March 19, 2020 1:27PM

Government Failure in Coronavirus Testing

Dr. Anthony Fauci called federal coronavirus testing “a failing” and the Wall Street Journal followed up with details on CDC and FDA blunders.

The blunders appear to have stemmed from a “government knows best” mentality that has hobbled the private‐​sector response. Governments tend to spin messages, erect barriers to private efforts, and act with overconfidence yet fail to deliver. These same sorts of problems exacerbated the damage in other major disasters, such as Hurricane Katrina discussed here.

With coronavirus testing, the federal government appears to have made numerous mistakes. According to the Journal article, government hindered private testing because of concerns about accuracy, yet the CDC’s own test was inaccurate. The CDC told the states its testing capacity was adequate, but that was proved wrong as demand soared. Private labs were required to use the CDC’s testing method, but that resulted in depleting the materials needed for that test. Private labs were dissuaded from pursuing testing by officials who said they had it covered. Finally, the FDA put up bureaucratic barriers to private test development, such as requiring special permissions.

Thankfully, the government has changed course and the CDC and FDA are fixing these problems. America is counting on federal health agencies to succeed in this crisis, so I hope some broader lessons are learned. Top‐​down controls, misinformation, barriers to private efforts, and treating the private sector as a bit player are common mistakes in disaster response.

Here are some highlights from the Wall Street Journal piece by Christopher Weaver, Betsy McKay, and Brianna Abbott:

While the virus was quietly spreading within the U.S., the CDC had told state and local officials its “testing capacity is more than adequate to meet current testing demands …”

… Federal officials hoped the virus could be contained—even as they disputed alarms from those on the front lines that the CDC’s guidelines weren’t keeping up with the outbreak’s spread …

… CDC officials botched an initial test kit developed in an agency lab, retracting many tests. They resisted calls from state officials and medical providers to broaden testing, and health officials failed to coordinate with outside companies to ensure needed test‐​kit supplies …

… The Government Accountability Office had warned federal officials in early January that its readiness for something like a pandemic fell short, a GAO official said. GAO investigators found crisis plans didn’t fully account for the huge role the private sector would have to play, documents show.

… The FDA first announced labs seeking to perform testing would have to submit a special application to get permission to start on Feb. 4. That initially deterred some hospitals and other lab operators—which normally aren’t required to submit any application—from developing tests, experts say.

“We had considered developing a test but had been in communication with the CDC and FDA and had been told that the federal and state authorities would be able to handle everything,” Alan Wells, the medical director for the University of Pittsburgh Medical Center’s clinical laboratories, told reporters over the weekend. He said in an interview on Monday that it later became clear the CDC and states were overwhelmed.

Once the CDC launched its initial test in the first week of February, the response was quickly stymied by setbacks, including flaws that forced the CDC to claw back many of the kits it had already sent out to state public‐​health laboratories, according to the agency and public‐​health officials.

Jeffrey Singer discusses coronavirus testing failures here.

March 19, 2020 11:42AM

The Cruise Industry Assistance Washington Should Give: Repeal the Passenger Vessel Services Act

Alaska cruise

As the coronavirus produces gaping holes in the balance sheets of companies throughout the economy, President Trump has given numerous indications that he considers the cruise industry a prime candidate for a federal bailout. With many of the world’s major cruise lines headquartered in electorally‐​important Florida, that’s not a surprise.

But before appropriating a single dollar of taxpayer money to these cruise lines, Congress and the White House should opt for another form of relief: repeal of the Passenger Vessel Services Act (PVSA). Passed in 1886, the law mandates that vessels transporting passengers within the United States be U.S.-flagged, U.S.-crewed, U.S.-owned, and U.S.-built. Its provisions largely mirror those of the better‐​known Jones Act but apply to people instead of cargo.

Like the Jones Act, the PVSA has been hurting the country almost since its inception. Indeed, after Hawaii was annexed by the United States, and thus became subject to cabotage laws such as the PVSA, representatives from the territory complained that transportation to the U.S. mainland became more difficult than when Hawaii was still an independent kingdom. The advent of commercial air travel, which is not subject to a U.S.-build requirement for domestic service, has thankfully eliminated this hassle.

