Thursday, July 7, 2022

FDA Finally Admits It Caused the Baby Formula Shortage

The agency is now taking small steps to allow foreign formula manufacturers to import their goods into the U.S.

By Eric Boehm of Reason.

"The Food and Drug Administration (FDA) has finally determined what's to blame for America's recent shortage of baby formula.

The FDA.

More specifically, it's the FDA's unnecessary and protectionist rules that effectively ban foreign-made baby formula from being imported into the United States. On Wednesday, the agency announced plans to tweak those rules so foreign formula manufacturers can permanently import their goods into the U.S., giving American consumers greater choice in the marketplace and ensuring more robust supply chains.

"The need to diversify and strengthen the U.S. infant formula supply is more important than ever," FDA Commissioner Robert Califf said in a statement. "Ensuring that the youngest and most vulnerable individuals have access to safe and nutritious formula products is a top priority for the FDA."

That might be true now, but it clearly hasn't been the case in the past. As Reason has detailed throughout the recent crisis, the FDA's priorities have been protecting the domestic formula industry (and the dairy industry, which provides key inputs for baby formula) from foreign competition. As a result, it's nearly impossible to find foreign-made baby formula in the U.S., even though formula manufacturers based in England, the Netherlands, and Germany are some of the biggest suppliers of baby formula to the rest of the world.

When the Abbott Nutrition plant in Michigan was forced to close temporarily due to an FDA investigation into possible contamination, it created a supply shock that left store shelves empty and parents scrambling to find formula. Because of the FDA's protectionist rules (and high tariffs levied on foreign-made formula), markets could not adapt quickly to the shortage here in America—instead, we got political stunts like the White House's "Operation Fly Formula" that accomplished little.

In testimony to Congress, FDA officials admitted to botching the response to the contamination at the Abbott plant. But the real culprit of the recent shortage was a deeper and more pervasive one. No matter what nationalists like Sen. Josh Hawley (R–Mo.) might suggest, closing off the country to international trade is not a recipe for resilience. The baby formula crisis demonstrated that it is quite the opposite.

So it's good to see the FDA admit those mistakes and crack open the door to allowing foreign formula into the U.S. on a permanent basis.

Unfortunately, the list of policy changes the FDA announced on Wednesday mostly amounts to providing technical assistance to foreign firms that want to sell formula here. That is, offering help in navigating the complex approval process, rather than sweeping aside those regulations entirely. If a formula maker has passed muster under E.U. regulations, that should be good enough for the FDA.

There's also the matter of tariffs on imported formula, which are so high that they effectively make any imported formula uncompetitive in the American market. Why would a foreign manufacturer like Holle or HiPP go through the complicated FDA approval process (even after the announced changes) if it knows in advance that its goods won't be able to compete on a level playing field in America?

Give the FDA credit for identifying itself as one of the major causes of the baby formula shortage. But more changes are needed—including permanent changes to U.S. trade policy—to ensure a disaster like this can't happen again."

What Caused Gas Prices to Jump?

By David Henderson.

"If you, unlike Michigan Democratic senator Debbie Stabenow, have bought gasoline lately, there’s a good chance that you’ve seen a sticker on the gas pump with a picture of President Biden saying, “I did that.” Typically, those stickers are placed by customers, not gas station owners, and for that reason, I’m against them: they violate the owners’ property rights.

But I’m more interested here in the substantive question: did Joe Biden “do that”? My answer is “somewhat.” It wasn’t Biden alone. The Federal Reserve had some role, and the recovery from the pandemic had a large role. But the many actions Biden took before Vladimir Putin’s invasion of Ukraine and some of his actions afterwards have certainly caused the price of oil and gasoline to rise. Biden didn’t do all of  “that.” Other governments have contributed to the problem, and various US government restrictions in the oil and gasoline markets have also contributed.

These are the opening two paragraphs of David R. Henderson, “What Caused Gas Prices to Jump?” Defining Ideas, June 30 2022.

