump was elected will expire on January 20, and unless he has won an election occurring between now and then, he will cease to be President. Short of legislation with bipartisan support, the date of the election will remain November 3rd, and states will be in charge of setting election procedures on topics on which Congress has not spoken. 

The United States held a national campaign and election during the deadly 1918–19 flu pandemic, a more lethal one than we face currently. 

And we will be having an election on November 3, 2020 to decide whether President Donald Trump is to have a second term, whether he likes it or not. 

July 29, 2020 6:16PM

The Government’s Plan to Turn Kodak Into a Pharmaceutical Company Sure Seems Underdeveloped

The Wall Street Journal reports that Eastman Kodak Co. has received initial clearance for a $765 million loan from the U.S. International Development Finance Corporation (DFC), issued under the Defense Production Act with no congressional input or oversight (or transparency), to produce “starter materials” and “active pharmaceutical ingredients” (APIs) for generic medicines, including the President’s favorite drug hydroxychloroquine. According to the WSJ story, the government financing – if formally committed after due diligence – would allow the (famously-mismanaged) camera‐​turned‐​digital‐​turned‐cryptocurrency company to “change gears” once again and become a “pharmaceutical company,” with this brand new division eventually (supposedly) making up 30% to 40% of Kodak’s entire business.

For the U.S. government, the goal of the loan is to “reduce reliance on other countries for drugs,” especially in case of a pandemic. Although multiple sources identified China as the primary concern (isn’t it always?), White House senior adviser Peter Navarro was more honest about the loan’s actual intent – supply chain “repatriation”:

This is not about China or India or any one country…. It’s about America losing its pharmaceutical supply chains to the sweat shops, pollution havens, and tax havens around the world that cheat America out of its pharmaceutical independence.

President Trump similarly hailed the deal as a “breakthrough in bringing pharmaceutical manufacturing back to the United States.”

Given these statements and the emergency action at issue, you’d think that American pharmaceutical manufacturers are in dire straits or that the United States is now suffering major shortages of critical pharmaceuticals. Fortunately, a review of the available data tells a different story.

First, although solid public stats on global API production are not available, the data we have do not indicate that government funding is urgently needed:

[A]ccording to the Food and Drug Administration, of the roughly 2,000 global manufacturing facilities that produce active pharmaceutical ingredients (APIs), 13 percent are in China; 28 percent are in the USA, 26 percent in the EU, and 18 percent in India. For the APIs of World Health Organization “essential medicines” on the U.S. market, 21 percent of manufacturing facilities are located in the United States, 15 percent in China; and the rest in the EU, India, and Canada.

The FDA adds that the United States was home to 510 API facilities in 2019, 221 of which supply the aforementioned “essential medicines.”

Second, U.S. government data – on output, R&D and capital expenditures (see tables 1–3 below) – show that American pharmaceutical manufacturers are far from the basket case that Navarro describes:

A recent report from the World Trade Organization further notes that, while the United States is indeed a major importer of pharmaceutical products, it’s also one of the world’s largest exporters, having shipped almost $41 billion in medicines (35% of total U.S. medical goods exports) last year. So it’s safe to say that, contra Navarro and Trump, this is hardly an industry in serious distress.

Third, the pharmaceutical supply chain has held up pretty well (so far). Imports of pharmaceuticals that the U.S. International Trade Commission recently deemed critical to fighting COVID-19 have not collapsed in 2020 – in fact, only 16 of 63 products have seen an average monthly decline of more than 20% (by quantity) as compared to the product’s monthly average in 2019. A majority (35) have increased this year – some quite substantially. These are top‐​line estimates in an extremely volatile market so caution is warranted, but they’re still noteworthy, given that the entire world – including major pharmaceutical suppliers in China, Europe, India and elsewhere – was suffering through a generational pandemic for most or all of the months at issue.

Imports, of course, are only one part of the supply chain story (inventories, stockpiles, domestic production and other factors are also relevant). Most importantly, there have been few (if any) signs of major national drug shortages. The last FDA notice on a potential shortage was in late March for the trendy (at the time) hydroxychloroquine – a shortage that never actually materialized. There’s also been no major spike in drugs that the FDA lists as “currently in shortage”: as I noted a few months ago, there were 109 drugs on the list in mid‐​December of last year; 103 in late February 2020; and then 108 in mid‐​April. This week, after months of unanticipated chaos, that number stood at 117 – a little higher, yes, but not a crisis.

All of this raises a host of questions that deserve to be answered before a dollar of taxpayer money is actually sent to Rochester:

  • Even assuming for the sake of argument that sagging domestic API production qualifies as a national emergency, why did Kodak, which has no API or other pharmaceutical experience (though it does make chemicals), receive this government loan, instead of it going to one or more of the hundreds of API facilities already operating in the United States?
  • Which APIs will Kodak’s new venture produce? The DFC press release touting the loan notes that “Kodak Pharmaceuticals will produce critical pharmaceutical components that have been identified as essential but have lapsed into chronic national shortage, as defined by the [FDA].” However, a search of the FDA’s website shows no such term, and FDA’s last “supply chain update” reported no drug, biologic or ingredient shortages at that time. Indeed, the DFC’s statement about Kodak producing an “identified” list of “critical” APIs seemingly contradicts a subsequent one that “[Kodak] plans to coordinate closely with the Administration and pharmaceutical manufacturers to identify and prioritize components that are most critical to the American people and U.S. national security.” So which is it?
  • Why is federal government involvement needed here at all? If a famous, billion‐​dollar corporation has a viable business plan, and if these “critical” APIs have indeed been in “chronic short supply” for American pharmaceutical manufacturers (who, as shown above, have plenty of money to spend), it stands to reason that financial assistance would be available from a private source on reasonable terms (DFC’s express loan condition), and that neither government coordination nor government capital would therefore be necessary. In other words, where’s the market failure?
  • Finally, what’s the urgency here? Kodak’s API production will probably take years to get off the ground, and the data above raise questions about whether it’s even needed. In fact, the FDA has stated (repeatedly) that it needs more information before it could make any definitive conclusions about the global API situation, drug supply chain “resiliency,” and U.S. national security. Private pharmaceutical companies, moreover, are already adapting to a new reality that accounts for lessons learned from COVID-19 (and for worsening U.S.-China trade frictions). Thus, the supply chain issue that Kodak and the Trump administration claim to have identified yesterday might not even exist by the time Kodak Pharmaceutical is operational. The original CARES Act has commissioned a new study of the pharmaceutical supply chain to identify potential vulnerabilities. Maybe government action might (might) be necessary at that time, but until then, the Trump administration seems to be throwing darts blindfolded. Why?

Unfortunately, there’s seemingly no way to know the answers to these questions at this time (though DFC says it eventually “will make detailed project‐​level information publicly available, consistent with applicable law”). This didn’t stop Kodak’s stock from exploding upward this week (some of it a little early?), but hopefully someone in Congress is a bit more skeptical.