Fortunately for the cruise industry, the PVSA’s restrictions can be avoided if voyages departing from the United States feature at least one stop in a foreign port. This explains why cruises to Alaska departing from Seattle typically include Victoria, Canada on their itinerary or why cruises from the West Coast to Hawaii often have passengers disembark for a few hours in Ensenada, Mexico.

These unnecessary ports of call result in wasted time and resources. That translates into higher costs and reduced competitiveness for the cruise industry. But it’s also bad for U.S. tourism. Visits to Ensenada or Victoria is time not spent enjoying the sights and attractions of Alaska or Hawaii.

The PVSA, meanwhile, has done nothing to foster a U.S.-flagged cruise industry. Indeed, such ships are almost non‐​existent. Of all the world’s oceangoing cruise ships only a single one, Norwegian Cruise Lines’ Pride of America, complies with the PVSA’s strictures. But even this lone vessel comes with a rather large asterisk:

In 2001, powerful Southern senators arranged for U.S. taxpayers to subsidize a shipyard in Mississippi so it could build a cruise vessel. It tried, and it failed. Within a year, a bungled, half‐​completed hull was declared “unfloatable” and was towed across the Atlantic to be completed in Germany for Norwegian Cruise Lines. But to avoid embarrassment to the U.S. government, the ship is still billed as “Made in America” and is free from the knotted mooring of the Passenger Vessel Services Act.

The case for repealing the PVSA, or at least exempting large cruise ships from its requirements, is overwhelming. It would provide needed economic relief to both the cruise industry and the U.S. destinations they visit at no cost to taxpayers. Equally important, it would be a powerful signal of Washington’s seriousness of purpose in confronting the current crisis and willingness to slaughter the most sacred of cows, including the country’s protectionist maritime laws, in order to place the economy on a steadier footing. Markets would surely take notice. The time to act is now.

March 18, 2020 4:54PM

Slashing Regulations to Combat Coronavirus

The coronavirus is battering the U.S economy as businesses cut back and close down. Unfortunately, federal policymakers are pursuing their usual misguided response to all crises—passing a big stimulus bill that will accomplish little except putting the government further into debt. After the financial crisis a decade ago, Congress passed an $800 billion stimulus and we suffered the slowest recovery since World War II.

Government spending to boost demand won’t help the economy when supply chain disruptions and safety fears are restricting production. Rather than stimulate demand, governments should repeal regulations that aren’t in place for legitimate safety reasons.

These articles point to regulations that are being repealed, or should be repealed, to aid the crisis response. Many of the regulations are unneeded even if there were no crisis. CEI, ATR, CNN, and Walter Olson have compiled similar lists.

During Hurricane Katrina in 2005, bureaucracy and regulatory bottlenecks amplified the damage. Let’s hope that governments have learned the lesson and move quickly to repeal rules that stand in way of rapid and efficient private‐​sector responses.

March 18, 2020 2:29PM

Holding the Line: Maintaining Fiscal and Monetary Policy Boundaries in the Midst of a Crisis

Not long ago, the CMFA staff and I were preparing to officially launch The Menace of Fiscal QE, my book aimed at countering efforts to have the Fed undertake or otherwise fund off-budget government spending programs.

Then came the crisis. Of course our plans were dashed. But so, I feared, were my hopes of having people take the message of Menace seriously. "Who now," I wondered, "wants to hear about the need to respect policy boundaries? More likely the hue-and-cry will be, 'Let's pull all the stops: boundaries be damned!'"

And so it has come to pass, in some quarters at least. Thus Congresswoman Maxine Waters, Chair of the House Committee on Financial Services (D-CA), declared on March 16th:

This is in many ways an unprecedented crisis which calls for extraordinary federal response. Unfortunately, the Fed appears to be using its old playbook in trying to calm funding markets by flooding them with liquidity. During this time of economic turbulence, it is critical that the Fed go beyond these steps and provide much-needed support to those who are on the front lines of this pandemic. …While Congress works on a bold, fiscal stimulus package to help these individuals, I call on the Fed to reevaluate its response and work creatively to address the needs of everyday Americans.

Some experts, in the meantime, are recommending that the Fed resort to "helicopter money." Jordi Gali, for example, suggests that it and other central banks finance emergency spending programs by simply crediting their governments' accounts:

That credit would not be repayable, i.e. it would amount to a transfer from the central bank to the government. …[S]uch a transfer from the central bank to the government would be equivalent to a commensurate purchase of government debt by the central bank, followed by its immediate writing-off, thus no longer having an impact on the government's effective debt liabilities.