Another excerpt:

One factor is Biden’s and many European governments’ response in the oil market to Vladimir Putin’s invasion of Ukraine. They have colluded to keep Russian oil off the market. The Russian government has responded by selling oil to China and India that it would have sold mainly to European consumers. This could be just a game of musical chairs, with the qualification that the number of chairs equals the number of players. In such a case, the overall effect on the world oil market would be small. But the collusive agreement seems to be holding up. Why do I say that? Because the prices that Russia is charging China and India are deeply discounted from world prices. If the collusion had broken down, the prices would be close to equal. The EU and Biden have effectively segmented the world oil market. Chinese and Indian consumers move down their demand curve at the lower prices they pay, buying more than they would have, and we other consumers are bidding over a diminished supply. So, the EU and Biden have definitely contributed to the higher price of oil since the Russian invasion.

Interestingly, Biden admits that his and the EU’s actions have increased oil prices. In a June 22, 2022, speech, Biden stated:

We cut off Russian oil into the United States, and our partners in Europe did the same, knowing that we would see higher gas prices."

Wednesday, July 6, 2022

Sorry, Biden, Gas Stations Can't Just 'Bring Down the Price'

The average gas station owner makes pennies per gallon of gas sold

By Eric Boehm of Reason.

"Over the holiday weekend, President Joe Biden discovered a new scapegoat for persistently high gas prices: Americans who own and operate gas stations.

"My message to the companies running gas stations and setting prices at the pump is simple: this is a time of war and global peril," Biden tweeted on Saturday. "Bring down the price you are charging at the pump to reflect the cost you're paying for the product. And do it now."

It arguably lacks the pomposity of former President Donald Trump's memorable tweet that "hereby ordered" American companies to stop doing business in China, but the content is equally unhinged. Biden has been aggressive about using vague executive powers to shape the economy in recent months, but that doesn't change the fact that an American president has no business whatsoever telling gas stations how much to charge at the pump.

If the tweet merely overstepped the limits of executive authority, though, it wouldn't be as noteworthy—that sort of thing is almost an everyday occurrence. It's also a telling example of just how little the Biden administration seems to know about what it believes it can design.

It would take no more than a few minutes of a White House adviser's time to learn that the "companies running gas stations and setting prices at the pump" in most cases aren't companies at all. More than half the gas stations in the country are single-store operations run by an individual or a family, according to the Association for Convenience and Fuel Retailing (NACS), a trade association representing the stores that sell more than 80 percent of the gasoline American consumers use.

A "Shell" or "Exxon" logo on the canopy above a filling station doesn't mean those oil companies own the gas station. All it means is that the station's owners have contracted with that company for the right to advertise the well-known brand. It's the same as having a neon "Coors Light" sign hanging in a bar—which doesn't mean MillerCoors owns the establishment.

And those gas station owners aren't raking in massive profits, either. Over the past five years, retailer gross margins have averaged 10.7 percent of the overall price of gas, according to NACS data. But most of those profits come from selling food, drinks, cigarettes, and the like.

The Hustle, a business and tech newsletter, put together a useful breakdown of the economics of gas stations last year. "Selling gas generally isn't very profitable" due largely to intense price competition among retailers and the ease with which consumers can shop around (because they are literally in their cars). On fuel alone, gas stations have an average margin of 1.4 percent.

If gas stations sold fuel at cost, consumers might hardly notice the difference—but the small-time entrepreneurs running those stations would have a harder time making ends meet.

Biden's ignorance about gas stations sounds like a replay of Sen. Elizabeth Warren's (D–Mass.) attempt at blaming higher food prices on greedy grocery store owners—despite the fact that they often operate on similarly tiny margins. It's also a worrying sign when coupled with the fact that the White House has ordered the Department of Justice and FBI to investigate companies for earning "illicit profits" due to inflation. How can the Biden administration be trusted to police companies' profits when it is demonstrating such economic illiteracy?

Biden's gas station tweet is "either straight ahead misdirection or a deep misunderstanding of basic market dynamics," tweeted Amazon CEO Jeff Bezos, a man who knows a bit about what it takes to run a successful business. Meanwhile, the U.S. Oil and Gas Association, an industry group, recommended that the "WH intern who posted this tweet" sign up for a basic economics class.

Maybe Biden should take the class too."

The Myth that Americans Were Poorly Educated before Mass Government Schooling

Early America had widespread literacy and a vibrant culture of learning.

By Lawrence W. Reed.

"Parents the world over are dealing with massive adjustments in their children’s education that they could not have anticipated just three months ago. To one degree or another, pandemic-induced school closures are creating the “mass homeschooling” that FEE’s senior education fellow Kerry McDonald predicted two months ago. Who knows, with millions of youngsters absent from government school classrooms, maybe education will become as good as it was before the government ever got involved.

“What?” you exclaim! “Wasn’t education lousy or non-existent before government mandated it, provided it, and subsidized it? That’s what my government schoolteachers assured me so it must be true,” you say!

The fact is, at least in early America, education was better and more widespread than most people today realize or were ever told. Sometimes it wasn’t “book learning” but it was functional and built for the world most young people confronted at the time. Even without laptops and swimming pools, and on a fraction of what government schools spend today, Americans were a surprisingly learned people in our first hundred years.

I was reminded a few days ago of the amazing achievements of early American education while reading the enthralling book by bestselling author Stephen Mansfield, Lincoln’s Battle With God: A President’s Struggle With Faith and What It Meant for America. It traces the spiritual journey of America’s 16th president—from fiery atheist to one whose last words to his wife on that tragic evening at Ford’s Theater were a promise to “visit the Holy Land and see those places hallowed by the footsteps of the Savior.”

In a moment, I’ll cite a revealing, extended passage from Mansfield’s book but first, I’d like to offer some excellent, related works that come mostly from FEE’s own archives.

In 1983, Robert A. Peterson’s "Education in Colonial America" revealed some stunning facts and figures. “The Federalist Papers, which are seldom read or understood today even in our universities,” explains Peterson, “were written for and read by the common man. Literacy rates were as high or higher than they are today.” Incredibly, “A study conducted in 1800 by DuPont de Nemours revealed that only four in a thousand Americans were unable to read and write legibly” [emphasis mine].

Well into the 19th Century, writes Susan Alder in "Education in America," "parents did not even consider that the civil government in any way had the responsibility or should assume the responsibility of providing for the education of children." Only one state (Massachusetts) even had compulsory schooling laws before the Civil War, yet literacy rates were among the highest in our history.

Great Britain experienced similar trends. In 1996, Edwin West wrote in "The Spread of Education Before Compulsion in Britain and America in the Nineteenth Century" that “when national compulsion was enacted ([in 1880], over 95 percent of fifteen-year-olds were literate.” More than a century later, “40 percent of 21-year-olds in the United Kingdom admit[ted] to difficulties with writing and spelling.”

Laws against the education of black slaves date back to as early as 1740, but the desire to read proved too strong to prevent its steady growth even under bondage. For purposes of religious instruction, it was not uncommon for slaves to be taught reading but not writing. Many taught themselves to write, or learned to do so with the help of others willing to flout the law. Government efforts to outlaw the education of blacks in the Old South may not have been much more effective than today’s drug laws. If you wanted it, you could find it.

Estimates of the literacy rate among slaves on the eve of the Civil War range from 10 to 20 percent. By 1880, nearly 40 percent of southern blacks were literate. In 1910, half a century before the federal government involved itself in K-12 funding, black literacy exceeded 70 percent and was comparable to that of whites.

Daniel Lattier explained in a 2016 article titled "Did Public Schools Really Improve American Literacy?" that a government school system is no guarantee that young people will actually learn to read and write well. He cites the shocking findings of a study conducted by the US Department of Education: “32 million of American adults are illiterate, 21 percent read below a 5th grade level, and 19 percent of high school graduates are functionally illiterate, which means they can’t read well enough to manage daily living and perform tasks required by many jobs.”

Compulsory government schools were not established in America because of some widely-perceived failure of private education, which makes it both erroneous and self-serving for the government school establishment to propagate the myth that Americans would be illiterate without them.

As Kerry McDonald wrote in "Public Schools Were Designed to Indoctrinate Immigrants," the prime motivation for government schooling was something much less benign than a fear of illiteracy. Her remarkable 2019 book, Unschooled: Raising Curious, Well-Educated Children Outside the Conventional Classroom, explains the viable, self-directed alternatives that far outclass the standardized, test-driven, massively expensive and politicized government schooling of today.

If you’re looking for a good history of how America traveled the path of literacy to a national education crisis, you can find it in a recent, well-documented book by Justin Spears and associates, titled Failure: The History and Results of America’s School System. The way in which government short-changes parents, teachers, and students is heart-breaking.