Gali recognizes that his plan subordinates monetary policy to "the requirements of the fiscal authority" and that it could therefore be considered "an outright violation of the principle of central bank independence." "But," he says,

we have seen many occasions in which rules that were considered sacred have been relaxed in the face of extraordinary circumstances. …Furthermore, the central bank could agree to participate voluntarily in such a scheme, thus preserving its formal independence.

Perhaps I am reading this wrongly, but Gali seems to be saying that central banks need never worry about losing their independence so long as they do whatever the government asks them to do.

Notwithstanding such appeals, and the urgency of the crisis, I believe that it's as important as ever for the Fed and Congress to stick to their respective fiscal and monetary turfs, and that if there's any reason why they can't do so, while taking all necessary steps to address the crisis, it's that Congress refuses to take responsibility for any potentially risky operations it would rather have the Fed undertake.

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March 18, 2020 1:17PM

States Lead The Way in Coronavirus Crisis With Emergency Removal of Occupational Licensing Obstacles—Why Not Make Them Permanent?

Today, the Center for Medicare and Medicaid Services issued a national emergency order to pay doctors for services rendered to patients in states in which they are not licensed to practice, so long as they hold an equivalent license in another state. This would be a good move. Luckily, many states are already ahead of the federal government on implementing such measures.

For example, Massachusetts Governor Baker ordered the state’s Board of Registration in Nursing to implement an emergency procedure last week that would grant temporary licenses, within one day, to nurses holding out‐​of‐​state licenses who wish to come to Massachusetts and staff health care facilities. This move was undertaken out of concern that the COVID-19 outbreak may leave health care facilities overwhelmed with patients and understaffed by health care professionals.

For the same reason, earlier this week, the Governors of South Carolina, Texas, and Maryland ordered their state’s Boards of Medicine and Nursing to issue temporary licenses to doctors and nurses holding out‐​of‐​state licenses. These are good moves, and hopefully more governors will follow the example.

In 2019 Arizona became the first state to grant what amounts to reciprocity to out‐​of‐​state license holders in all licensed professions and occupations, including doctors, nurses, and therapists. This was not a temporary emergency measure. This was a permanent measure, designed to make it easier for migrants to the state to practice their livelihood and provide their services to Arizona residents. Shortly thereafter Pennsylvania and Montana enacted similar reforms.

Occupational licensing laws act as barriers to the movement of skilled workers. They also impede the entry of new workers into the skilled workforce. As we are learning from the COVID-19 pandemic, sometimes such barriers can exacerbate public health emergencies.

When this public health crisis passes, governors should seek legislation making the temporary reciprocity permanent. If making it easier for doctors and nurses to provide care to their state’s residents is good in time of emergency, it should be good when there is not an emergency. It would be foolhardy to wait until a similar threat appears in the future before recognizing this.

And if making it easier for doctors and nurses to serve a state’s population is good for the people, the same principle should apply to services provided by all licensed professions, trades, and occupations.

We have all heard the infamous statement, “A crisis is a terrible thing to waste.” There are many useful discoveries we are making as our public officials manage this crisis. Important among them are the regulatory obstacles that have accumulated over the years that make our system less nimble and responsive to unexpected events. Let’s hope these discoveries lead to reforms that make our system more agile going forward.

March 18, 2020 11:49AM

We Were Warned

We were warned. After September 11, 2001, historian Stephen Ambrose told us what to do.

“One of the first things you learn in the Army is that, when you and your fellow soldiers are within range of enemy artillery, rifle fire, or bombs, don’t bunch up,” wrote Ambrose in the Wall Street Journal. Now that the U.S. was under attack from terrorists, Ambrose urged the nation as a whole to learn the same lesson: “don’t bunch up.” “In this age of electronic revolution,” he noted, “it is no longer necessary to pack so many people and office into such small space as lower Manhattan.”

Ambrose’s advice was ignored. Manhattan’s population has grown by 100,000 people since 2001. Fitting this number of people on a 23‐​square‐​mile island is only possible because of transit systems that force people to pack themselves into buses and railcars.