I promised to share a passage from Stephen Mansfield’s book, so now I am pleased to deliver it. Read it carefully, and let it soak in:

We should remember that the early English settlers in the New World left England accompanied by fears that they would pursue their “errand into the wilderness” and become barbarians in the process. Loved ones at home wondered how a people could cross an ocean and live in the wild without losing the literacy, the learning, and the faith that defined them. The early colonists came determined to defy these fears. They brought books, printing presses, and teachers with them and made the founding of schools a priority. Puritans founded Boston in 1630 and established Harvard College within six years. After ten years they had already printed the first book in the colonies, the Bay Psalm Book. Many more would follow. The American colonists were so devoted to education—inspired as they were by their Protestant insistence upon biblical literacy and by their hope of converting and educating the natives—that they created a near-miraculous culture of learning.

This was achieved through an educational free market. Colonial society offered “Dame schools,” Latin grammar schools, tutors for hire, what would today be called “home schools,” church schools, schools for the poor, and colleges for the gifted and well-to-do. Enveloping these institutions of learning was a wider culture that prized knowledge as an aid to godliness. Books were cherished and well-read. A respected minister might have thousands of them. Sermons were long and learned. Newspapers were devoured, and elevated discussion of ideas filled taverns and parlors. Citizens formed gatherings for the “improvement of the mind”—debate societies and reading clubs and even sewing circles at which the latest books from England were read.

The intellectual achievements of colonial America were astonishing. Lawrence Cremin, dean of American education historians, estimated the literacy rate of the period at between 80 and 90 percent. Benjamin Franklin taught himself five languages and was not thought exceptional. Jefferson taught himself half a dozen, including Arabic. George Washington was unceasingly embarrassed by his lack of formal education, and yet readers of his journals today marvel at his intellect and wonder why he ever felt insecure. It was nothing for a man—or in some cases a woman—to learn algebra, geometry, navigation, science, logic, grammar, and history entirely through self-education. A seminarian was usually required to know Greek, Hebrew, Latin, French and German just to begin his studies, instruction which might take place in a log classroom and on a dirt floor.

This culture of learning spilled over onto the American frontier. Though pioneers routinely moved beyond the reach of even basic education, as soon as the first buildings of a town were erected, so too, were voluntary societies to foster intellectual life. Aside from schools for the young, there were debate societies, discussion groups, lyceums, lecture associations, political clubs, and always, Bible societies. The level of learning these groups encouraged was astounding. The language of Shakespeare and classical literature—at the least Virgil, Plutarch, Cicero, and Homer—so permeated the letters and journals of frontier Americans that modern readers have difficulty understanding that generation’s literary metaphors. This meant that even a rustic Western settlement could serve as a kind of informal frontier university for the aspiring. It is precisely this legacy and passion for learning that shaped young Abraham Lincoln during his six years in New Salem.

Not bad for a society that hardly even knew what a government school was for generations, wouldn’t you say? Why should we blindly assume today that we couldn’t possibly get along without government schools? Instead, we should be studying how remarkable it was that we did so well without them.

When I think of the many ways that government deceives us into its embrace, one in particular really stands out: It seeks to convince us how helpless we would be without it. It tells us we can’t do this, we can’t do that, that government possesses magical powers beyond those of mere mortals and that yes, we’d be dumb as dirt and as destitute as drifters if we didn’t put it in charge of one thing or another.

When it comes to education, Americans really should know better. Maybe one positive outcome of the virus pandemic is that they will rediscover that they don’t need government schools as much as the government told them they do. In fact, we never did."

Tuesday, July 5, 2022

Why Biden's Attacks On Energy Are "Absolutely Insane"

The president says he's taking action to lower prices, but he's not. Why is that?

By Michael Shellenberger.

"President Joe Biden appears to be doing everything in his power to lower energy prices. Last month, Biden officials eased sanctions on Venezuela with an eye to increasing oil imports. Next month, Biden will travel to Saudi Arabia with the intention of improving relations and increasing oil production. And yesterday, Biden sent a harshly-worded letter to Exxon and other oil companies, urging them to increase production.

“At a time of war,” Biden wrote, “high refinery profit margins being passed directly onto American families are not acceptable… companies must take immediate actions to increase the supply of gasoline, diesel, and other refined product.”

But none of those actions will lower energy prices. Increasing oil production in Venezuela would take years and it wouldn’t be nearly enough to make up for the reduction of oil imports from Russia. Even Saudi Arabia and United Arab Emirates together could not produce enough oil to offset declining supply from Russia.

And it’s not clear how antagonizing American oil and gas companies will result in more production and lower prices. U.S. refineries are already operating at 94% of their capacity and Exxon invested $50 billion over the last five years to expand oil production by 50%. And, said the CEO of a large, publicly traded energy company, who asked to remain anonymous, “Biden’s attacks on the industry have created an uncertain environment that prevents investment.”

In what might be perceived as the extending of an olive branch, the Biden Administration last night invited oil and gas executives to the White House for talks about how to lower energy prices. And on CNN, Energy Secretary Jennifer Granholm emphasized that the administration is not seeking to destroy oil and gas companies but rather re-tool them. “We are asking the oil and gas companies to diversify,” she said, “and become diversified energy companies.”

But these gestures pale in comparison to the overarching hostility the Biden Administration has directed toward oil and gas companies since taking office. In March, it revoked a permit by a refinery on the U.S. Virgin Islands to expand production. Last month, the Biden administration canceled a massive, one-million acre oil and gas lease in Alaska. And earlier this week, Senator Ron Wyden proposed a large new tax on oil industry profits, which Biden officials say the president may support.

A senior executive at a major U.S. bank that finances oil and gas exploration yesterday told me, “If you were an oil company, why would you invest hundreds of millions of dollars into expanding refining capacity if you thought the federal government or investors would shut you down in the next few years? The narrative coming from the administration is absolutely insane. ”

As a result, mainstream journalists are increasingly calling out Biden officials for the glaring contradiction at the heart of their energy policy. “Are you telling me you want them drilling for more oil?” asked CNN host John Berman of Secretary Granholm yesterday. “You want the refineries putting out more gasoline in five or ten years?"

“What we’re saying is today we need that supply increased,” she said. “Of course, in five or ten years — actually in the immediate — we are also pressing on the accelerator, if you will, to move toward clean energy, so that we don’t have to be under the thumb of petro-dictators like Putin, or at the whim of the volatility of fossil fuels. Ultimately American will be most secure when we can rely on our own clean domestic production of energy through solar, through wind —”

“But that’s the problem for these companies,” interrupted Berman. “These companies are saying, ‘You’re asking me to do more now, invest more now, when, in fact 5 or 10 years from now, we don’t think that demand will be there, and the administration doesn’t even necessarily want it to be there.’”

The result of the Biden Administration’s hostility toward the energy industry is skyrocketing inflation. Where energy prices rose 35% over the last year, all prices rose just 8%. In Europe, higher energy prices are responsible for at least half of all inflation.

There are certainly other factors causing inflation, including the ramping up of supply chains following the pandemic, the $1.7 trillion stimulus last year, and China’s lockdown in response to the omicron coronavirus variant. But the non-energy factors behind inflation were temporary, and none explain consistently higher energy prices, which are a major factor in the higher prices of everything, from food to consumer products.

And energy’s role could be even larger than economists can detect. “When you strip out of the [Consumer Price Index] all the items that are linked to energy (air fares, moving/freight, rental cars, delivery services, new and used vehicles),” noted economist David Rosenberg, “the core was +0.36% and the [year-over-year] steadied near 4%. ”

The numbers speak for themselves. In the U.S., the monthly price change in May for all items was 1% but for fuel oil, airline fares, piped utility natural gas, and gasoline the price changes were 17%, 13%, 8%, and 4% respectively.

Some say there's nothing Biden can do to increase energy production but my sources say that Biden could significantly increase oil/gas production within 12 - 18 months. How? First, they say, he should invoke the National Defense Act for Oil and Gas. This will enable the acceleration of required permits for oil and gas projects, they say. Second, he should announce a national commitment to purchase oil to fill the Strategic Petroleum Reserve (SPR) at a floor of $80/barrel. That will, they say, be a powerful incentive for the oil guys. Third, he should announce trade agreements with the international community to supply them with LNG (liquified natural gas) Doing so will incentivize natural gas production and create a surplus of energy for exports with an "American-First asterisk (keep nat gas storage full while exporting).