Now, we are getting another lesson. Due to a novel virus, we are told to “socially distance” ourselves. But no one is telling us to drive our cars instead of riding transit. Instead, the transit agencies are still operating and giving out platitudes like we’re “wiping down the handrails” every day. Seattle’s Sound Transit is firmly responding to the crisis by “putting posters on vehicles reminding everyone” to wash their hands. San Francisco BART says it is running ten‐​car trains all day so people can stand as far from one another as possible.

It’s not just transit. The 9/11 attack had no effect on urban planners’ demands that we pack ourselves into denser and denser cities. Just last week, an affiliate of Smart Growth America issued a report saying that we should deal with congestion through densification which, the report admitted, would make congestion worse. No doubt the same organization is now coming up with some spin claiming that we would all be immune to the coronavirus if only we lived in denser cities.

Density–bunching up–makes us more vulnerable to terrorist attacks. It makes us more vulnerable to novel diseases. It makes us more vulnerable to crime, invasions of privacy, and traffic accidents. It makes us waste more time in congestion. Contrary to planners’ claims, people living in dense areas also pay higher taxes.

Densities and transit‐​dependence also makes us more vulnerable to natural disasters. When Hurricane Katrina hit New Orleans, 1,200 people died, mostly because New Orleans had the second‐​lowest rate of auto ownership (next to New York) of any major city in the country. At the time, some urban planners had the gall to say that fewer people would have died if auto ownership rates had been even lower. In fact, a few weeks later, Hurricane Rita hit Houston, which has much higher auto ownership rates. Four million people successfully evacuated, nearly all by car, and fatalities were only a tenth of Katrina’s.

Some might argue that a few events over two decades shouldn’t dictate social policy. But what should dictate social policy? Should it be the personal preferences of individuals and families? The overwhelming majority of those individuals and families prefer to live in low‐​density housing and travel in private automobiles. We don’t need social policy to change that.

Instead, urban planners want to impose policies on us to get people on transit and into high‐​density housing. They want urban‐​growth boundaries that make land too expensive for single‐​family housing. They want to dedicate arterial lanes to buses and bicycles so the increased traffic congestion will force people to stop driving. They aren’t even sure why they want these things, but they’ve managed to convince many people that single‐​family homes and private automobiles are wasteful and evil despite the fact that both are more energy efficient than the alternatives of multifamily housing and transit.

Urban planners have been wrong about almost all of their grandiose plans in the past. They once cleared “slums” that forced the people who lived in them to move to even lower‐​quality housing elsewhere. They once built high‐​rises for low‐​income people that proved so unlivable that some were torn down after as little as 17 years. They once tried to reduce toxic air pollution by increasing traffic congestion that actually increased that pollution. We should stop listening to them.

Despite the reassurances of transit agencies that have irresponsibly encouraged people to bunch up on their vehicles, transit ridership is down by 50 percent or more in many cities. That’s a good thing, but Amtrak and transit agencies are already asking for bailouts to make up for their loss of fare revenues, even though existing subsidies make up more than three‐​quarters of transit funds and half of Amtrak’s funds so they could easily deal with reduced ridership simply by reducing service.

The American Public Transportation Association has sent out a notice to its members asking them to support “$12.875 billion [in federal funding] for public transit to offset direct costs and revenue losses of COVID-19.” That would effectively double federal subsidies to an industry whose customer base has been declining for years.

The federal government has already said that transit agencies can spend federal funds dedicated to capital improvements on operating costs instead so they can continue to operate empty buses and trains. Everyone wants a bailout, but transit agencies, whose ridership has fallen in each if the past five years, are least deserving of one.

Don’t bail out government‐​subsidized transit. Better to end the subsidies completely and let the agencies wither and die. Instead, help people who don’t have automobiles buy fuel‐​efficient cars so they can drive in vehicles that are safe from novel viruses. Give transportation vouchers to people who can’t drive so they can use taxis, ride‐​hailing services, or private transit while encouraging transportation providers (at least during times like these) to sterilize the vehicles after each use.

These policies will cost a lot less than the $54 billion a year we are spending on urban transit, which is a blight on our society that most cities, other than New York, don’t even need. And New York won’t need it either once people and jobs stop bunching up and move out to lower‐​density areas, as happened years ago in Chicago and other big cities.

Next, stop encouraging densification. Stop subsidizing transit‐​oriented developments. Stop demanding that single‐​family neighborhoods be rezoned for denser housing (which, paradoxically, will actually make housing less affordable). Abolish urban‐​growth boundaries and other restrictions on development at the urban fringe. If someone wants to live in a high‐​density building, that’s fine, but let the market determine how people live, not urban planning dogma based on a crazy lady who was right to question the high‐​rise housing projects but wrong to think that, because she liked Greenwich Village, it was the model for all urban life.

Social distancing–not bunching up–is the appropriate response in the presence of a novel disease. But it will still be the appropriate response after the COVID-19 virus is no longer a threat. Let’s hope people learn the lesson this time. For that to happen, we may need some government distancing.

March 18, 2020 9:40AM

A Detached, Inflexible, Regulatory System Caused A Flat‐​Footed Response to Coronavirus Outbreak, Disregarded Our “Right to Test”

This morning, NBC Think published my opinion column discussing the sclerotic and disorganized initial response of the federal public health system to a building coronavirus pandemic.

In my column, I point out how the Food and Drug Administration’s cumbersome regulatory process resulted in a single, government‐​monopoly coronavirus test, made available in limited supply, by the Centers for Disease Control and Prevention.

This process kept the private sector and foreign‐​developed tests out of the process during the crucial weeks between when the first virus was identified in December and when it started spreading throughout the U.S. Meanwhile, when the tests were initially rolled out, they were found to be defective, forcing the CDC to play catch up getting new, corrected tests out to the public.

All of this was happening while other countries were already relying on tests developed by numerous private sector companies and organizations, operating under more liberal regulatory regimes.

The World Health Organization distributed a test developed by a Berlin biotech firm to 57 countries and China had five commercial tests on the market in January. South Korea enacted a reform after suffering a devastating attack of Middle East Respiratory Syndrome (MERS) in 2015 that grants nearly immediate approval of testing systems in the event of an emergency.

While the rest of the world sought to benefit from and enable private sector initiatives, the U.S. embraced a top‐​down command‐​and‐​control approach to the present biomedical challenge, replete with red tape and poor communication with local public health officials. This is not only tragic and unacceptable. It’s embarrassing.

Only in recent days has the FDA relaxed its stringent approval process and encouraged a rapid private sector response.

Will policymakers learn from this? If the streamlined emergency approval process is a good idea in this crisis, shouldn’t it be a good idea at other times? Will regulatory policy revert to the status quo ante once this crisis passes, only to lead to similar problems later?

The rusty and rigid FDA approval process needs reform.

Policymakers, in 2018, passed the “Right to Try Act”, in support of the right of the people to try medications that may save their lives, even if they weren’t approved by a federal agency. A bipartisan Congress and President understood that people must not be prevented by the government from making an informed decision to try a drug to save their lives.

As coronavirus cases began to spring up outside of China, including a small number in the U.S., the FDA should have sought to ameliorate the shortage of test kits by granting authorization for the use of tests already in use in other countries. Just as people have the right to try medications in order to save their lives, they also have the right to try tests aimed at saving their lives.

Policymakers should revisit legislation giving reciprocal approval to drugs approved in similar countries. Reciprocal approval already exists among the 27 European Union states plus Iceland, Liechtenstein, and Norway. Such legislation was introduced by Senator Ted Cruz (R‑TX) and Mike Lee (R‑UT) in 2015, dubbed the RESULT Act (“Reciprocity Ensures Streamlined Use of Lifesaving Treatments Act), but did not pass.

Reciprocal approval is one way to show support for the “right to test.” An even better option is to allow the domestic sale of tests (and drugs) approved in similar countries even if the FDA doesn’t give reciprocal approval. The drugs and tests can carry “NOT FDA APPROVED” on their labels. Labels should also be able to state “APPROVED BY WORLD HEALTH ORGANIZATION” or “APRROVED BY THE SWISS AGENCY FOR THERAPEUTIC PRODUCTS” if applicable. Consumers would know the FDA hasn’t signed off on the test or drug, but that other reputable foreign and international organizations have done so.

As federal, state, and local health authorities rush to get tests out to people suspected of COVID-19 infection several weeks later than they should have, we hope fatalities are kept to a minimum and people can soon emerge from self‐​quarantine and rebuild their lives. When the all dust settles, our federal and state regulatory regime needs a thorough update. And the right of the people to self‐​medicate and self‐​test needs to be reaffirmed.