Biden’s doing none of that. As a result, Biden’s hostility to expanded energy production could result in recession. The Federal Reserve yesterday raised interest rates more than at any point since 1994 and could raise them again next month in an increasingly desperate battle against inflation. “It may take a recession to stamp out inflation,” concludes Bloomberg, “one that may cost Biden a second term.”

Why is that? Politicians are famously self-interested, focused on their own preservation at all costs. Why, then, is Biden not only wrecking the economy, by failing to take action to lower energy prices, but also destroying his own presidency?"

The FDA is Increasing Skin Cancer

By Alex Tabarrok.

"Americans who travel to the beaches in France, Spain, or Italy routinely do something that is illegal in the United States–they buy and use European sunscreens to protect themselves from sunburn and skin cancer. Suncreens in Europe and Asia are better than in the United States because more ingredients are allowed and these create more effective and more pleasing suncreens. I’ve been writing about this since 2013! My view hasn’t changed:

My rule is very simple. I don’t think the FDA is better than the EMA so if any drug or device is approved in Europe it ought to be available for purchase in the United States with a label saying “Approved by the EMA. Not approved by the FDA.” (By the way, we do have reciprocity type agreements with Canada and New Zealand for food so this would not be unprecedented.)

Here’s the latest from Amanda Mull writing in the Atlantic:

Newer, better UV-blocking agents have been in use in other countries for years. Why can’t we have them here?

…In formal statements and position papers, doctors and cancer-prevention advocates express considerable interest in bringing new sunscreen ingredients to the American market, but not a lot of optimism that any will be available soon.

…In 2014, Congress passed a law attempting to speed access to sunscreen ingredients that have been in wide use in other countries for years, but it hasn’t really worked. “The FDA was supposed to be fast-tracking these ingredients for approval, because we have the safety data and safe history of usage from the European Union,” Dobos said. “But it seems to continually be stalled.” According to Courtney Rhodes, a spokesperson for the FDA, manufacturers have submitted eight new active ingredients for consideration. The agency has asked them to provide additional data in support of those applications, but none of them has yet satisfied the agency’s requirements.

“In the medical community, there is a significant frustration about the lack of availability of some of the sunscreen active ingredients,” Henry Lim, a dermatologist at Henry Ford Health, in Michigan, told me. The more filters are available to formulators, the more they can be mixed and matched in new ways, which stands to improve not just the efficacy of the final product, but how it feels and looks on your skin, and how easy it is to apply. On a very real level, making sunscreen less onerous to use can make it more effective. “The best sunscreen is going to be the one you’re going to use often and according to the directions,” Dobos said. Skin cancer is the most common type of cancer in the United States, and by one estimate, one in five Americans will develop it in their lifetime."

Monday, July 4, 2022

The Justices Send a Message to Congress

The EPA case doesn’t preclude climate rules. It require lawmakers to enact them.

By Kimberley A. Strassel. Excerpts:

"Sweep away the opinion’s numbing technical descriptions, and the ruling is a joy to read. The six conservatives on the court, in an opinion by Chief Justice John Roberts, have officially declared the “major questions doctrine”—a concept that has appeared in a handful of past court decisions—to be a living, breathing principle. The federal bureaucracy is no longer allowed to impose programs of major “economic and political significance” on the country absent “clear congressional authorization.” Hallelujah.

That’s a bummer for the executive branch—and its army of bureaucrats—which for decades has been acting as if it were king. In this case, the Obama administration was frustrated Congress wouldn’t enact a law empowering it to regulate climate emissions. So it magicked up the authority out of the 1970 Clean Air Act. Democratic administrations in particular are growing brazen in delegating to themselves these new superpowers. The Biden team last year in litigation insisted there existed in a 77-year-old law the authority to impose an eviction moratorium. Just as it found permission in a 51-year-old law to impose a vaccine mandate on the nation’s workforce. The high court struck down both and—just in case Mr. Biden didn’t get the hint—used this week’s EPA decision to lay out stricter rules going forward.

But it’s equally a bummer for Congress, which was essentially just told by the court to get off its lazy backside and resume the people’s work. It’s easy to bash the administrative state, but bureaucrats are simply filling a vacuum created by a legislature that these days can rouse itself to little more than naming a post office. “Federal agencies must have the authority to regulate carbon!” every Democrat wailed in response to this week’s ruling. To which the obvious response is: Then give it to them! Pass a law. Do your job."